1. The Digital Revolution and its Impact on Business Performance
November 2017

2. Introducing the Speakers
Meade Monger
Randall Eisenberg
Digital Transformation
Member of Alix leadership team for last 16+ years building technology offerings across all service offerings and markets
Designed and led many digital transformations to increase revenue and productivity, streamline and automate operations, and reduce costs across many industries, including oil & gas, retail, CPG and financial services
Served in significant roles among the largest restructuring projects in history, including General Motors, Kmart, and WorldCom
MBA, CPA, Masters of IT
Restructuring
Successfully guiding large global companies through complex transformations and turnarounds as a senior advisor and interim officer
Advises management teams, boards of directors, equity sponsors, and creditor constituents in the transformation of stagnant or underperforming companies by way of effective leadership that rebuilds shareholder and stakeholder value.
Holds a Masters in Management from Northwestern, is a Certified Turnaround Professional and a Certified Public Accountant

3. The Digital Revolution has brought disruption, transformation and restructurings
…with more to come
Our era
The fourth industrial revolution
Born Digital Companies
Traditional companies must digitally transform in order to compete
What’s happening?
Companies that have digitally transformed are more profitable – those that have not are suffering
There are two primary criteria in order to digitally transform
Operational Excellence – with underlying data platforms
Great Customer Experience – digital interactions/transactions
Many other key characteristics to consider
Restructuring considerations
Is this creating more restructurings?
Is it adding new restructuring considerations?
How are traditional businesses impacted?
Impacts coming from major digitally born companies
What are we seeing across industries?
What are some recent examples?

4. Three major revolutions shaped industrialization
Digitalization is widely considered as the fourth industrial revolution
Physical
Digital
1800 to 1960
1960 to 2000
2000 to 2020
1700 to 1800
2.0
3.0
4.0
1.0
Steam engine, mechanization
Electricity, assembly lines
IT, computers and robots
Internet of Things, connected universe
For the first time ever, it is possible to do these things at same time instantaneously:
Collect essentially unlimited amounts of information
Analyse it
Communicate it globally
Born digital companies are disrupting the market and requiring traditional companies to digitally transform in order to compete
This has changed how businesses operate and created entirely new business models

5. The Platform Revolution
EXAMPLE
Business is changing
‘Born digital’ companies have emerged
Competitive threat to traditional companies
Traditional companies must digitally transform
....and create digital platforms
Traditional Banking Model
We call this “Silos and Spaghetti”
Digital Banking Model

6. Infrastructure Suppliers
What are platforms?
A plug-and-play business model that allows multiple participants (producers and consumers) to connect to it, interact with each other and create and exchange value
Platform ecosystem roles and interactions
Uber example
Orchestrator
Platform Ecosystem
Platform Ecosystem
Drivers
Riders
Producers
Consumers
Infrastructure Suppliers
Navigation technology example
What makes platforms possible?
Cloud
Social
Mobile
enables ability to create content and applications for a global audience
connect people globally and maintain their identity online
allows connection to this global infrastructure anytime, anywhere

7. Schneider Electric’s platforms A traditional company that has conquered complexity
Our EcoStruxure architecture delivers on the real promise of the Internet of Things: connectivity that turns data into operational and energy efficiency across all levels of an enterprise."
—Jean-Pascal Tricoire, CEO
Leveraging the Internet of Things (IoT) to improve buildings with reduced costs and increased efficiency
Real time “smart controls” that control plant operations through connected machines and processes that are operated and controlled through underlying data and technology

8. Customer Experience is also Critical1
Profile customer groups to analyze common traits
Understand where each customer is in their lifecycle
Provide multiple seamless ways to purchase and transact
Give each customer a personalized experience 1 3 2 4 3 2 4
Must be digitally enabled

9. Walgreens’ customer experience
A surprising innovator in the field is 116-year-old chain store Walgreens (NASDAQ:WBA). The $117 billion global destination is at the forefront of delivering digital experiences that engender excellence, efficiency, and trust online……
Source: Seeking Alpha
Seamless digital uses across all channels
Great customers experiences
Making it simple
Encourages employees to be end users
Obsessed over customers’ feedback
Well beyond the store with rich information online and digital notifications
….such as the ability to refill by scan in 17 seconds instead of standing in line at the store
Lots of easy instructions for doing business including how-to videos
A great way for employees to really understand how it works and explain to customers
Constantly getting feedback from customers and employees through many methods
Forbes – July 8, 2017

10. The Importance of Technology in Today’s Business World
Our joint research with MIT CISR is compelling…
Why are we even talking about “digital strategy” and how is this different than “IT”? Historically corporate “IT” has been able to automate and standardize task and operations to make them more cost effective and standardized. This is different – it is the convergence of new technologies to enable a totally new way of doing business. Not just automating or standardizing the existing operations (IT) but redefining the way business is being done. The effect is one of “agility” – meaning responsive and tailored to customers’ and market needs – down to the individual. It also means learning from feedback and incorporating this feedback into products and customer offers. It can be seen in Amazon’s offers to customers or Tesla’s weekly updates to it cars. Traditional companies with long planning cycles and manual processes will never be able to compete.

