Optimizing Global Operations in the Electronics & High Tech Industry

Optimizing Global Operations
in the Electronics &
High Tech Industry

Creating high performing global
operating models in the Electronics
& High Tech Industry
With the global economy improving
and organizations cautiously preparing
for the upturn, electronics and hightech
(EHT) companies find themselves
facing competing imperatives: Become
more efficient to fight off strengthening
competitors while becoming more
responsive to an increasingly complex
and demanding customer base.
Indeed, with their leaner cost structures,
lower-priced offers and, in some cases,
government backing, many competitors
from emerging markets have been able
to improve their positions during the
recession while more established players
were focused on damage control. For
some, such as computer manufacturer
Acer, this has taken the form of a sharp
focus on simple products and supply
chain excellence. Acer has paid close
attention to driving down costs and
waste, increasing vertical integration
where possible and using its volume
advantage to reduce input prices. As
a result, Acer can do business at a
low price point, thus helping force
more established players to diversify
into software and services to secure
sustainable market positions.
To more effectively compete against
such competitors at home and within
high-growth emerging markets, EHT
companies will need to achieve greater
operational efficiency. This efficiency
imperative is heightened by the price
pressure inherent in an increasingly
commoditized EHT market populated by
recession-weary consumers.
However, an exclusive focus on
operational efficiency is insufficient
for success. Today’s EHT companies
also must embed innovation, relevance
and responsiveness into their
operations. Customers do not simply
want inexpensive devices—they want
devices that are affordable, powerful,
fashionable, and able to deliver an everexpanding
torrent of communications,
data and media. Companies from
multiple segments have developed
groundbreaking innovations to
meet these demands, from Google’s
Nexus One, to Apple’s iPhone, to
Lenovo’s anticipated smartphonelaptop
hybrid. Successfully keeping
pace with this trend requires a high
degree of operational sophistication.
Companies must embrace frequent
change, accelerate innovation
processes and create winning ideas
that translate into revenue. Clearly,
a narrow focus on operational
efficiency will not be enough.
EHT companies compete in a diverse
number of segments, and the need
to be simultaneously efficient and
responsive play out differently
across different parts of the industry.
For handset makers, the major
challenge comes in the form of
unpredictable competition from new
competitors originating from adjacent
segments, such as Apple and Google.
Computer and computer accessory
manufacturers face increasing product
commoditization and downward price
pressure from operationally adept
competitors based in lower-cost
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Figure 1: Creating the appropriate global operating model
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Design, Sell
and Market
Value Proposition
Competitive Essence
Operating Model
Value Chain
Corporate Support
Buy, Make and
Distribute
Operating Model Levers
Transact, Service
and Collect
People Process Technology Structure
countries. Margins in this part of
the industry also are being eroded
by price-conscious consumers in
these same markets. In addition,
companies competing in the server
space also must increasingly engage
with technologies such as virtualization
and cloud computing, which requires
greater customer orientation, deeper
relationships and a local network
of partners. In a similar vein, wellestablished
communications technology
firms increasingly are encountering
competitors from emerging markets
that offer high value. China-based
network-equipment manufacturer
Huawei is the archetype of this new
breed of rival—its model has allowed
the company to establish significant
presence across the world by tailoring
customized solutions to clients at
affordable prices, and achieving
both high levels of efficiency and
responsiveness.
A Structured Approach
for Global Operations
Optimization
Regardless of where they compete, the
key issue that all EHT companies must
address today is this: determining the
most appropriate way to organize their
global operations to strike the balance
between efficiency and responsiveness
that will enable them to outperform
their competitors.
To learn how leading EHT companies
are approaching these operational
issues, Accenture is conducting research
into how EHT companies address and
execute their most pressing operating
model challenges. Looking at leading
practices—including those of high
performance businesses in the industry
such as Cisco, Nokia and Apple—we
gleaned a number of important insights.
We found a common approach among
companies that excel in creating and
executing an operating model that both
is tightly aligned with who they are as
a company and that allows them to
efficiently respond to and capitalize on
market opportunities.
The approach these leaders take is
illustrated in Figure 1. They start by
having a clear idea of what their
organization does well to enable them
to win in the market and deliver their
distinctive value proposition—what
we call “competitive essence.” These
companies are able to express their
competitive essence in a simple
statement that people in the
organization can identify with and
commit to. At Apple, for instance,
this critical dimension is speed to
market, rooted in delivering constant
innovation in the form of designs that
are attractive and extremely userfriendly
(think iPhone). To deliver on
this competitive essence, Apple must
focus on boosting user intimacy and
maintaining its leadership in multimedia
convergence.

