Certainly the M&A and consolidation story has been big this year for the semiconductor and electronics industry. With this comes a number of changes and adjustments, be they partner or component line shifts, logistics, EOL, pricing and so forth. However these are not, in the least, new moments for our industry. Nestled among the strategic raison d’etre of these consolidations is a greater focus on new initiatives.
Among CEOs’ leading drivers in the high-tech industry is the new focus on sustainable growth strategies over traditional cost cutting, according to Virginia Howard, Supply Chain Research Director at Gartner, in a recent interview with EPS. The ramifications of this shift are further promoted by the macro-context of the industry and global economics: there are significant and ongoing changes in products and services that are rooted in the increased complexities and customized solution demands.
Additionally, there are the ongoing challenges presented by the still cautious macro-economic environment. Why the shift? It’s quite simple when you consider that the staggering drop year-over-year in annual revenue growth and the changing component and customer ecosystem that organizations must provide more. But how to do so in a tighter supply chain where specializations are deepening and products alone are not enough to carry the corporation?
As Howard’s ongoing Gartner research elegantly explains, “High-tech businesses are no longer relying on proprietary product features or service capabilities for competitive advantage. In an increasingly competitive world, they, and the supply chains that support them, are focusing on orchestrating solutions as a means to create value and support growth.” Solutions represent the contemporary Holy Grail. CEOs, in their quest for sustainable growth, are taking the supply chain on a journey beyond the litany of even more complex product features and service offerings in order to present unique, collaborative value adds to customers. Solutions, unlike services, leverage the intercept of collaborative strengths across an ecosystem of business partners, wherein the sum is greater than the parts.
This is truly a new level of supply chain collaboration. The successful solution in this context is enabled by the real advantages of a maturing digital business system at inter- and intra-organizational levels. No longer is a solution a bundle of assets and capabilities price-packaged for value; rather it must be a strategic and truly integrated supply chain partnership rooted in trust and explicit expectations, coordinated responsibilities, and overtly managed steps across multiple organizations. This business evolution, as Howard underscored, IS the digital revolution for the high-tech supply chain. The positive disruptions and the new era of business strategies brings with it truly challenging coordination requirements, and the necessity to construct agile and integrated ecosystems rooted in mature digital technologies within the organization.
In the public sphere, outside of the high-tech industry writ large, there are increasing waves of adoption for what has been called a “Sharing Economy” or “Collaborative Economy”, a peer-to-peer, transactional-based micro-economic system that has been steadily growing by double digits over the past couple of years. No longer are centralized control structures prime (nor do they produce as dynamic ROI). The strictures of top-down silos are at odds with the open-access, transparent, and hyper-sharing of information and ideas that characterizes today’s societies.
Not only are global borders reduced or made negligible by digital data sharing, but corporate borders are similarly following suit. This represents an incredible shift in management and business structures, yet it is already here and proving to be the path that leading, solution driven corporations, particularly in high-tech, are embracing. In the coming weeks, additional articles delving intoHoward’s research and what it means practically to the supply chain will be featured – make sure to keep EPS on your holiday reading list; you won’t want to miss out on the fresh news (we’ll skip the upcycled fruitcake). Happy Holidays!