Exploration of Factors That Influence Failure in The Electronics Hardware Outsourcing Industry. Oral Presentation Submitted to the Faculty of Argosy University Campus, College of Business. In partial fulfillment of the requirements for the Degree of Doctor of Business Administration David O. Chavez 8-18-11
} Research Problem:} Failure in outsourced manufacturing Survey: Only five percent achieve significant benefits (Lonsday, 1999). Survey considered 37% outsourcing engagement failures, (Barthelemy, 2003).} Limited data exists in Electronic Hardware Manufacturing Outsourcing (EHMO) because: ◦ Publicity damage reputation and stock prices. ◦ High Technology Intellectual capital secrecy ◦ Competitive pressures
} Research Problem Background ◦ $370 Billion Industry ◦ Global Industry ◦ Much Intellectual Property involved ◦ Over 4000 Contract Electronic Manufacturers supporting Multinational Original Equipment Manufacturers. ◦ Impacts Manufacturing in the following industries: Medical Device Consumer Electronics (Cell phones, Tables, PCs, etc) Aerospace Electronics Military Electronics (Communications, etc.) Industrial Controls Communications (Infrastructure Hardware)
} Main Research question: ◦ What did participants perceive as major factors that influence failure in EHMO industry? -Sub Questions: 1 How did participants perceive the alignment of capabilities and goals as influencing failure in outsourcing in the EHMO industry? 2 What did participants perceive as failure in the EHMO industry? 3 What did participants perceive as the necessary types of people needed for a successful outsourcing relationships?
Literature Communication People Capabilities Flexibility Goalsreview FactorsCapabilities X X X XOutsourcing X X X XWrongProcessesIntegration X X X X XRisksNPI/NPT X X X X XRisksProduct Mix X X X X Xand VolumeRisksProduct Life X X X X XCycle RisksCosts X X X X XInnovativeness X X X XQuality X X X XTime Related X X XLack of Trust X X X X XGlobal Risks X X X X X!
} Rationale for Qualitative Research ◦ Complex and interrelated Human factors such as trust, commitment, communication and business culture. ◦ Qualitative research is good for: Providing Rich explanation of complex Phenomenon. Discovery of Human experiences and perceptions. Explore of evolving concepts or theories. Further understand human relationships and patterns. (Rubin & Rubin, 2005; Cronbach, 1975; Hoepfl, 1997; Bloomberg & Volpe, 2008)
} Criterion-based Purposeful Sample selected (Electronics Hardware Executives, 10+ yrs).} Develop Interview & critical incident questions & Demographic survey.} (1) Pilot Sample} Refine Research Design} (8) Semi-Structured, In-depth, telephone interviews} (1) Semi-Structured, In-depth, Face-to-Face Interview} Data is recorded, transcribed, coded, & analyzed in Nvivo and Synthesized.} Findings, conclusions & Recommendations
} Rationale: Needed to have experience executives that have experienced failure and discuss details of factors.} Total of 10 executives} Electronics Hardware Executives with average of 10 year experience with CEMs, or OEMs.} Participated in electronic outsourcing selection process.} Manager, Director, CEO level experience} Experience working either engineering, management, quality, supply Chain, procurement, or sales.
} Primary data collection tool is the recorder during interviews.} Recorder provided ability to: ◦ evaluate voice inflexion, ◦ emphasis on certain topics ◦ ability re-listen to details not gathered in live interview.} Memos, Annotations of Data, Notes} Survey filled during interview
} Read, re-read, listen to transcripts and annotate Data in NVivo.} Assign Preliminary categories based on on transcripts and literature review.} Translate Categories to “Free nodes” in Nvivo.} Consolidate Free nodes to broad nodes in NVivo.} Cross-code to capture data from prompted & non-prompted responses.} “Coding-on” and break down some codes to further define (Tree Nodes in Nvivo).} Validate Data (Text and Code association query)} Synthesis of Data.
Business Culture Text Query 4% Flexibility 9% GoalsCommitment 25% 10% Capabilities Communications 16% 19% Trust 17% Flexibility Business Culture Manual code References 9% 4% Trust 11% Capabilities 21% Commitment Communication 17% 20% Goals 18%
A Code Query searches for associations with two or more codes assigned in data.