Competitive essence should act as a
magnetic pole that guides operational
decision making, helping to evaluate
choices and trade-offs in a way that is
true to the company’s strategic direction.
A thorough understanding of
competitive essence helps EHT
companies to more easily achieve
operational excellence by making
plain which elements of the business
are most critical to support with
an operational strategy, and how
to balance the trade-offs they face
between efficiency and responsiveness.
Competitive essence should act as a
magnetic pole that guides operational
decision making, helping to evaluate
choices and trade-offs in a way that
is true to the company’s strategic
direction. (See Figure 1.)
With their competitive essence
clearly articulated, the leaders we
studied are able to structure their
operations around the world—
prioritizing investments, choices and
trade-offs—and subsequently execute
those operations in the right manner
which delivers that competitive
essence. Creating and executing
the “right” global operations for
the business typically requires
thoroughly answering a number of
critical questions.
Four Operating Model
Levers: Choices and
Trade-offs
As they work to align their operating
model with their competitive essence,
the critical questions which companies
must ask themselves can be broadly
grouped around four levers of the
operating model:
• Organizational structure: To what
extent is decision making centralized or
decentralized? How do different groups
relate to each other?
• Management processes: To what
extent should different capabilities be
customized by location, standardized
across the firm, shared centrally or
outsourced externally?
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• Management technologies: What is
the right underlying IT infrastructure to
enable operations? Which capabilities
are built in-house and which are
bought?
• People: Who should execute each
capability, where should they be
located, and what skills and culture
do they require?
Organizational Structure
From an organizational structure
standpoint, companies must determine
how critical capabilities are organized,
how decision-making will be structured,
and how internal and external partners
will connect. Take, for example, the
innovative approach of technology
giant Cisco, which continues to
expand into new industry adjacencies
in networking equipment, services,
software, consumer electronics and
beyond. How does Cisco coordinate and
integrate these diverse businesses while
focusing on its customers? A large

part of the answer is in its distinctive
organizational structure. Rather than
organizing around products or customer
segments, the company seeks efficiency
by organizing around functional lines.
This helps guarantee that processes
are rarely if ever redundant across the
firm. Then, cross-functional working
groups called “boards” and “councils”
collaborate on weighty projects like new
market entries; the diverse composition
of these teams means that new
products are considered within Cisco’s
broader technology ecosystem, and can
be combined with existing technologies
as part of complete solutions to
customers.
Key Questions:
Organizational Structure
• How should important capabilities like innovation be
organized within the firm?
Management Processes
• Who will be the decision makers, and where in the
organization should they sit—at global headquarters, in regional
headquarters or in local markets?
• How will different business units, functions and geographies
connect? For example, how will a group selling products
interface with a group selling services?
• Who will interface with partners around innovation or
associated service provision, and at what levels?
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Management processes also should be
taken into consideration. In particular,
EHT companies must decide which
processes are standard, where they
are performed, and whether a role for
outsourcing would apply. For Finnish
handset maker Nokia, whose products
are manufactured and sold at high
volumes around the world, this has
meant making its component sourcing
and manufacturing processes global
in nature. The company is thereby
able to rapidly accommodate changes
while manufacturing a wide array of
products between different sites around
the world. Nokia’s clear visibility into
inventory and supply chain means it
can market and sell the right products
in the right places at the right times to
fill shifting demand.
Management Technologies
The third area of consideration is
management technologies and,
in particular, the ways in which
technology should be used to support
key capabilities such as customer
insight and analytics. EHT companies
should consider the use of cloud
computing to achieve efficiencies, open
innovation with partners, suppliers and
customers to boost responsiveness, and
whether there is a role to be played
by technology outsourcing to boost
efficiency. They must, at the same time,
weigh the benefits of these changes
against the managerial implications
they may have. For example, some firms
may be less comfortable with the loss
of total control that cloud computing
or open innovation entail. Once again,
Nokia provides an example with its
intense focus on retailer relationships
and on understanding how its phones
are used by customers. The company
Key Questions: Management
Processes
• How should processes underlying key activities such as R&D,
manufacturing, supply chain or marketing be executed? Should
they be standardized globally or customized for each local
market?
• To what extent can and should processes and activities
be outsourced, and are there clear guidelines for making these
decisions?
• How will alliances with external partners enhance the
performance of key capabilities? For example, how does the
company’s strategy of sourcing component parts impact
manufacturing efficiency?

