Collaborative Innovation: Forging a new path to profitability in the electronics industry

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Electronics companies face short product lifecycles, commoditization, intense competition, fast-changing demand and brand erosion. Traditionally, the standard response has been to single-handedly rush innovations into the marketplace and hope they catch on. Producing profitable and sustainable growth, however, requires a radically different approach.

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Collaborative Innovation: Forging a new path to profitability in the electronics industry

  1. 1. IBM Global Business Services Human Capital Executive briefCollaborative innovation: forging Managementa new path to profitability in theelectronics industry.
  2. 2. Electronics companies face short product lifecycles, commoditization,intense competition, fast-changing demand and brand erosion. Traditionally,the standard response has been to single-handedly rush innovations into themarketplace and hope they catch on. Producing profitable and sustainablegrowth, however, requires a radically different approach.Innovation alone won’t grow profits • The visionary leader — A senior executive, with outstandingFor the last ten years, innovative companies consistently have foresight into industry trends, potential products or a newbeen able to grow profit margins eight times faster than other business method, motivates employees to pursue his or herfirms, according to an article in BusinessWeek. While innova- 1 vision. The executive also has an uncanny ability to spottion is a major component of competitive differentiation — and new ideas with potential. Think Steve Jobs and Henry Ford.a compelling way to heighten marketplace acceptance and • Innovation through rigor — Project teams use carefullyenhance revenue success — it is how innovation happens that designed processes to produce results systematically.is setting businesses apart. These companies closely monitor the industry landscape and focus their tactics to quickly and efficiently developTraditionally, innovation has been built into products through solutions. Think Samsung.internal research and development efforts. But advances in tech- • Innovation through collaboration — A company teams withnology have become too fast paced, complex, expensive and outside firms and people to develop the most appropriatetime-consuming for most organizations to remain informed on solutions to meet customer needs. Collaborative organiza-every issue that affects their business, especially when it comes tions create a common performance vision with partnersto introducing new products. As a result, business models and and nurture innovative cultures that can support the busi-the way companies drive innovation have begun to change dra- ness model. Think Vodafone and IBM.matically. Although no two organizations will approach innovationin exactly the same way, IBM has identified several archetypes, One point to keep in mind about these archetypes is that theyincluding the following: all heavily rely on collaboration, whether it’s internal, external• The marketplace of ideas — Employees are encouraged to or both. Even the visionary leader works closely with others to develop and promote their ideas to colleagues and corporate identify productive ideas and areas for improvement, because leaders. The best new products and ideas are implemented that is often the only way to access the diverse sets of skills and quickly to test their feasibility. Think Google. resources needed to implement today’s multifaceted solutions. With digital convergence and the demand for solutions instead of products, many businesses are finding that they must collaborate — or risk being left behind.
  3. 3. Top benefits realized through collaborative innovation. (Percent of respondents) Access to markets/customers 59 Higher quality or customer satisfaction 48 Access to skills/products 48 Reduced cost 44 Increased revenue 44 Focus on specialization 39 Faster time to market 37 Overall speed and strategic flexibility 33 Move from fixed to variable cost 26 Shared/reduced risk and capital investment 26 0 10 20 30 40 50 60 Source: The Global CEO Study 2006.That’s why the electronics industry is embracing collaborative A new paradigm is taking rootinnovation, a new business model that enables organizations Clearly, CEOs of electronics companies recognize that ongoingto differentiate themselves more effectively by leveraging the timely introductions of new products is necessary for long-core competencies of an outside source to augment and drive term marketplace success . And they realize that the ability tointernal innovation. All while minimizing costs, speeding time maintain tight development cycles is essential to gaining first-to market and improving success rates. mover advantages, including potentially greater market share. However, execution is often difficult with excessive cycle timesGlobal collaboration is needed throughout the innovation resulting in cost overruns and lost revenue opportunities. Whilechain — from research and development to commercialization. the consumer electronics segment is affected most, disruptiveAnd now that there’s a fundamental shift under way in terms trends are felt throughout the electronics industry value chain.of how companies create value — a transformative changethat extends beyond electronics companies — organizations To maintain a competitive edge, organizations in all industriesare challenged to better support cross-enterprise collabora- are looking to outside resources to significantly reduce coststion and fast-cycle-time innovation. and time to market—and increase responsiveness to customer needs. In fact, the IBM Global CEO Study 20062 found that top CEOs are collaborating beyond their organizations — with their extended networks of suppliers, customers, business partners and others.
