1. Digital Transformation in a Digital Economy November 2014

2. Why it matters now: consumer demand coupled with „exploding“ supply capabilities o Chess invented in the Gupta Empire in India during 6th century CE o Emperor wanted to reward the inventor -> the Inventor humbly replied „Place one grain of rice on the first field, two grains of rice on the second, four on the third and so on … till all fields are filled“ o By 32 nd field about 4 billions grain of rice, output of one large field …. BUT … o By the 64 th field about 18 quintillion grains of rice more rice than ever produced o When it comes to digital capabilities we are entering the second half of the chessboard! Anecdote: The Chess Board Demand-Pull Constant Connectivity: Anytime, Always Parallel worlds: Physical and Digital Customer Savviness Multi-Channel: Online and Offline …. Multi-device: Phone, Tablet, PC, other (wearables),.. Data Processing and Storage: Kryder’s Law Computing Power: Moore’s Law Ubiquitous Connectivity: Everywhere …. Broadband Connectivity: Mobile, Fixed, Cable Enabled Devices: Supply-Push

3. The numbers: The Digital Economy is happening all around us o Internet users globally -> 2.9 billion o Mobile connections -> 7.3 billion o Unique mobile subscribers -> 3.6 billion o Shipments of smart connected devices -> 1.8 billion o Connected devices (IOT) -> 16 billion o Mobile broadband subscriptions -> 2.3 billion o Connected CE /TV devices -> 1 billion Source: ABI, IDC, ITU, Internet World Stats, Internetlivestats, GSMA, Strategy Analytics Internet Users Globally (2014) (in billons)

4. Case in point: Papal elections

5. And does it apply here?: Internet Usage in CEU and Russia Internet Users (2014) (as % of population) Internet Users (mn)8.32.884.46.411.24.72.925 Growth 2014 (%)3%2%10%2% Source: Internetlivestats

6. What it does: The Digital Economy enriches our lives everyday o Instant & global access to largest information base in human history o Search (Google, …) o Reference (Wikipedia,..) o Media (Newspaper, Video, …) o Books (Amazon, …) o Commercial o Education /Schooling o... InformationEntertainment Communications/ Social Networking Amazon offers over 2.5 million e-books, even a leading bookstore does not stock more than 250,000 titles o Instant & global access to rich media content and applications (text, audio, video, …) o Music (iTunes, Spotify,…) o Video (YouTube, TV, …) o Movies (Netflix, iTunes, …) o Gaming (EA, Giant Interactive, …) o … About 20 million songs available on Spotify, even an avid music fan would have only had a fraction o Instant & global access to family, friends, contacts, …) o Communications: Phone, SMS, Email, …(Skype, WhatsApp,..) o Social Media (Facebook, LinkedIn, …) o Forums, Blogs o Email o … Average number of Facebook friends is 338, few address books had that number of addresses

7. What it does: Some challenging macroeconomic impacts (GDP does not capture this) o Digital Economy can create deflationary pressure o Growth in consumption and benefit.… o … coupled with decline in generated revenues –> fall in GDP indicators o Price declines: Media, Consumer Electronics o Free goods: Skype, WhatsApp, Wikipedia o Increased price and service transparency: Comparison sites, Global Music Industry Revenues (US$ billions) Source: IFPI

8. Revenue Growth o Improved customer acquisition and marketshare growth o Higher revenues per customer/higher customer utilization of products o Increased customer cross-selling between products/to new products o Improved customer loyalty and retention What it does: Digital Transformation pays off for digital leaders … Cost Reduction o More efficient Sales and Distribution Channels o Rise of Direct Sales vs. Indirect Sales Channels o More efficient Customer Care and Servicing o Increased automation of operational processes o More effective supplier management Average operating cost reduction of 9% (up to 20% in digitally-oriented industries e.g. banking, insurance, telecommunications) Average revenue upside of 5 – 15% (with digital leaders growing digital sales 2.5 * faster than laggards ) Average bottom-line improvement of around 30% Source: McKinsey cross-Industry study on Digitization (2013)

9. Case Example: Upside for banks Improved customer acquisition Better customer retention High quality customer base Lower branch costs New revenue sources Higher technology costs o Improved customer acquisition with superior digital offer, potential marketshare gains of 0.2 to 0.3 % (absolute) p.a. o Improved customer retention with customer churn reduction by 25 – 33% for mobile banking customer (vs. non-mobile banking customers) o Improved customer base with stronger presence in younger (< 45 years) and urban demographic; about 25 – 33% (relatively) higher than normal country population distribution o Branch costs reduction of around 10-20% with branch numbers being reduced by around 20% and staff going down by about 20% o Development of new revenue sources from third party promotion and transactions o Increased technology costs for superior user interfaces, IT- infrastructure upgrades and organizational/process transformation Indicative Numbers