meets demand in its diverse markets
through a deep analytics-based
understanding of its customers—for
example, by studying and adapting
to how their phones are used—and
tracking its products in the market. For
instance, even though it doesn’t own
the distribution channels, Nokia prides
itself on its ability to build relationships
directly with even the smallest
retailers. In India, this means access to
approximately 250,000 outlets.
People
The final area to consider when
weighing trade-offs between operational
efficiency and responsiveness is people.
EHT companies should ask themselves
which talent pools will be most
important going forward, whether to
standardize or localize talent acquisition
strategies and career development
initiatives, and how best to leverage
the knowledge of its external partners.
For Apple, a major factor in its success
Key Questions: Management
Technology
• Are IT imperatives prioritized based on business objectives?
For example, if increasing revenue from existing customers is
a high priority, shouldn’t technology enabling customer insight
and analytics also be a high priority?
• What are the required IT governance, management
and delivery capabilities to support those business
priorities? What does the longer-term implementation
roadmap look like?
• What is the target IT architecture that will best support
business plans and strategies? For example, are there
opportunities to use cloud computing for certain activities to
achieve efficiencies?
• How should that technology be sourced? Should it be
located within the organization or outsourced?
• Are there opportunities to enable and support knowledgesharing
and open innovation with channel partners, suppliers
or even customers?
has been its people. Passion, motivation
and dedication to excellence is standard
within the company’s culture—from its
famously hands-on top leadership to
its product design teams. The company
has utilized the skills and drive of its
workforce by successively narrowing
its product portfolio and focusing more
energy and talent on a select set of
exceptional devices and services. At the
same time, it has fostered and harnessed
a culture of collaboration—both within
the firm and with external partners. “It’s
not serial,” Apple’s senior vice president
of industrial design explained. “It’s not
one person passing something on to the
next.” The rapid development of the iPod
in less than nine months, for example,
brought together internal teams around
hardware, power supply and display,
among others, combined with the
expertise of external consultants, third
party software and existing technologies
from component suppliers. “Apple’s
designers spend 10 percent of their
time doing traditional industrial design:
coming up with ideas, drawing, making
models, brainstorming,” explained a
former Apple executive. “They spend
90 percent of their time working with
manufacturing, figuring out how to
implement their ideas.” As a result,
products combine style, function and
cohesive integration with an ecosystem
of cutting-edge software and services.
Key Questions: People
• Which talent pools are relevant for different key activities
such as innovation, marketing or the provision of services?
• What are the roles of senior leadership and headquarters,
expatriates in local markets or local talent pools?
• Are talent acquisition strategies and career development
initiatives standardized worldwide or uniquely tailored for
local operations?
• How will corporate culture support change while reinforcing
excellence?
• How can the company leverage the talent and know-how of
its partners around key market insights?
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An Example of an
Organization on the Road
to Operational Excellence
A major global defense contractor with
tens of thousands of global employees
sought to gain an understanding of the
role its organizational model played in
achieving high performance. Like many
complex global companies, the company
was challenged by the difficult decision
of the best place to start. Accenture
recommends that companies pursue
five stepping stones on the path toward
operational excellence:
1. Identifying the company's
competitive essence: Understanding
what they do well in their industries
to offer a distinctive customer value
proposition.
2. Establishing the right structure:
Relying on strategic decisions about
customers, products and routes
to market, which serve to deliver
the capabilities that match the
competitive essence.
When developing a global operating model, one of the
most important exercises is deciding how to structure
and execute each major business process. Should it be
performed in-house or outsourced? Should it be done
off-shore, near-shore, or on-shore (e.g. in each country)?
Does it require reengineering or can it remain as is?
Of course, conducting such an evaluation of hundreds
of complex, global business processes can be a daunting
task. That’s why Accenture has developed the Accenture
Business Operations Modeling Tool, another unique
approach to helping companies enhance their business
operations delivery model.
The tool utilizes a powerful modeling framework, is datadriven
and objective, and provides clear guidance on each
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3. Out-executing: The emphasis here
is on how the right day-to-day work
processes can help an organization
achieve significant measurable
performance improvements in cash
flow and cost efficiencies by improving
flexibility and speed to market, quality
and reliability, and customer value.
4. Balancing structure and execution:
Determining the unique balance between
structural alignment and execution that
will drive operational excellence.
5. Choosing the right journey:
Identifying the type of journey and level
of change that will work best for the
organization: continuous improvement,
targeted interventions or top-down
transformations.
For many companies, this path may be
accelerated using Accenture’s Operational
Assessment Tool. By applying this
diagnostic to its existing operational
model, a company can gain deep
insights into where it has the capabilities
required for operational excellence, the
shortcomings it should address and
the business benefits of doing so. The
diagnostic helps provide a keystone
towards out-structuring, out-executing
and out-performing the competition.
Using Accenture’s Operational
Assessment Tool, the top five
improvement areas for the global
defense contractor were quickly
identified, as shown by the distance
between the desired and actual
performance (Figure 2). For this
company, low-hanging fruit was found
in the areas of design, sales, leadership,
performance management and human
resources. The diagnostic also suggested
areas from which investment could be
redirected without negatively impacting
performance.
Improving Business Processes: The
Importance of a Structured Approach
process. Among the aspects the approach considers when
modeling operations are each process’s position within the
operating model, the business skills involved in executing
it, the volume and flexibility of transactions involved, and
its strategic importance. For example, for some highly
efficient, mission-critical processes, the right solution may
be to leave them in-house, unchanged. For others, the tool
will indicate how they can be enhanced via centralization,
reengineering or outsourcing—or a combination thereof.
By using the Accenture Business Operations Modeling
Tool as part of their overall operating model development
efforts, organizations can create additional value from their
business processes while reducing the risk and disruption
that often can accompany large-scale process changes.