  4. 4. Even so, electronics companies still generate twice as many spur IT advancements that are beneficial to developers andideas internally as externally — probably because most innova- users.4 In January 2008, IBM opened its jazz.net developmenttion efforts are closed, protected and increasingly inadequate.3 platform to provide an open, commercial community designedCollaborative innovation offers a glimmer of hope to an indus- to help companies globally and transparently collaborate ontry that depends on innovation for its survival. If companies the development of IBM Jazz™ platform–based technology.can determine which organizations they should collaborate Rather than simply providing a vehicle for feedback, the Jazzwith and when, they stand a better chance of achieving mea- platform enables the global community to be a part of IBM’ssurable results, despite the business challenges. development process from start to finish, resulting in more effec- tive solutions.5Cultivating collaborative innovationNearly 90 percent of the electronics CEOs interviewed for the Build on sharing and nurturing a culture of innovationIBM Global CEO Study 2006 believe that collaboration is impor- In addition to considering what they want to share, electronicstant to the innovation process. Nevertheless, many electronics companies must also carefully consider how to share new ideas.companies find that while technological knowledge is plentiful, The process of bringing new insights and approaches to thebusiness insight is in short supply. Because of business skills surface requires a high level of creativity and innovation. Moreshortages and engineering-dominated cultures, technological specifically, it requires companies to develop new forums andknowledge and business insight aren’t always combined at the networks dedicated to collaboration—forums that spark neededright time or to the right degree. dialogues and inspire participants to generate new ideas. For IBM, this meant implementing three big innovation drives:Therefore, to establish effective collaborative innovationapproaches, electronics companies need to fundamentally • InnovationJam — The largest online brainstorming sessionrethink some aspects of their operations. ever conducted, InnovationJam attracted more than 150,000 people from 104 countries and 67 companies and generatedAdapt to the “two-way-street” reality of collaborative innovation more than 37,000 ideas.For the majority of companies, innovation is still driven by • Global Technology Outlook — An in-depth, yearly presenta-one-way, secretive internal processes. At its core, however, tion at which scientists from IBM Research discuss emergingcollaborative innovation is about embracing a two-way process. software, hardware and services technology trends that arePart of the challenge is to give up secrecy and total control over expected to have a major influence on business in the nextnew products in favor of potentially greater progress at a faster, two to ten years.more efficient pace with the right input from parties that have a • Global Innovation Outlook — An annual event that bringsstake in the outcome. together some of the brightest minds in business, politics, academia and nonprofits to collaboratively address theCompanies also need to get used to the idea of opening their most pressing business, societal and technological issuespatents — some of their most valuable assets — to partners and by engaging in an ongoing global dialogue.even competitors to promote progress and foster new ideas. IBMhas opened access to more than 500 software patents for indi-viduals and groups working on open source software. IBM’s goalis to cultivate an industrywide “patent commons” that can help
  5. 5. Take advantage of the right toolsTo promote constructive collaboration, it’s important to pro-vide context to show how related information is relevant. Forexample, companies with geographically dispersed teamsno longer have to depend on face-to-face meetings, telecon-ferences or e-mail to collaborate. Now they’re finding it eveneasier to share ideas and content with each other — as well “ Previously, product-basedas monitor the status of a project — when access to a wiki is innovation was of greatestcombined with project-specific information. importance. However, marketAccording to a recent report from the consulting firm Frost Sullivan, companies that arm themselves with effective pressures are driving thecollaboration capabilities routinely outperform competitors inareas such as revenue growth and operating margins.6 These importance of business andcollaboration tools can range from enterprise instant messag- operational model innovation.”ing to Web 2.0 technologies such as social software. — Electronics CEO study participant,To that end, IBM has developed a variety of solutions that can The Global CEO Study 2006help electronics companies accelerate development cycles,reuse product design knowledge and align IT and systemsinvestments with business priorities — freeing them to focuson creativity and innovation.Stay focusedAs the business environment moves from closed-door researchand development to a more open, collaborative approach, IBMis helping electronics companies:• Identify strategic business ideas• Spin off new innovation efforts• Build collaborative networks• Develop and refine business offerings• Conduct product trials to improve offerings.
  6. 6. For years, IBM has worked closely with several major electron- By leveraging IBM’s integrated product development processics companies to create marketplace-leading chips for top video across different electronics segments, organizations can reducegame consoles, along with embedded software, wireless health- their time to market and operational expenses. What’s more,care products, speech translation solutions and numerous other companies can focus on their core strengths and pursue newinnovations. This experience has given IBM the industry expertise business opportunities by taking advantage of business trans-required to deliver cutting-edge solutions and processes. formation outsourcing to better manage a growing range of business processes.Singing its way to increased sales Through ongoing collaboration with IBM and other organizations,For two years, IBM and a developer of karaoke solutions in Japan col- businesses can access a wide range of skills sets to amplifylaborated at IBM’s Yamato Laboratory to create two groundbreaking creativity and fuel profitable growth. In this way, innovation willwireless karaoke controllers. The new controllers eased the burden of continue to reseed itself as the industry follows a path of jointsearching and choosing songs from unwieldy paper catalogs by using a cooperation. This also represents a critical step in becoming apersonal digital assistant device with a touch screen panel and easy-to- globally integrated enterprise, the new successor to the multina-navigate search options. The company chose to work with IBM because tional corporation.of IBM’s deep technology and engineering expertise, extensive designexperience and manufacturing connections to the joint project. Designing a winning combination A large Japanese consumer electronics company needed to streamlinePlanting the seeds of success and simplify its -D design processes with a single, comprehensiveElectronics companies can achieve significant business results toolset capable of meeting all of its product development needs — fromand expand their competitive advantages by using IBM’s prod- styling to manufacturing. By deploying the CATIA V solution, theuct lifecycle management (PLM) solutions to speed new ideas company reduced development times and optimized the use of existinginto the marketplace more efficiently. Build first-of-their-kind prod- designs and engineering know-how. Also, the collaboration with IBM,ucts. And become more responsive to business shifts throughout enabled by IBM’s PLM solutions, helped reduce manufacturing costs onthe world. mock-up orders by percent.
