Hans Von Lewinski and Armen Ovanessoff, Accenture
USA: Many high tech firms are unprepared for global expansion. Accenture discovered this in its new research that polled chief operating officers and other executives from companies in the enterprise, communi cations and consumer technol ogy sectors that have operations in Asia, Europe, and North and South America.
The research and analysis is summarized in a research report titled “The Future of Electronics and High-Tech: Developing International Operating Models for the Next Era of Competition.”
To better prepare for such expansion, every firm needs to, first and foremost, have a clear understanding of its competitive essence. A firm’s competitive essence should be an idea, a vision, an inspiring rallying cry that everyone—employees, customers and collabor ators—can understand easily and that is difficult for competitors to imitate. In determining this competitive essence, a firm needs to make realistic assessments about what its most important differentiating qualities and capabilities are. A company needs to objectively ask itself what it does better than others to win in the market and deliver its distinctive value proposition.
A firm’s competitive essence should act as a magnetic pole that guides operational decision making, helping executives to evaluate choices and trade-offs in a way that remains true to the company’s strategic direction. The guidance of its competitive essence verifies that investments are prioritized effectively.
Competitive essence may sound like a familiar and intuitive concept, but it’s surprising how few companies are able to drive this essence across the breadth and depth of their operations, let alone remain focused on competitive essence during times of serious market change. Those that do so improve their chances of achieving high-performance.
Most executives we interviewed for our survey—76 percent—believe their global operations are geared towards delivering something distinctive to customers - a competitive essence - and 77 percent agree their boards are aligned with that definition.
However, few are satisfied with how their operating model is positioned to bring their competitive essence to life in a way that leads to high performance. Less than one third (31 percent) strongly believe they are leveraging their global scale effectively. The conversion of a clear and differentiating competitive essence into business results is getting lost in the translation.
There are exceptions to this general rule such as Apple, Cisco, and Huawei. Each has distinct value propositions and well elucidated definitions of their competitive essences. Because of this, each ranks among the industry’s most revered firms.
A firm’s competitive essence should drive operating model decisions, and there needs to be flexibility in how these decisions are made. As their competition continues to evolve, and as technology progressively changes, firms need to adapt their operating models more frequently to ensure they are organized for success.
Yet, only 21 percent of our survey respondents strongly agree they are well positioned to respond rapidly and effectively to changes in the global market. It’s imperative that they build flexibility into all aspects of their operating models. All this must be done while remaining true to their competitive essence. This is not an easy feat, but stagnation is a losing proposition in this industry.
As they work to align their operating model with their competitive essence, critical questions companies should 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?
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?
Tools to grow
Accenture’s survey reveals that industry executives are overwhelmingly committed to improving their international operations over the coming years. As they think about specific investments to make in their operational capabilities, they can leverage diagnostic tools that assess the fit between their global operations and their competitive essence. Using these tools, opportunities can be identified in any part of the organization whether in design, sales, leadership, performance management or human resources.
Our research also suggests that more sustainable solutions can be found in the smart use of networks and partnerships to cope with burgeoning new competitors and ever-changing technologies. Accenture’s survey revealed that developing and enhancing partnerships and networks with customers is an operational imperative which has grown in importance because of the economic downturn—even more so than controlling costs.
Firms such as Cisco and EMC have shown that choices around partnerships and networks are as operational as they are strategic, requiring a firm-wide focus on external collaborations to better serve customers, grasp new opportunities, and more effectively manage risk.
Finally, cutting-edge analytics tools can help executives leverage deep customer insights, allowing companies to better satisfy their customers’ changing needs. Our research found, though, that very few firms use analytics to understand customers better – even though these tools have proven their value across other industries.
Hans Von Lewinski is a managing director with Accenture’s Asia Pacific Electronics and High-Tech industry group. He can be reached at firstname.lastname@example.org.
Armen Ovanessoff is a Senior Research Fellow in Accenture’s Institute for High Performance. He can be reached at email@example.com.