Optimizing Global Operations in the Electronics & High Tech Industry

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Figure 1: Creating the appropriate global operating model 4 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? 5 • 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
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