Electronics strategy consulting

Transcription

1 IBM Global Services Electronics strategy consulting Strategy consulting help helps companies transform the way they do business. We help our clients achieve competitive advantage through a fusion of business, customer and technology strategies and an explicit linkage of critical issues to actions and results. We bring our clients the resources of IBM Global Services, the largest services company in the world, and the first-hand operational experience the IBM Corporation has gained over the course of its ten-year transformation. Below is an example of our insights and work in the electronics industry. TRANSFORMING PRODUCT CENTRIC COMPANIES FROM A CHINK IN THE SUPPLY CHAIN TO A LINK IN THE CUSTOMER'S VALUE CHAIN The Issue: Many product-based companies in the electronics industry are suffering from declining margins due to global competition, shorter product life cycles and more fickle customers. Products in the same market rapidly start to look alike, leaving price as the only differentiating factor. To combat this, some companies have tried to become "services" or "solutions" providers. Most have failed, either completely or in meeting unrealistic margin goals. Our Perspective: To start successfully down this path, companies must first create a new type of strategic initiative that looks not for services opportunities, but for opportunities to create -- and share in -- business value with your customers. When properly executed, such strategies align your incentives with your customers' and create differentiated offerings

2 with high barriers to competition. Further, as the depth of customer knowledge and the breadth served in the customer's value chain expands, high barriers to competition are created. Case in Point: In light of the global oversupply of microelectronics for the technology industry, a Global 500 consumer and hightech electronics company quickly needed to generate new sources of revenue that would smooth cyclical business results and strengthen their existing customer relationships. A joint IBM-electronics company team conducted extensive primary customer research to identify the needs of the microelectronics market, behavioral segments, and overall readiness as well as the size and profitability of potential opportunities. They also analyzed their existing product-based business to identify leverageable capabilities and assets as well as any organizational barriers that could jeopardize a fledgling services-based business. Their final recommendations proposed three new services businesses with detailed pro-forma financials, operational requirements, a list of pilot customers, and a go-to-market approach. From this rigorous and clear analysis, completed in 8 weeks, the executives selected and are now implementing the plan to build a US$1B services company to employ approximately sixteen hundred service-professionals within five years. A Global 500 consumer and high-tech electronics company was interested in leveraging its core capabilities to generate new sources of revenue that would smooth cyclical business results and strengthen its existing customer relationships. In order to build a business that achieved these goals and created value for the end customer, a joint IBMelectronics company team conducted extensive primary customer research to identify the market's needs, behavioral segments, and overall readiness as well as the size and profitability of potential opportunities. The team also analyzed the company's existing product-based business to identify leverageable capabilities and assets as well as any organizational barriers that could jeopardize a fledgling services-based business. The final recommendations proposed three variations on a new services business and included detailed pro-forma financials, operational requirements, a list of pilot customers, and a go-to-market approach. Lessons learned from IBM's own transformation experience has helped this historically product-focused client build its own services business, one that is expected to generate US$1 billion annually and employ approximately sixteen hundred service-professionals within five years. 2

3 MANAGING FOR FLEXIBILITY IN THE ELECTRONICS INDUSTRY The Issue: The significant downturn in the electronics industry in was evidenced by large inventory write downs, factory closings, and massive layoffs, particularly in development organizations. At their root, these changes were spurred by a mismatch between supply and demand and more specifically, the inability of these companies to quickly make adjustments to compensate for shifting demand curves. In a rapidly changing market with short life cycles and highly volatile demand, firms must manage their supply flexibly to meet demand. Our Perspective: A firm that is truly flexible can quickly adjust to changes in demand and create sustainable value in a volatile marketplace. Electronics industry managers must develop capabilities and tools that allow them to quickly respond to changing market dynamics in a flexible and agile manner. There are two areas that can be managed for flexibility. The first is production: the sourcing, manufacturing, and distribution of product. The second is innovation: the research, development and design of new product concepts, processes, and features. Over the long run, companies that can manage their innovation and production capacity to closely anticipate and match market demand will create the most business value. Managing for this kind of flexibility requires strong control of your production processes and tools that enable visibility into these processes. This knowledge will give managers the ability to make educated decisions on how to respond to changes and optimize business value. The development of greater predictive capabilities will allow managers to create more accurate forecasts and develop a higher degree of confidence to react. In the innovation area, companies need to gain visibility or control over their development and design processes. Innovation Management solutions and Product Lifecycle Management (PLM) tools such as Integrated Product Development (IPD) can be used to control these development processes. In the production area, processes tend to be much more transparent and in control after years of MES, MRP, and SCM deployments. Leading companies are now moving to integrate these systems to create a unified view of their supply, manufacturing, and distribution capacity. 3

4 Complete visibility across innovation and production processes and the ability to react quickly to changing market dynamics will enable firms to better match supply to demand, thereby optimizing their business value. Case in Point: A US$3B international manufacturer of networking equipment was challenged by trade policy changes that would open doors to new competition and threaten its success in the marketplace. It needed a way to transform its current approach to planning, selecting, justifying, and managing new product development in order to maintain its leadership position. The joint IBM-manufacturer team's initial assessment of the market and their capabilities, identified Integrated Product Development (IPD) as the primary lever by which to address the new challenges. The project was undertaken in four major steps: Identify the problems in the manufacturer's current product development operations Educate the manufacturer on product development best practices, leveraging IBM's own transformation experiences Develop the 'to-be' product development process at an operational level Expand the management approach of the new product development processes. Emphasizing a market view of new products and coupling its product development with market needs, rather than an internal, technology-driven view, allowed the manufacturer to position itself to better react to fast-changing markets. The first pilot successfully produced an 'on-schedule' product introduction. By the end of the second pilot, the manufacturer assumed ownership of the IPD process, now in full deployment. With a management structure the manufacturer is on track to achieve a 40 percent reduction in time to market for new products. Additional links Multiplying business value: The fusion of business and technology Consultants have long proclaimed the need for strategic alignment between business and IT: Set your business strategy, and then determine how technology can help. Unfortunately, traditional alignment approaches invite risk and leave opportunities untapped. Higher returns can be achieved through a higher degree of strategic alignment - - the fusion of business and IT. 4

5 Closing the performance gap: Back to basics for the U.S. banking industry Banking institutions across America show a striking dichotomy in terms of stock performance. Those that remain at the top of the charts display strategies and attributes that consistently garner shareholder value. A recent study by the IBM Institute for Business Value suggests that while their methods may vary, these leaders share three distinct strategies. Weathering the economic downturn while moving ahead While the economic downturn has hit some sectors and geographies harder than others, almost every business has felt its impact. At the same time, economic uncertainty elicits different reactions from different firms. Some organizations simply tread water, while others move ahead of competitors. As executives rethink their business strategies, they should consider a variety of approaches -- including some that are not immediately obvious given today's uncertain economic climate. 5