4 campanile seagate strategy_20150316
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4 campanile seagate strategy_20150316
- 1. “Those who study genetics… study fruit flies… If you want to understand why something happens in business, study the disk drive industry.” − Clayton Christensen, The Innovator’s Dilemma, 1997 Min Xiao, Daisuka Itoga, Roshini Das, Surbhi Bordia 3/16/2015
- 2. 2 What is Hard Disk Drive?
- 3. 3 Founded: 1979 Employees: 52,000 (2014) Executive office: Cupertino, CA Principal products: Hard Disk Drives (HDD) Revenue: $13.7 billion, 28% margin (2014) Who is Seagate? Asia- Pacific Americas EMEA OEMDistributors Retail Lead the world in storing, protecting and sharing its digital creations Revenue
- 4. 4 High Barriers to Entry • Tens of thousands of patents • Capital intensive High Buyer Power • Cost sensitive • Quality & reliability • Cyclic demand High Threats from Substitutes • SSD (flash) • Optical Storage • Tape High Supplier Power • Low profit margin • High precision • Quality & reliability • Large variety Industry Structure • Rapid product cycle • First mover advantage • “Like-for-like”, price wars • Compete on standards Nature of Business
- 5. 5 Maturity to Decline? Good News: Seagate survived Bad News: commoditization, threats from SSD < 60 years > 200 companies 2+ companies 45% 40%
- 6. 6 Current Business – Make Everything Cloud Service Gaming DVR Storage Client Computing (67%) Portable External Storage Consumer Brand Sharing Wireless Storage NAS Surveillance Camera Storage Enterprise Storage (13%) Client Non-Computing (20%) It was the winning formula. But is it now?…..AHHHH
- 7. 7 Changing Landscape Political / Governmental • Data-, National-Security • Anti-Trust (MOFCOM) • Environmental, labor regulations Social / Cultural / Demographic • Mobile, media-rich, wireless • Social networking Technological • HDD technology slowing down • SSD taking over smart-phone, tablet, laptop, high-end enterprise • Cloud, Big Data, Internet of Things Economic • Storage growing 35%/year • Customer shifting from PC OEM to data centers and NAS
- 8. 8 O Opportunity S Strength • Vertical integration • Manufacturing, automation • Engineering know-how • Supplier partnership • Global, close to market • Consumer brand recognition • Conservative, procedure- ridden • Reactive, fast-follower • Low differentiation • Cloud, NAS, surveillance • Out-of-the-box w/ software • Cut-out VARs, OEMs W Weakness T Threat $/GB (Log) • “All-flash”
- 9. 9 Grow Out of HDD, Provide Total Solution Strategic Options Benefits Risks Dominate Data Centers • Growing market • Margin • In touch w/ end needs, optimized system performance (software & hardware) • Newer business Focus on NAS, Surveillance • Growing demand • Brand equity • Service • Margin • WD first mover Focus on HDD OEM • Historical • No direct sales • Focus on engineering & manufacturing • OEMs capturing most profit • Lose touch w/ end customers Status quo “make everything” • Diversified, hedging bets • Resources • Manufacturing complexity • Margin
- 10. 10 Dominate data centers before SSD reaches cost parity Implementations – Time is Critical Now Realign resources Build core competences (software & hardware) Co-create values with customers Branding 12-24 months Move up stack Deliver systems in volume Expand service 24-36 months Go direct to end users Dominate data centers “You Don’t Adjust. You Just Dominate” – Al Davis
- 12. 12 Value Chain Korat (Thailand) Wuxi (China) Suzhou (China) Penang (Malaysia) Korat (Thailand) Tepurak (Thailand) Korat (Thailand) Korat (Thailand) Wuxi (China) Woodlands (Singapore) Normandale (US) Springtown (N. Ireland) WAFER SLIDER HGA HSA Media Technology Product Design Component Manufacturing Assembly Marketing, Distribution Customer Service Design Centers Shakopee (US) Longmont (US) Science Park (Singapore) System Integrators Storage Services
Editor's Notes
- Page 20 “Those who study genetics avoid studying humans,” he noted. “Because new generations come along only every thirty years or so, it takes a long time to understand the cause and effect of any changes. Instead, they study fruit flies, because they are conceived, born, mature, and die all within a single day. If you want to understand why something happens in business, study the disk drive industry. Those companies are the closest things to fruit flies that the business world will ever see.”
- - IBM RAMAC 350 (1956), 50 24” platters, 3.75 MB
- One of the first foreign companies to enter China (1995) and Thailand (1983). Currently 41,400 or 86% of the employees are in Asia (15,400 in China, 16,400 in Thailand). EMEA: Europe, Middle East, Africa OEM: original equipment manufacturer Company of the Year 2006
- Buyer power [differentiate, flexible, common components] Supplier power [vertical integration, dual sourcing, local infrastructure] High barriers to entry [difficult to re-tool or re-invent] High threats from substitutes SSD: Solid State Drives, uses flash memory technology [embrace SSD: Samsung acquisition] [WD acquied Virident, sTec (SSD maker), Velobit (enterprise SSD manufacture)] Current industry structure [compete on cost]
- Seagate is at a critical juncture. Is it going to grow, sustain or decline? (I have a colleague who told me that he was sitting at the same desk while the company changed hands four times.)
- Volume: units shipped Enterprise servers and storage systems in mission critical and nearline applications; Client compute applications, primarily for desktop and mobile computing; Client non-compute applications, a wide variety of end user devices such as digital video recorders ("DVRs"), personal data backup systems, portable external storage systems and digital media systems.
- General external environment Political [Seagate’s acquisition of Samsung, WD’s acquisition of Hitachi GST, MOFCOM Chinese Ministry of Commerce] Economical Social [media-rich, wireless storage, smaller form factor – but cannot compete with SSD] Technological [Seagate spent $1.2 billion or 9% on R&D in 2014, WD 7%. Seagate has 4962 issued US patents as of June 27, 2014]
- VAR: value-added reseller Acquired Xyratex in 2013. Seagate’s real competitor is not WD but flash “Seagate Way” was launched in 2012 to change culture.
- Focus on HDD OEM: Seagate’s traditional territory. No need to deal with end customers, can focus on engineering & manufacturing.
- Capital intensive operations Strong manufacturing and automation Own key components [vertical integration] Dual sourcing [worked well in Thailand flood, however complex to manage] Global operation Seagate acquisitions 2005, Mirra, personal servers for data recovery, ActionFront Data Recovery Labs 2006, Maxtor for $1.9 billion all-stock 2007, Evault 2011, Samsung [SSD supply] 2013, Xyratex [enterprise computing and storage, testing equipment] for $374 million 2014, Avago / LSI [flash] for $450 million