As electronics and high-tech companies cautiously prepare for an economic upturn, they find themselves facing apparently contrasting imperatives. To compete more effectively, especially given the price pressures inherent in an increasingly commoditized marketplace, companies will need to achieve greater operational efficiency. At the same time, they must embed creativity, relevance and market responsiveness into the way their global operations supports the production of new products and services. Consumers and enterprise customers alike want more than just affordability; they want services and devices that are innovative and leading- edge, and that meet their ever-expanding needs.
EHT companies compete in a diverse number of segments—handsets, computers, servers, network technologies and more—so the need to be simultaneously efficient and responsive plays out differently across the industry. Regardless of where companies compete, however, the key imperative is to determine the most appropriate way to organize their global operations to strike the balance between efficiency and responsiveness, which will enable them to outperform their competitors.
Based on new Accenture research into how EHT companies address and execute their most pressing operating model challenges, we have identified a common approach among companies that excel in creating and executing an operating model that is both tightly aligned with their core value proposition and allows them to efficiently respond to market opportunities.
These companies start by having a clear idea of what their organization does better than others in the market—what we call their “competitive essence.” They are then able to optimize their operating model—their global value chain, as well as how the company markets, sells, distributes and profits from their products—using four key levers: organizational structures, processes, technologies and people.
These levers enable successful EHT companies to prioritize investments, choices and trade-offs, and subsequently to execute operations in the right manner to deliver their competitive essence.
Keeping it simple
Our research revealed that the most successful companies are able to express their competitive essence in a simple statement—one that people within 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 user-friendly (think iPhone). To deliver on this competitive essence, Apple must focus on boosting user intimacy and maintaining its leadership in multimedia convergence.
A thorough understanding of competitive essence helps EHT companies more easily achieve operational excellence by making plain which elements of the business are most critical to support with an operational strategy. That understanding also helps them balance inevitable trade-offs 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.
Four operating model levers
As they work to align their operating model with their competitive essence, companies must ask themselves a series of critical questions that can be broadly grouped around four key levers of the operating model: organizational structures, processes, technologies and people.
Organizational structures
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 and consumer electronics. How does Cisco coordinate and integrate these diverse businesses while maintaining a laser focus on its customers?
A large part of the answer is in the company’s distinctive organizational structure. Rather than organizing around products or customer segments, Cisco seeks efficiency by structuring itself around functional lines to verify that no processes are unnecessarily redundant. Next, cross-functional working groups collaborate on weighty projects such as 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.
Processes
EHT companies must decide which processes are standard, where they are performed and whether outsourcing strategies can help them optimize the efficiency of those processes. 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 at different sites worldwide. 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 meet shifting demands.
Technologies
Information technologies are a key enabler, and companies must consider in particular the ways in which technology should be used to support important capabilities such as customer insight and analytics. EHT companies should weigh the use of cloud computing and outsourcing to achieve new efficiencies. At the same time, encouraging open innovation with partners, suppliers and customers can be a way to boost responsiveness.
Once again, Nokia provides an example of how to compete operationally through technology. The company maintains an intense focus on retailer relationships. Additionally, Nokia meets demand in its diverse markets through a deep, analytics-based understanding of its customers—for example, by studying and adapting to how the company’s phones are used—and tracking its products in the market.
People
The fourth critical operating model lever is a company’s 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.
Distinctive talent has been a major factor in the success of a company such as Apple. Passion, motivation and dedication to excellence are embedded at all levels of the company’s culture. 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 company and with external partners.
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.
Achieving balance
Accenture recommends that companies keep the following five imperatives in mind as they seek to balance operational efficiency with innovation and responsiveness:
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Identify competitive essence: Understand what the company does well in its industry to offer a distinctive customer value proposition.
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Establish the right structure: Rely on strategic decisions about customers, products and routes to market, which serve to deliver the capabilities that match the competitive essence.
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Out-execute: Identify and support the right day-to-day work processes that can help an organization achieve significant measurable performance improvements in cash flow and cost efficiencies.
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Balance structure and execution: Determine the unique balance between structural alignment and execution that will drive operational excellence.
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Choose the right journey: Identify the type of journey and level of change that will work best for the organization: continuous improvement, targeted interventions or top-down transformations.
Conclusion
Success in the EHT marketplace 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 primary goal. At the same time, an increasingly complex and convergent marketplace requires innovation and greater responsiveness to changing marketplace and economic conditions.
By determining how to best use the four key levers of an enterprise operating model— organizational structures, processes, technologies and people—in the context of an organization’s competitive essence, EHT companies can build the capabilities that will help achieve the right balance: winning on price, delivering category-killer innovations and more deeply engaging with increasingly diverse and demanding customers.
About the authors
Hans von Lewinski is the managing director of Accenture Electronics & High Tech in the Asia-Pacific region.
For more information about the research, please contact:
Julia P. Riss, Program Manager, Global EHT Industry Program
Armen Ovanessoff, Senior Research Fellow, Accenture Institute for High Performance
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