11. Key characteristics separating winners and losers
Future ready
Traditional
Comprehensive underlying data platforms connecting different business areas, customers, suppliers and business partners
Decentralized businesses and systems (silos) with limited real-time connectivity with customers, suppliers, etc.
Standardized and reused applications with consistent-systematic common business processes across common functions
Lots of localized applications and doing similar things in different ways
Heavy infrastructure investments as a percentage of revenue constantly
Bulk of IT spend goes to keeping disparate systems running with limited investment dollars
Deeply understand each customer, customized interactions with them and offering them seamless multiple channels to buy products/services
A lot of ‘one size fits all’ approaches to customer marketing and selling
Continuously automate job functions with algorithms, artificial intelligence and robotics
Manual job functions with limited investments in automation
Business Intelligence – holistic understanding of the business in near real time at granular levels of profitability
Time consuming and manual analysis methods to determine what’s happening in the business

12. Examples of Digital Transformations
Company
Transformation headlines
Domino’s Pizza
The ‘Pizza Tracker’ allows you to order and track your pizza
USAA
Automatically communicates with you about all life events (e.g. marriage, baby, moving, etc.)
John Deere
MyJohnDeere is a data platform connected to John Deere equipment providing data on weather, soil conditions, food demand/supply, etc. to help farmers manage fleet, downtime inefficiencies and fuel costs
Ferrovial
A leading innovator within the infrastructure and services industry has solutions such as toll roads with rates varying based on demand
Lego
Design capabilities have been increasingly handed over to their fans e.g. through Digital Designer (a web-based 3D design tool to create own designs)
BMW
Transforming to a customer-centric approach providing personalized individual offers based on analytics and allowing customers to buy cars in 10 minutes by being 97% pre-informed
BB&T Bank
‘U Platform’ allows customers to customize their own look and feel of their digital banking experience, no matter where they log on
HD Supply
Virtualized data center providing abilities for field agents to take pictures of parts with their phones and have a new part that day
Philips
Nearly human-less production with machines reading chips to know how to make each custom product – no changeover time
Caterpillar
Sensors in equipment that test and check maintenance thereby eliminated routine service checks and downtime

13. Digital Financial Mindsets are also key
Antiquated IT Department
Transformed IT Department
Costs to run business
Improve business
Invest to Improve business
Duplicative efforts
Keeping the lights on
Crisis
Enabling Business Value
Routine Operations And Maintenance
3x silos/ spaghetti
Future Ready Firms continue to innovate while Silos and Spaghetti risk dying on the vine

14. What are some restructuring considerations for traditional companies?
Continued delays to digitally transform is causing some enormous catch up costs
Digitally born companies have proven to displace many traditional companies – and more is expected
Virtually every industry is getting impacted – at varying degrees
Some recent bankruptcies have headlined disruptions and challenges
Disrupted business models from online retailers
Modernized production requirements
Technological advances necessary for competitive customer experiences
Migrating from print to digital business models
Obsolete products and technologies

15. Traditional Companies are falling further behind year after year
Future ready
Industrialized
Integrated experience
Silos and Spaghetti
IT spend % revenue
4.0%
3.9%
3.2%
Future Ready companies spend more on IT
Infrastructure investment
50%
44%
38%
37%
Future Ready companies allocate a lot more of their IT spend on their data platforms
Percentage new projects
43%
36%
Future Ready companies allocate a lot more of their IT spend on improving the business – not running old systems

16. Digitally stood-up businesses in old-line established industries
How do these traditional companies compete given demographic changes and often times lower pricing?
Online
Platform
Key
Product
Industry Disrupted
Examples of
Platform Disrupted
Apple
iOS mobile platform
PC operating systems
Microsoft Windows
Google
Ad-supported search
Ad-supported media
R.H. Donnelley
Facebook
Ad-supported network
Ad-supported print media
Gannett Company
Amazon
Amazon Marketplace
Shipping malls and department stores
Simon Malls
Uber
Ride-sharing app
Taxi and limousine companies
Yellow Cab Company
Airbnb
Home or room daily rentals
Early still, but probably hotels and booking sites
Too early to tell, but probably Booking.com
Snapchat
Messaging app
Traditional communications
AT&T SMS

