© 2005 IBM Corporation The Value of Innovation in Era of Economic Globalization Linda Sanford Senior Vice President, Enterprise On Demand Transformation & Information Technology

© 2005 IBM Corporation 2  Over 40 years, only 5 percent of Fortune 500 grew revenue above the inflation rate  From 1997 to 2002, revenue growth for Dow Jones index companies less than 5 percent  Of 1800 sample firms, only 13% grew consistently over a 10-year period  Large companies in Europe and North America on average exist for just 20 years Growth Is Hard and Getting Harder

© 2005 IBM Corporation 3 Leveraging world-class capability and growth, wherever it is located A New Model: The Globally-integrated Company

© 2005 IBM Corporation 4 Strategy Tactics Execution Business Administration Finance Administration Supply Chain & Distribution Store/Channel Operations Manage Customers Merchandising Alliances Market Mgt. Channels CRM Insights Vendors IPT Customer Accts. Store/Channel Strategy Labor Store Design Promotions Planning LOB Planning Procurement Real Estate IT HR Financial Planning Finance Treasury Back Office Accounting SCM Distribution Logistics Distribution Ops. Transportation Supply/Demand Customer Sat. Space Mgt. Inventory Product Directory Vendor Mgt. Item Mgt. Customer Directory Order Mgt. Store Mgt. Inventory Store Services Perf. Mgt. MI Process Design Legal/Reg Strategic View Strategy Tactics Execution Business Administration Finance Administration Supply Chain & Distribution Store/Channel Operations Manage Customers Merchandising Labor Planning Financial Planning SCM Logistics Transportation Customer Sat. Space Mgt. Customer Directory Order Mgt. Store Mgt. Channels CRM Insights Vendors Customer Accts. Promotions IPT LOB Planning Procurement Finance Treasury Back Office Accounting Inventory Store Services Perf. Mgt. MI Process Design Legal/Reg Real Estate IT HR Distribution Distribution Ops. Supply/Demand Product Directory Vendor Mgt. Item Mgt. Inventory Alliances Market Mgt. Store/Channel Strategy Store Design Financial View Strategy Tactics Execution Business Administration Finance Administration Supply Chain & Distribution Store/Channel Operations Manage Customers Merchandising Transformation View Planning LOB Planning Procurement Financial Planning Finance Treasury Back Office Accounting SCM Transportation Inventory Store Services Perf. Mgt. MI Process Design Legal/Reg Alliances Market Mgt. Real Estate IT HR Distribution Logistics Distribution Ops. Supply/ Demand Customer Sat. Space Mgt. Product Directory Vendor Mgt. Item Mgt. Customer Directory Order Mgt. Store Mgt. Inventory Channels CRM Insights Vendors Customer Accts. Store/Channel Strategy Labor Store Design Promotions IPT Strategic View Financial View Component Business Model Framework

© 2005 IBM Corporation 5 Technology Enables New Business Models WWW. Globalization Digital Economy Open Standards Interoperability

© 2005 IBM Corporation 6 Teragrid National Digital Mammography Archive UK Research Grid Butterfly.net eDiamond Project Oxford University Dutch National Grid Istituto Nazionale di Fisica Nucleare Grid Computing

© 2005 IBM Corporation 7 Implications Embrace a new model of innovation Focus on developing next generation of innovation leaders Invest early and strategically in emerging nations

© 2005 IBM Corporation The Value of Innovation in Era of Economic Globalization Linda Sanford