10. o Unclear KPIs and business case around digital initiatives o Multiple separate digital initiatives without overall strategic direction o Organizational dispersion and/or isolation of digital initiatives o Lack of leadership and talent for digital initiatives o Failure to effectively program manage digital initiatives implementation and progress o Limitations of legacy organization, processes and IT- systems o Viewed purely as an IT-project How to achieve it: … but is often challenging to realize Typical Challenges and PitfallsCommon Failure Points 1) Failure Point% of Respondents Lack of senior and project leadership 23% / 19% Limitations of existing technology infrastructure and IT- systems 22% Failure to redesign business processes 20% Lack of available functional and technology talent 18% / 17% Lack of organizational alignment 17% 1)McKinsey Global Survey on Digitization Initiatives (2013), 850 C-level respondents

11. Perspective: A sense of optimism regarding Digital Transformation in CEE and Russia … Do you view the Digital Economy more as an opportunity or as a threat? (% respondents) Source: IDC, New Frontier Group (2014), C- level respondents in 61 companies in CZ, RO, SRB and RUS o Ability to reach more customers o Communicate beyond transactions o Collect feedback from customers o Target marketing campaigns o Improve operations and automate business processes o Improved collaboration among employees Opportuntiy Threat o Security and cyberthreats o Increased price competition o New competition through cross- industry moves o New competition from international players o Start-ups with new business models

12. What to do: The Digital Transformation Journey Assessment and Strategy Prototyping and Piloting Implementation Technology Strategy Organizational Execution Detailing and Program Mngmt. Define your Digital Strategy Is your business strategy digitally proofed? Ecosystem change? Touch-points? Business model innovation? Detail your digital initiatives Business case? KPI? How do you track? Organizational execution? Modify processes? Technology strategy and migration? Test different digital initiatives in the field How are they received? Learnings and improvement opportunities? Fine-tuning? Pilot and prototype cycles Go to market with innovative digital technology solutions How to market and position? How to sell and service?

13. 2006 Vienna Founded August 2006 and Headquarter in Vienna, Austria 7 years Fast growing regional IT solutions player in the last 6 years through M&A as well as organic growth despite the crisis 1800+ People Highly skilled workforce in all major IT Solution areas 17 Countries Austria, Slovakia, Czech Republic, Slovenia, Romania, Russia, Serbia, Turkey, Bosnia & Hercegovina, Macedonia, Montenegro, Hungary, Poland, USA, Canada, Australia. new frontier group What we do: NFG with over 1800 people and revenues of about € 200 million

14. What we do: NFG’s global footprint with focus on CEU and EEU  Banking & Insurance  Telecom & Hightech  Energy & Utilities  Public & Health  Industry & Manufacturing  Retail, FMCG & Pharma Industries

15. What we do: Digital Transformation Consulting at NFG provides end-to-end support Assessment and Strategy Prototyping and Piloting Implementation Technology Strategy Organizational Execution Detailing and Program Mngmt. Define your Digital Strategy Is your business strategy digitally proofed? Ecosystem change? Touch-points? Business model innovation? Detail your digital initiatives Business case? KPI? How do you track? Organizational execution? Modify processes? Technology strategy and migration? Test different digital initiatives in the field How are they received? Learnings and improvement opportunities? Fine-tuning? Pilot and prototype cycles Go to market with innovative digital technology solutions How to market and position? How to sell and service?

16. What we do: NFG unique proposition for our clients o Passionate about Digital Transformation: Experience and history working with clients on realizing Digital Transformations of their business o Holistic view: Understanding Digital Transformation beyond pure SMAC technology but as the execution of an adjusted and extended business strategy to embrace the opportunities of the Digital Economy o End-to-end capability including piloting and prototyping: Results-driven from Digital Strategy development to organizational execution to piloting and prototyping to implementation o Strong track record of going to market with Digital technology solutions: Successful and profitable implementation of innovative portal, cloud, collaboration, marketplace and gaming solutions with our clients o Addressing typical failure points: Understand and have led clients through failure points such as organizational, process and technology infrastructure alignment o Focus on the region: 300 of 500 top enterprises in CEU/EEU and Russia are our clients 1 2 3 4 Accelerating our Clients’ ability to realize Digital Transformation 5 +

17. What we do: Contact Details Christian Terfloth Head of Digital Transformation Consulting Pottendorferstrasse 23-25/4/3/2 A-1120 Vienna Mobile +49-175-290 5019 Tel +43 1 890 46 23 – 10 Fax +43 1 890 46 23 – 30 Email terfloth@newfrontier.euterfloth@newfrontier.eu Web www.newfrontier.euwww.newfrontier.eu

18. Shaping Future Delivering Results