17. Digitalization is taking the world by storm – transforming virtually all industry sectors…
Re-imagining…payments
Re-imagining…contracts
Re-imagining…customer service
Re-imagining…meeting people
Re-imagining…money
Re-imagining…photography
Re-imagining…navigation
Re-imagining…news
Re-imagining…education
Source: KPCB, Internet Trends

18. Consumer Demand Changes
Media Industry
Current market trends are fundamentally changing the media and entertainment industry, among them:
The growth of traditional revenue streams is declining as new revenue models emerge
Individual business models are being replaced by a complex ecosystem of industry participants from new startups to super platforms
Digital brands are gaining prominence, powered by an ability to deliver an engaging multi-channel customer experience
Wave 4:
Internet of Things
Wave 3:
Social and Mobile
Wave 2:
Consumer Demand Changes
Wave 1:
File Sharing
In the late 1990s,
Napster and file
sharing suddenly appeared
In the early 2000s, media companies realized that file
sharing had
fundamentally changed how people wanted to access music and content
In the second half of the decade mobile, social and the cloud grew
and consumers began to expect access to music, books and films anywhere, anytime
The next transformational
innovation is likely to be the internet of things giving media enterprises
opportunities to move into
new ecosystems

19. Telecom Industry
An industry witnessing large-scale change that is also a key driver of worldwide digitization
Traditional operators not successful protecting traditional voice and messaging revenue streams from digital businesses
While legacy revenues under pressure, telecom operators have largely failed to launch and scale new business models
Competitive pricing pressure accompanied by rapidly increasing costs with big demands on bandwidth and speed
Consistently losing out to both new, nimbler digital businesses (e.g. WhatsApp and Skype)

20. Retail Banking Industry
BBVA Chairman
Former Barclays CEO
Wharton Business School
A large number of technology start-ups are ‘attacking’ banks
Many banks not equipped to survive
Big number of banks will disappear
Banking is reaching its ‘Uber moment’ as technological advances will lead to hundreds of branch closures and a possible halving of people employed in the sector
‘Banks seem to be headed the way of Blockbuster’
need to transform from inflexible, analog monoliths to delivering highly personalized physical and digital experiences 
AlixPartners Retail Banking Survey
Digital orientation of consumers is rapidly evolving – especially younger populations
And is a big factor in decisions to switch banks
And close to 10% of consumers switch banks each year
Online banking capabilities is the biggest reason that consumer switch banks (36% of time)

21. Retail Industry
More than 300 retailers have filed for bankruptcy this year
Credit Suisse predicts that as many as 8,600 brick and mortar store locations will shutter their doors in 2017
The number of distressed retailers is nearing recession levels, tripling over the past six years
Many retailers are at risk and struggling with liquidity, not only due to the changing landscape in retail, but because they are overleveraged and crippled with debt at unfavorable terms
Amazon isn't the only force causing the mass disruption of retail
The main disruptor has been the consumer itself with a secular shift in consumer preference that favors shopping online and new high demands:
competitive pricing
convenience
large selection
quick delivery
24/7 access
free shipping

22. Consumer Products Industry
Demand for CP companies’ products has fragmented
Consumers have grown increasingly fickle by being empowered by social media and online search
Consumers compare companies and products and communicate their experiences and opinions to others
Consumers are demanding more transparent, more-responsible businesses
Digital technologies are reshaping CP companies’ business models through direct-to-consumer offerings and extensive information widely shared about products
CP companies will experiment with innovative business models, including direct distribution
Achieving the full promise of digital technologies will require embedding them in every part of the organization
Winners will embrace the change, whereas others will be swept aside by the tidal wave

23. Automotive Industry Connected Autonomous Shared Electrified CASE
The auto industry is poised for more change in the next five to ten years than seen in the past 50.”
– MARY BARRA CEO OF GM
The auto industry is at an inflection point for massive change… not just evolutionary change.
– TIM COOK CEO OF APPLE
Imagine Uber with a driverless vehicle in three to five years….they could unleash numerous disruptive impacts.
– DR ALEXANDER SCHEIDT IBM, AUTO INDUSTRY LEADER
CASE
Plausible scenarios
A significant shift away from ownership to car sharing
Regulations relaxing for Internet-based purchases thereby dismantling dealerships
Fully autonomous vehicles becoming a reality far faster than what anyone predicts
A mixture of core tier-one suppliers teaming with Internet-based companies on grand scales
Majority of new car sales as hybrids and fully electric cars
Autonomous
Connected
Shared
Electrified
Acronym used to describe the automobile of the future

24. Some Recent Bankruptcies (non-O&G)
Excerpts from bankruptcy court filings

25. Some Recent Bankruptcies (non-O&G)
Excerpts from bankruptcy court filings

26. Some Recent Bankruptcies (non-O&G)
Excerpts from bankruptcy court filings