March 1, 2006 4:00 PM PST

IBM says big business is readying for change

NEW YORK--CEOs are preparing for big changes in their companies in the next two years, according to a new study released by IBM on Wednesday.

Based on face-to-face interviews with about 750 CEOs and business unit heads of large global companies, the survey showed that 65 percent of the world's corporate chief executives are planning for radical change in their companies in the next two years, due to pressures from competition and market forces.

IBM's Business Consulting Services performed the survey, called the Global CEO Study 2006, last year. Big Blue executives shared the results at a press event here on Wednesday.

The survey found that CEOs are concentrating more on making big changes in their business models and operations instead of looking for ways to introduce products and services. In fact, approximately two-thirds of CEOs' efforts are now targeted at business model and operational innovation, according to the survey.

And much of this innovation is coming from outside the company. The study found that 76 percent of CEOs ranked business partner and customer collaboration as top sources for new ideas. This greatly contrasts with internal research and development, which ranked eighth as a source for new ideas.

One of the attendees at the press conference, Ronald Williams, CEO of Aetna, said that the health care benefits provider has made several specific changes to its business based on conversations with customers. For example, Aetna realized that its members will increasingly be responsible for the cost of their health care as medical costs rise.

As a result, he explained how Aetna used IBM's data warehousing products to develop special tools that allowed its members to directly compare the cost of their medical care. Using the online tool, they can compare the price of a doctor's visit or a medical procedure with that of a comparable physician or hospital before they actually show up for their appointment.

"It sounds like a pretty simple idea," Williams said. "But it hadn't been done before. Listening to what our customers needed forced us to innovate and ultimately develop new products for them."

While a large portion of CEOs recognize that big changes are on the horizon, a significant portion indicated some trepidation about their company's ability to make the necessary changes. According to the study, only 20 percent of CEOs said they have been highly successful at navigating through similar changes in the past.

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Aetna Inc., CEO, data warehouse, survey, IBM Corp.

3 comments

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Why pay Consultants? Listen to its Customers and Employees.
I have learned over years of consulting, that consultants usually get their ideas from customers and employees. Senior management should learn to listen to these people rather than paying big dollars to consultants.

But then how will management get the kickbacks and be wined and dined. Follow the Money.
Posted by (31 comments )
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"Senior management should learn....
... to listen to these people rather than paying big dollars to consultants"... If consultants are not hired by any management for that matter - how will analytical and reporting methods that are absent in the "mind set" of "customers and employees" be available to Senior Management for Decision Making!
Posted by Captain_Spock (894 comments )
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free: the new cheap
I have been noticing as of late the growing trend in third party marketing. Marketing something that isnt theres. I think its interesting that ceos are taking user feedback and revamping there buisness model accordingly. We are seeing buisness more as an evolving virus, something that is not set in stone can not become stagnant and will be less likely to go under. Although i think there is much to be said about the infalability of a ceo's choice in a company. some times it is the manic beliefs of the ceos that keep the positive spin on a company and the fear away from investors. I think its important to listen to evolved common sense from the customer base but one should not forget who started the company and the vision they had to begin with
Posted by phillipeb (16 comments )
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