Presentation on theme: "Collaborate to Build Competitive Advantage"— Presentation transcript:
1 Collaborate to Build Competitive Advantage By Arun Kottolli
2 IntroductionFor high tech startups & medium sized technology service firms, it is increasingly difficult to maintain competitive advantages on basis of technical advantageFuture advantage will go to those who can simulate & support collaboration with their alliance partners to leverage their distinct resourcesAs startups grow, they have to compete with global giants for international resources & worldwide marketOpen Silicon being a startup – looking at rapid growth in future can benefit a great deal via collaborating with vendors such as TSMC, Virage, ChipIdea, ASE etc. to build competitive advantage over other Fabless ASIC firmsThe 90nm reference design can leverage a lot by working closely with our existing partners. Design flow & methodology work done at TSMC can be leveraged when worked with the tool vendors. There is possibility of getting design methodology (or even scripts for timing analysis, DRC/LVS etc) from our partners, thus avoiding the need to reinvent the wheel.
3 Semiconductor Industry Semiconductor industry is dominated by a handful of global players: Intel, TI, ST Micro, Samsung, Philips, Freescale, Micron, NEC, Toshiba, etc who have global reach, enjoy economies of scale and have deep R&D capabilityStartups have to compete with these giants for resources, technology development & market access. Startups have always competed with these giants by carving niche marketsTransition & growth from the startup stage to mature stage requires firms to gain competitive advantages in ways unique to that industry
4 Semiconductor – Case study Consider the case of Nvidia & Xilinx, these firms were able to establish firmly in semiconductors arena – not by their technical powers alone – but with their ability to leverage technical strengths of their vendors, customers & partnersThey were able to lower the costs of technology development, and develop products that was better aligned with the market needs by collaborating with others; In the process developing the fabless business model
5 Case Study - NvidiaNvidia put together an alliance with fabs (TSMC, IBM), packaging/testing firms (Amkor & ASE), software developers & OEM/ODM manufacturers to deliver the best in the class product at a very competitive prices – and win against competitor such as Intel.Nvidia collaborated with IBM & Sony to develop new graphics chip for Sony’s Playstation-2 and leveraged this knowledge in PC graphics segment
6 Case Study – XilinxXilinx – a Programmable chip vendor worked with TSMC to develop Vertex-4 line of FPGA with more that 150K gates on a new 90nm process technology – a first of its kind for Xilinx & TSMCXilinx also worked with customers & IP vendors to identify the built-in IP blocks in the chip.Xilinx worked with IP vendors to minimize the area for that IP, added programmable logic to increase its flexibility of use; thus creating a win-win situation.IP vendors got the minimum die size estimate on 90nm process – which they can use to promote their IP to other customersCustomers got a flexible product which meets their needs
7 Gaining AdvantageStartups must continuously seek new sources of competitive advantages against global giantsBy collaborating, startups can gain economies of scale based on their partner’s scale of manufacturing & economies of scope based on their partner’s business units in diverse locationsFirms can gain competitive advantage by sharing knowledge, jointly developing new products & services & better leveraging their dispersed resourcesFor example, Open Silicon can work with ASE to develop a cheaper packaging solution for our customers. Take Teradyne as a case study. If we can work with ASE to get a FCBGA solution instead of Hyper BGA.
8 Global InnovationToday, technology companies have their value chain activities dispersed all over the worldSourcing components world wide, manufacturing it at lowest cost locations, R&D done where talent is availableFor Most companies product development teams are scattered all around the worldGlobally dispersed units often develop into “centers of excellence” & tend to be dominated by the thinking and technologies available in that locationManufacturing in Taiwan, Packaging in S.Korea, Testing in Malaysia, product development in India, Marketing in the USFor high impact innovation, one has to integrate far flung business units in sharing knowledge & leverage different skill sets
9 Global InnovationBy sourcing and Integrating knowledge from dispersed geographic locations, companies can generate more innovations of higher value and lower costsInnovation typically arises from combining existing technology & expertise in new waysCompanies can greatly improve their innovation process by assembling the best combination of technical know-how & market expertiseCoordination or Collaborating with other units in the value chain becomes the key enabler for global innovationFor startups, other units in the value chain may be other firms with which they have strategic alliances or business relationshipsOur supplier locations are dispersed widely. In Korea, US, Israel, Taiwan, India etc. To improve & optimize our value chain activities, we need expertise from our partners.
