Emergence of a new market/channel – huge untapped potential for Nordic companies 25 megacities: 470 million inhabitants – a market larger than the European and US markets Investing in urbanisation – the example of China New G2M approach needed – from "micro-thinking" to "macro approach" Reaching an attractive position – four elements to address
Megacities – discovering potential How to approach this new market
Quartz+Co is setting a new agenda concerning megacities as a potential new market/channel for many Nordic companies Quartz+Co works with several customers for whom the megacities of the world are becoming a very attractive segment – however, the key issues are
• How to structure the go-to-market model? • What product/solution to offer to whom? • Whom to partner with in order to be part of the "game"?
2 Source: Quartz+Co feature in Berlingske Tidende, October 2011
Today, there are 25 megacities in the world with a combined population of 470 million inhabitants – a market that is greater than both the European market and the US markets Top-25 megacities in the world with estimated populations Inhabitants London (12.5 million)
Istanbul (13 million)
Moscow (14.8 million)
Tehran (13.1 million)
Comparison of population size Million inhabitants Beijing (13.9 million)
Guangzhou (25.2 million)
Seoul (25.1 million) Tokyo (34.3 million) Los Angeles (18.1 million)
Shanghai (24.8 million) Mexico City (22.9 million)
399 313
Dhaka (14 million)
Rio de Janeiro (12.5 million)
Manila (20.3 million) Cairo (15.3 million)
SĂŁo Paolo (20.9 million) Buenos Aires (14.4 million)
470
Osaka (16.7 million)
New York City (22 million)
Lagos (12.1 million)
Karachi (17 million)
Kolkata (16.6 million) Mumbai (23 million)
Delhi (23.3 million)
Note: Population figures are from July 2011. Figures include urban areas 3 Source: CIA World Fact Book
Jakarta (18.9 million)
USA
EU15
Top-25 megacities in the world
The pace of the world's urbanisation rate will continue, and future investments are expected to be significant Share of the world's population living in urban areas Per cent (billion people)
Example of Chinese investments in megacity developments
(8.22) (7.91) (7.57) (7.22) (6.84) 41% 43% 46% Rural areas
Urban areas
48% 50%
50%
2010
52%
2015
54%
57%
China is planning to invest DKK 1,800 billion across 160 infrastructure projects over the next years to merge nine cities in South China, creating a city with 42 million inhabitants
59%
Total investment in urban infrastructure in China over the next five years is expected to hit GBP 685 billion, with an additional GBP 300 billion spend on high speed rail and GBP 70 billion on urban transport 2020
2025
2030
4 Source: World Economic Forum; The Economist; British Chamber of Commerce
British Chamber of Commerce
ILLUSTRATIVE
The traditional go-to-market approaches will not be suitable when addressing this new market as demand is moving from "micro-thinking" to "macro approach", introducing new decision models in the market From a micro-thinking approach with multiple customer touchpoints across sectors ‌
‌ to a macro approach where purchasing decisions are co-ordinated and made on an aggregated level across sectors
Traditional go-to-market approach
Market approach towards megacities
Energy
Transport
Water
Buildings
Suppliers
Energy
Suppliers
5
Suppliers
Suppliers
Suppliers
Masterplanning
Transport
Water
Buildings
ILLUSTRATIVE
The change in market logic will drive a shift in demand from single components to integrated infrastructural solutions consisting of multiple components, advising and services
Megacities are demanding integrated solutions in which previously independent components and services are bundled
Energy production and distribution
Component 4
6
Servicing
Component 3
Installation
Component 2
Advisory
Component 1
CASE
Megacities is one of four key strategic focus areas for Siemens and an opportunity for the company to leverage its diversified portfolio to one defined customer segment The new Infrastructure & Cities Sector will manage the company's global business with cities and infrastructures. The new Sector, with around 87,000 employees, will contain the Mobility and Building Technology Divisions from the Industry Sector, as well as the Power Distribution Division and Smart Grid business from the Energy Sector. Siemens, September 2011
7
In order to obtain an attractive position within the megacity market/channel, a potential player needs to address four elements Underlying issues 1
Product offering
2
Go-to-market model
• To what extent is your stand-alone offering unique and innovative in the market in terms of other solutions from competitors and substitutes?
• How can your company best succeed in the market with the new channel needs and market logic? – As a stand-alone company only offering own products and services – Through partnerships with other players offering more integrated solutions
3
Business strategy
4
Organisational capabilities
8
• How, and in what order, should you address the different subsegments in the market (cities/geographies)?
• What are the organisational requirements needed to be able to address this new channel/market? • To what extent do your current competences match the needs?