Manual Code association References80706050403020 References10 0
} Main Research question: ◦ What did participants perceive as major factors that influence failure in the EHMO industry? ◦ Findings #1 1 Capabilities, 2 Communications, 3 Goals (cost, quality, delivery, functionality & financial), 4 Trust, 5 Flexibility, 6 Commitment 7 Business Culture.
} Finding #2: The majority (65% of participant code association references) cited commitment & capabilities combined with other factors to influence failure with other factors the most.
Par$cipant Code Associa$on References (Capabili$es and Commitment) 70605040302010 0
} Sub-Question 1How did participants perceive alignment of capabilities and goals influence failure in the EHMO industry?Finding #3: The overwhelming majority (82% of participant references) cited commitment, capabilities and goals influence failure.
Sub-question 2:} What did participants perceive as failure?Finding #4: 96% of participants cited misalignment of relationships, communications & goals as influencing failure. Percep$on of Failure Significant Loss References 4% Relationship 21% Goals 39% Communication 36%
Finding #5: 39% of participant references cited not meeting a critical goal (product price, quality, delivery, or functionality) as a failure.
Finding #6: 34% of participant references cited problems with relationships and communications related to failure. Code Association References3025201510 5 0 Communication Communications Relationships & Communcation & Goals & Relationhships & & Relationships & Goals Goals Significant Loss Significant Loss Significant Loss
Finding #7: 4% of participant references cited a “significant loss” related to failure. Significant loss is defined as a loss of large customer, opportunity, or catastrophic event.
Finding #8: 100% of participant references cited a skilled communicator, dedicated, & Flexible as the necessary type of people needed for successful outsourcing relationships.Finding #9: 52% of participant references cited a dedicated as necessary characteristic for outsourcing relationship. Successful People Manual Codes References Flexible 11% Skilled Dedicated communicator 52% 37%
Critical Incident Report Code References Communication 8% Goals Capabilties 13% 29%Flexibility 15% Business Culture 18% Committment 17%
Code Association References504540353025201510 5 0 References
} Failure occurs when one, some, or all of the following are misaligned: ◦ Communications ◦ Flexibility ◦ Commitment ◦ Goals ◦ Business Culture ◦ Capabilities ◦ Trust
} Outsourcing cannot sustain non-achievement of certain critical organizational goals (price, delivery, quality, & functionality).} Goals were listed: ◦ Top 3 (Main Question) ◦ Top 2 (Sub-Question 1) ◦ Top 1 (Sub-Question 2) ◦ Top 5 (Critical Incident)
} Misalignment of goals, trust, commitment & communications are “Fundamental Factors” to most failures. All within Top 4-5 factors in Code references Goals Communication Trust Commitment Capabilities Flexibility Business Culture
} Trust, Communications, & Commitment are key building blocks of a CEM and OEM outsourcing relationship. Communication Trust Relationship Commitment
} Capabilities and Goal alignment is not enough to prevent failure. OEMs and CEMs must be committed to each other. Code Association Analysis & Interviews.} “Many-to-Many” communications lead to “Many-to-Many” relationships to reduce failure. Code Analysis & Interviews.} Significant loss: non-achievement of critical goals, or loss of key customer relationship.
} Only (10) participants.} (5) Participants contributed much more in Content to the study.} Limited on the impact of factors on specific Industries (medical, military, industrial, consumer, etc.)} Limited on the impact of factors on other geographic cultures, languages, markets and technologies.} Researcher interviewing and probing skills.} Researcher Interpretation of data.
The Outsourcing Factor Iceberg Hard FactorsVisible & Goalsmeasureable CapabilitiesNot Visible &hard tomeasure Soft Factors Relationships: Communication, Trust, & Commitment Business Culture Flexibility
} Emphasizes “Soft Factors” when evaluating Outsourcing partners.} Emphasizes managing and improvement of soft factors over time.} Transcends to other outsourcing industries such as: ◦ Pharmaceutical, ◦ Call Centers, ◦ Mergers and Acquisitions ◦ Strategic Supplier relationships.