  7. 7. Digging deeper for a long-term advantage Cutting a supply chain redesign down to sizeIn 2006, IBM introduced the concept of a powerful, new busi- IBM recently helped a manufacturer of signal processing circuits developness design and dubbed it the globally integrated enterprise. a new custom supply chain management process that allows it to modelIt means that a company has globally shared services and and optimize its production plans in real time.assets that can be deployed worldwide, making it possible torespond to marketplace demand quickly and efficiently. In an With 10,000 unique products and 0,000 customers worldwide, theenvironment where competitive advantages and economics company now has the ability to match current demand with supply toare being redefined by an increasingly flat, smart, connected an extraordinary degree. Moreover, IBM worked with them to imple-and unpredictable world, companies have little choice but to ment the project in just half the time typically required.embrace the change.While the idea of a globally integrated enterprise is still evolving, Tapping into a wealth of inspirationseveral attributes have surfaced that promise to clearly sepa- As an integral part of an overall business strategy, electronicsrate the winners from the losers. A successful enterprise can be companies are keenly aware of the need to embrace organiza-viewed as one that: tional changes to support collaborative innovation and generate more profit from valuable ideas, no matter where they originate.• Shifts its focus from what it makes to how it makes it IBM has repeatedly observed impressive results for companies• Understands that economies of expertise will thrive regard- that use the collaborative innovation model—and these benefits less of location are particularly important for the electronics industry. Not only• Believes that open always wins. does this model help promote collaborative innovation through- out the extended enterprise, it helps enable organizations to:Globally integrated enterprises adopt shared business and • Improve worldwide production and distribution capabilitiestechnology standards that enable businesses to plug into as well as product qualityglobal systems of production — from sourcing to design and • Implement an integrated, global management and planningfrom manufacturing to distribution. Most notably, they recog- system to improve visibility, speed marketplace responsenize that open is the new leveler that stimulates the free flow and increase efficiencyof ideas and promotes new levels of collaboration. As one ofthe first globally integrated enterprises on the planet, IBM is • Create a flexible, efficient operating infrastructure to meethelping electronics companies take advantage of this new growing global demand.business model in a way that’s proven to be successful.
  8. 8. The truth is that innovation networks aren’t always easy to manage; there will always © Copyright IBM Corporation 2008be hurdles to overcome. But working with IBM can make it easier for electronics compa- IBM Global Services Route 100nies to access more intellectual and technological horsepower than they could on their Somers, NY 10589own, helping them to make strategic changes to their offerings, business models and Produced in the United States of Americainnovation capabilities. It’s hard work, but companies that are able to transform them- 03-08 All Rights Reservedselves in this way have the best shot at becoming long-term leaders — and realizing IBM, the IBM logo and Jazz are trademarks or regis-sustainable profits. tered trademarks of International Business Machines Corporation in the United States, other countries,For more information or both. Other company, product and service names may beTo learn how IBM is helping to deliver on the promise of collaborative innovation, trademarks or service marks of others.contact your IBM sales representative or visit: References in this publication to IBM products or services do not imply that IBM intends to make themibm.com/electronics available in all countries in which IBM operates. The information contained in this documentation is provided for informational purposes only. While effortsAbout the authors were made to verify the completeness and accuracyKumi Ito is an associate partner in Strategy and Change with IBM Global Business of the information contained in this documentation, it is provided “as is” without warranty of any kind, express orServices. She leads Japan operations strategy practice with deep experience in innova- implied. In addition, this information is based on IBM’stion management, new business development, marketing and research management. current product plans and strategy, which are subject to change by IBM without notice. IBM shall not be responsible for any damages arising out of the use of,Paul Brody is a partner with IBM Global Business Services. He brings a decade of or otherwise related to, this documentation or any otherconsulting experience to the position as the global leader of the electronics industry documentation.strategy practice. Nothing contained in this documentation is intended to, nor shall have the effect of, creating any warranties or representations from IBM (or its suppliers or licensors), or altering the terms and conditions of the applicable license agreement governing the use of IBM software. 1 David Henry, “Creativity Pays. Here’s How Much.” BusinessWeek, April 24, 2006. 2, 3 Expanding the Innovation Horizon: The Global CEO Study 2006, March 2006, http://www.ibm. com/bcs/ceostudy 4 IBM, “IBM Pledges 500 U.S. Patents To Open Source In Support Of Innovation And Open Standards,” press release, January 11, 2005, www-03.ibm.com/ press/us/en/pressrelease/7473.wss 5 IBM, “IBM Innovations to Help Companies Overcome the Challenges of Globalization,” press release, January 14, 2008, www-03.ibm.com/press/us/en/ pressrelease/23308.wss 6 Frost Sullivan, Meetings Around the World: The Impact of Collaboration on Business Performance, June 2006. ELE03002-USEN-00

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