Figure 2: Results of the use of the Accenture Operational Assessment Tool at a defense contractor
OE Index = 35.5 (range: poor 0 to excellence 50)
3
2
1
0
Design Sell Market Buy Make Distribute Transact Service Collect Leadership Perf Mgmt IT HR Finance
+1x
+1.5x
+2x
-1x
Desired structure and execution Actual structure and execution
+1x
+2x
+1x
+2x
3
2
1
0
9

Conclusion
Success in the EHT market increasingly
demands the simultaneous achievement
of what can seem like opposing goals.
On the one hand, a tougher competitive
environment and more price-conscious
consumers drive companies to make
efficiency a top goal. At the same
time, an increasingly complex and
convergent marketplace requires greater
sophistication and responsiveness to
changing conditions.
This challenge certainly is not new.
Indeed, many of the trends we’ve
discussed have been years in the
making. However, the recent recession
substantially magnified the challenge
and has driven EHT companies to a
point at which they no longer can
ignore or downplay what’s needed.
Strategic and operational responses
are required, and required now.
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By determining how to best structure
and use the four key levers of one’s
operating model—organizational
structure, management processes,
management technology and people—in
the context of an organization’s
competitive essence, EHT companies
can build the capabilities that will help
allow them to “do it all”: win on price,
deliver category-killer innovations, and
more deeply engage with increasingly
diverse and demanding customers.

Sources
1. “The World According to Chambers”
The Economist, 29 August 2009
2. Almar Latour, “Trial by Fire Tested
Mettle Of Rivals Ericsson and Nokia —
Crisis Bared One's Weakness, Other's
Strength” The Wall Street Journal
Europe, 29 January 2001
Austin Weber "Telecom's Wild Ride: Will
New Technology Help The Mobile Phone
Business Rebound?" (Industry Watch)
Assembly, 1 April 2003
3. “How Nokia Listens to Market
Signals” Business Line (The Hindu),
26 April 2010
4. Betsy Morris, “What Makes Apple
Golden” Fortune, 3 March 2008
Leander Kahney, “The Straight Dope
on the IPod’s Birth” Wired Magazine,
17 October 2006
Rob Walker, “The Guts of a
New Machine” New York Times,
30 November 2003
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Contact Information
To find out more about how Accenture
can help your organization with its
global operations, please contact:
Hans von Lewinski, Managing Partner,
Electronics and High Tech, - APAC
hans.von.lewinski@accenture.com
Juan Carlos Marcos, Senior Executive,
Global Supply Chain - Technology
juan.carlos.marcos@accenture.com
Henrik Östhed, Partner,
Communication & High Tech - Strategy
henrik.osthed@accenture.com
Jonathan Wright, Managing Director,
Supply Chain for SEAAK
jonathan.wright@accenture.com
Copyright © 2010 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.
For questions related to the research,
please contact:
Julia P. Riss, Program Manager,
Global EHT Industry Program
julia.p.riss@accenture.com
Armen Ovanessoff, Senior Research
Fellow, Accenture Institute for
High Performance
armen.ovanessoff@accenture.com
About the Accenture
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Performance develops and publishes
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leaders to demonstrate, through
original, rigorous research and analysis,
how organizations become and remain
high performers.
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Joshua B. Bellin
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Armen Ovanessoff
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