10 Collaborate to Reduce Costs Global Supply chain can exploit the lowest cost for each activity – thus reduce the overall costs of operationCost of utilizing distant resources may be lower. For example, Firms are leveraging the low cost of programmers in India, Aerospace engineers in RussiaCollaborate with other firms in those low cost locations to leverage the cost advantage while avoiding huge investments in those countries which is otherwise needed to tap the cost benefit
11 Tapping into the Benefits To reap the benefits of collaboration, companies must do three things:Prospect – Find suitable partnersAssess – Decide on the optimal nature of collaborationMobilize – Use cost effective mechanisms to reap the benefits of collaboration & Motivate employees of the firm to make the best use of the collaborationValuable knowledge exists in other organizations, where the very different environments tend to encourage diverse skills & capabilities
12 Collaboration is not Easy Collaboration can be a source of competitive advantage – but it does not happen automatically.There are several barriers that impede collaborationTo overcome these barriers, companies have to develop distinct organizational capabilities that cannot be easily imitatedTop level managers must develop a framework to drive collaboration with others – The framework must address means to reduce the barriers to collaboration & promote several types of value creationFor small firms & startups, resource availability is a serious limitation, i.e., people who drive the collaboration. We may not have the required bandwidth to fully exploit the possible benefits of collaboration.Firms face a shortage of people time & skills to drive the collaborative efforts
13 Framework for Collaboration Barriers to CollaborationManagement LeversLeadership, Values and GoalsHR proceduresLegal proceduresFormal & Informal systemsNeedle in aHaystackproblemHoarding ofExpertiseProblem“Stranger”SeekerOf HelpProviderOf helpNot-inventedHere problemValue CreationBest Practice transferJoint Problem SolvingCross sellingBold IdeasCross pollinationUnwilling to HelpUnableTo helpFrame work for creating value through collaboration
14 Value Creation from Collaboration Firms must collaborate only if it can reap economic benefits by doing soTypes of benefits generally falls among 5 categoriesCost savings through transfer of best practicesBetter decision making based on partner inputsInnovation through cross pollination of ideasEnhanced capacity for collective action that involves dispersed unitsIncreased revenue sharing through sharing of expertise and productsCollaborate only if there is mutual gains
15 Barriers to Collaboration Given the obvious advantages of collaboration, its surprising to see that collaboration agreements between firms often do not work well.Often companies unknowingly erect barriers that prevent individuals from engaging in collaborative activities:Not invented here syndromeNeedle in a haystack problemUnwillingness to helpInability to work together & transfer knowledge
16 “Not-Invented-Here” Syndrome Organizations often encourage in-house innovativeness and have incentive schemes to promote in-house innovation.Formal & informal policies to reward heroic individual efforts rather than collaborative effortsPolicies which encourage people to fix their own problems instead of seeking helpThese policies have an un-intended effect: “Not-Invented-Here” syndromeEmployees spend time & effort in reinventing the wheel – instead of learning from othersAt Nvidia senior management keeps a close watch on the extent their business unit ask for assist from collaborators & will intervene if someone is not asking for enough helpAnother management lever is recruitment: hire people who have the natural inclination & confidence to ask for help
17 Needle-in-a-haystack Problem Even when employees are willing to seek help, they may not be able to find it or search efficiently so that the benefits outweigh the cost of searching.In a globally dispersed network this needle-in-a-haystack problem impedes collaborationSomeone in the global network knows the answer to the problem, but its nearly impossible to connect the person who has the expertise with the person who needs itCompanies can create Intranets for knowledge sharing – but it is usually off-limits for anyone outside the firmTo overcome, firms can create an informal network of people who are experts in a certain field & create opportunities for them to interact with experts from their collaborating partnersCompanies need to create “Connectors” i.e., experts who can connect with other experts in other firmsWe do have connectors in place. Like Rajesh for IP, Dan for packaging etc. But during crunch times they (connectors) may feel overburdened.
