Among the key questions facing the global electronics and semiconductor industry are the creation of value and the development of new growth strategies in the midst of still challenging and conservative market conditions. Given the high rate of mergers & acquisitions (M&A) we’ve been seeing, clearly, there are deep financial pockets that corporations are now using to extend or deepen market offerings.
Value creation in the current market is no easy feat – the necessity of truly strategic alliances and deeper supply chain partnerships is intensifying and the M&A headlines are not the only value creation story. How new business goals and the shifts in business requirement foci are taking shape points to a set of real changes within organizations and within industries. Driving the shifting perspectives on how to create real value and efficiencies and realize growth is the challenge presented by the current, prolonged, weaker demand cycle and subdued spending, as well as a waning demand for once new commodity items such as smartphones, tablets and related mobile devices.
Leading corporations are making concerted efforts to explore radically different consortia to collectively provide customized services that meet individual client needs and market strategies. This is very different than the traditional M&A approach. To succeed in today’s hyper-customized approach to service provisioning, supply chain leaders are turning to federated approaches to innovation, or as Gartner analyst Virginia Howard explains:
High-tech firms focused on digital business transformation are increasingly leveraging external partnerships to deliver holistic goals to create new value. […]
Given the extent of the opportunities to generate business value, the use of innovation ecosystems is expanding. […]
Many of the challenges facing today’s supply chains are so complicated that no one organization can solve them. Instead, solutions emerge from interdependent partners in innovation ecosystems through the process of “open innovation,” a term coined by Henry Chesbrough, executive director of the Center for Open Innovation at the Haas School of Business at the University of California, Berkeley.
These innovation ecosystems are highly strategic, collaborative networks of supply chain partners who actively work together to discern the best interrelationship for creating significant, unique value out of their respective core strengths and sharing in the monetization of the innovative solutions. As a federated ecosystem, or an innovation ecosystem, there is somewhat of a reduced risk as well as a real sharing in new idea generation and dedicated solution development and execution. This shift in collaborative, deep relationships across corporations is a very radical shift in the industry where previously there was typically a wall across which solution development would be passed iteratively through the chain. Today’s vision of deep information and knowledge sharing demands a transparency and level of cooperation that was even scarce within organizations just a few decades (or less!) ago.
In the coming articles, EPS will be discussing some of the real implications, challenges, and opportunities for the semiconductor and electronics industry supply chain with Gartner’s Virginia Howard as we look to better understand the trajectory of change occurring around us in response to market conditions and internal management shifts spurred on by new millennials rising through the ranks. Stay tuned for insights and new ways to think about our industry’s shifts over the next weeks.