18 Unwillingness to HelpSometimes the problem lies with the potential provider of help. Some employees are reluctant to share information & help people from other organizationsEmployees will hesitate to share information with those who are seen as potential competitionEmployees have no incentives to help others – HR policies are designed to reward individual performance but does not reward for helping othersThis can be overcome by having a suitable HR policy – A 360 review involving people from collaborating firms to encourage knowledge sharing & peer assist programsWhat if someone at TSMC refuses to help us in 90nm process? – then we get struckSo one needs to work with all the partners to ensure the one gets the help requested
19 Inability to Work Together Sometimes people are willing to work together but can’t easily transfer knowledge.This is often the case involving “tacit” knowledge which is difficult to its contents & nuances to others – who in turn may find it hard to understandKnowledge in question may be related to a specific culture. The problem gets aggravated when people are separated by a huge geographic distancesTacit, culture specific knowledge takes a longer time to transfer than explicit knowledgeTo alleviate this, management should work to establish relationship between employees of the partner firmsCreate opportunities for employees to interact, arrange for training at the partner locations etc.Employees who move temporary move to other locations on assignments develop strong bonds with people there – leading to cross-site collaboration successSome of the market knowledge is difficult to be transferred over the s or phone. It may need a face to face meetings.
20 How to Promote Collaboration Management procedures to promote collaboration include:Leadership, Values & GoalsHuman Resource ProceduresLateral Cross unit mechanisms: Formal Internet systems for knowledge sharing & Informal people network“As Leaders signal the importance of collaboration by working together among themselves, employees are more likely to seek & provide help”Like wise we also need to work with our customers & TSMC to help them improve.
21 Leadership, Values & Goals Leaders signal the importance of collaborating to the entire organization through their actions & wordsSome leaders are very effective in motivating employees towards the goalsLeaders must help employees locate experts and help employees to work well togetherLeadership behaviors and articulation of shared values & goals are necessary but not sufficient conditions for effective collaboration between firms
22 Human Resource Procedures Recruitment & reward policies also reduce the unwillingness to seek or provide helpRecruiting people who have a natural inclination and confidence to seek or provide help will populate the organization with people who thrive in a cooperative work environmentSetting procedures to reward those who exhibit collaborative work culture sends the right signals to the entire organizationPromotion to those who cooperate with other organizationsCompensation structure which promotes cooperation360 review involving peers from other organizations
23 Lateral Cross unit Mechanisms If the problem is the inability to find help, then it can be overcome by:Cultivation of “connectors” – experts in the firm who have connections with other experts in other firmsDevelopment of electronic yellow pages/directory that lists experts from both within the firm and from the collaborating firmsDevelopment of benchmark systems that allow employees to identify best practices from all the collaborating firms in the networkIf the problem is the inability to work together, it can be overcome by:Creating opportunities to establish strong professional relationship between employees from different firmsDevelopment of formal cross-unit groups/committees to promote interaction between companiesProvide a forum for employees to know one another and develop strong personal bonds that facilitate knowledge sharingCreate opportunities for employees to work with other collaborating firms
24 Collaborate to Innovate Innovation invariably needs a driver – A necessity to drive the innovation process, which in most cases comes in form of customer needsMost collaboration for technical innovation involves a combination of complex market and technical knowledgeMobilizing knowledge is not easy or cheap – it involves additional costsCompanies must also develop suitable mechanisms for knowledge transfer by electronic meansIn case of transferring/Learning complex tacit knowledge, it may be necessary to transfer people to other locations where the knowledge is
25 Mobilizing Knowledge High Complexity Of Market Knowledge Low Of TechnicalMove technicalInformation toWhere MarketKnowledge isArms lengthExchangeInformationDigital TransferWill sufficeMove knowledgeBy rotating peopleor by temporaryrelocationMove marketWhere technical
26 Potential DownsidesCollaboration can create substantial value, it also has a downside that needs to be managed.One big pitfall is that it can be easily overdoneEmployees motivated by their need to collaborate, may create several unnecessary cross-unit networks which does not have a strong focus on the bottom lineEmployees may work too much on a collaborative work with another firm – but that activity may not have any significance to the parent firmManagers need to have a dual capability: Ability to deliver results in their own units and their responsibility to seek and provide help others
27 Closing ThoughtsHow one views the importance of collaboration relates directly to the ideas about the purpose of any firm and the reason for its existenceFirms come into being in order to enable them to achieve collaboratively what they could not achieve aloneFor a startup, collaboration with suppliers, vendors, partners & customers can be a significant source of competitive advantageToday, economies of scale & scope are not enough to sustain competitive advantagesManagers must focus on steps to foster collaboration between firms to innovate & gain competitive advantageInnovate for product development or process improvementCollaboration must be centered around mutual gains; A win-win relationshipSuccessful exploitation of collaborative possibilities holds the key for startups to gain competitive advantage over their well established global competitors.