|






 

Customization

’ „oyota is gearing itself to deliver a custom built car

within five days of receiving the order.
’ Dell promises delivery of a customized PC within a few
days of receiving the order.
’ Motorola delivers their made-to-order cellular phones
the next day to customers anywhere in the United States.
 |






 

Customization

’ Standardization starts upstream - raw materials,

fabricating
’ Customization starts downstream - special features &
services

’ Key question is how far upstream in the value chain can

or should product/service be customized?
 |






 

Customization

’ Standardization Strategies for Enabling

Customization
± Part Standardization: By using common components across
members of a product line, the firm reduces costs (due to
economies of scale), reduces inventories (due to risk pooling),
reduces parts proliferation, and improves the predictability of
requirements for components.
 |






 

Customization
’ Standardization Strategies for Enabling
Customization
± Process Standardization: requires that the process be
modular and enables the firm to store inventory in semi-
finished form (before full information about demand is
realized) and later customize the product according to
requirements.
’ Benetton's sweater-making process primarily consists of two stages: knitting
and dyeing. „he original process was to dye first and then knit based on
requirements. However, the main source of demand uncertainty came from the
choice of colors that customers wanted. So in order to exploit that Benetton
resequenced the process by first knitting the sweaters and then dyeing them
after perfect demand information was obtained.
 |






 

Customization

’ Standardization Strategies for Enabling

Customization
± Product Standardization: offer large variety of
end products, but stock only a few in inventory.
’ Advertise availability of products far greater than
actual availability on average.
 |






 

Customization
’ Standardization Strategies for Enabling
Customization
± Product Standardization (continued)
’ If customer requests product version not normally stocked, the
manufacturer either makes the product after receiving the order
or, downward substitutes (provides the customer one of the
available models that has a superset of features required by the
customer.)
± Downward substitution is quite common in the semiconductor
industry where a higher speed/functionality chip (under
appropriate circumstances) is marked as a lower
speed/functionality chip when the lower-end chip is not available
in inventory
 |






 

Speed
It is not enough to be fast - one also has to
achieve a better balance of speed, low cost,
high performance, and high quality.

For example: Rule of 10X - technology in question must be

10 times better than what it is replacing.
More accurately, Consumers need to perceive new
technology to be 10 times better to think it worth the
upheaval of changing.
 |






 

Speed

Speed depends on the ability to:

1. Initiate and manage change inside company
2. Use and provide leverage in market chains
to initiate change in other companies.
 |






 

Speed

Ability to change inside the firm depends on ability

to avoid the ³competence trap´

Competence trap:
firms that strive for competence within a given
strategy can become trapped in this strategy and
miss opportunities for strategic change
 |






 

Speed

Competence trap derived from routines and

procedures successful in past:

å promotion and hiring

å incentive systems
å capital budgeting
å organizational structures
å personal commitment to status quo
 |






 

Speed
Some methods for avoiding the competence
trap:
’ Avoid organizing around strict product
³modules´(Intel¶s emergent product teams).
å Avoid complete dependence on existing customers and
suppliers for new product & service ideas (Microsoft¶s
multiple vendors of X-Box software).
å Focus new product development teams entirely on
unserved markets (Nokia¶s evolution into ³wireless
home´).
 |






 

Knowhow
„he critical role of CLUS„ERS in global strategy

’Competition is dynamic, depends on innovation, search for

strategic differences
’Location affects competitive advantage through impact on
3

 3
 

 |






 

Knowhow
„he critical role of CLUS„ERS in global strategy

’ A Cluster is a critical mass of companies in a particular field in

a particular location and include a group of companies,
suppliers, firms in related and complementary industries,
infrastructure providers, knowledge creators, and collective
associations.
 |






 

Knowhow
„he critical role of CLUS„ERS in global strategy

Clusters improve 3
 by

’ providing access to specialized inputs and information,
’ facilitating complementarities among cluster participants,
’ improving performance measurement
’ improving rate and success of innovation
’ lowering barriers to entry
 |






 

Knowhow
„he critical role of CLUS„ERS in global strategy

Cluster theory and Globalization

’ a firm must harness advantages of spreading activities across
locations but also capture the innovation advantages of home
base
’ outsourcing reduces locational disadvantages, but limits access
to cluster-associated resources
’ locating in cluster may reduce overall costs
 |






 

Knowhow
„he critical role of CLUS„ERS in global strategy

’ Examples of Emerging Clusters in Nanotechnology:

± Northern California
± Austin, „exas
± „sukuba, Japan
± Stirling, Scotland
 |






 

„ime Pacing: Combining Speed and Knowhow

„ime Pacing
’ Creating new products or services, launching new businesses, or
entering new markets according to the calendar.
’ „ime-pacing is not (just) SPEED ;
± It is synchronizing SPEED and IN„ENSI„ OF EFFOR„.
 |






 

„ime Pacing: Combining Speed and Knowhow

’ Manage „RANSI„ION and R „HM

± „ransition: capable of moving into new products, businesses,

markets, acquisitions, mergers, etc.

± Rhythm: in sync with cycles linked to external agents ± customers,

suppliers, competitors, and even regulators.
 |






 

Industry Case: „he race for the world VCR market

Product development is a 100-yard dash;

Industry development & transformation is a triathlon.

Stages of Industry Development and „ransformation

[ 
3
 
  

 
 
 3
 
3
 


 

 

 
3
 

 


 
 

 |






 

Industry Case: „he race for the world VCR market


3
 
  


 
 
 3
å Race to commercialize VCR spanned decades, rather than years
å Ampex, 1959 - 1st VCR; Matsushita, late 1970¶s - first mass
commercialization of VHS standard VCR
å VCR was 1st major innovation in consumer electronics
commercialized first in mass markets by Japanese firms, rather
than U.S. or European companies.
 |






 

Industry Case: „he race for the world VCR market


3
 
  


 


 3
Philips, Sony and Matsushita (JVC) each worked for close
to 20 years to produce VCR for home use.

 
 
3
 
 !

: Learning

how to make extremely precise, revolving video-
recording heads presented major competence-building
challenge to all comers.
 |






 

Industry Case: „he race for the world VCR market


3
 
  


 


 3
’  
 
3
 " 
 




 
’ Continued experimentation in marketplace with multiple
models.
å „he more rapid the pace of market experimentation, the
quicker the learning about what customers really want in a
product.
 |






 

Industry Case: „he race for the world VCR market


3
 
  


 
 
 3
å Gain deeper understanding than competitors of trends and
discontinuities - technological, demographic, regulatory, or
lifestyle
å „rends and discontinuities will transform industry boundaries
and create new competitive space
å New types of customer benefits, or radically new way of
delivering existing customer benefits
 |






 

Industry Case: „he race for the world VCR market


3
 


 

 


Creating an industry standard

å battle between Sony¶s Beta, JVC¶s VHS, and Philips¶ V2000
å winner reaps benefits of software availability, licensing income,
and economies of scale in component production
 |






 

Industry Case: „he race for the world VCR market


3
 


 

 


å Sony took early lead, 85% market share by end of 1976

å JVC introduced 2-hour record time
å JVC co-opted licensee partnerships - „elefunken (Germany),
„horn (Great Britain), „homson (France), RCA and GE (U.S.).
å „hese companies were initially sourcing components and
finished VCRs from JVC
 |






 

Industry Case: „he race for the world VCR market


3
 


 

 

å Influence the direction of industry development
å Race to accumulate
± necessary competencies,
± test and improve alternate product/service concepts,
± attract coalition partners who have critical complementary
resources,
± construct product/service delivery infrastructure,
± get agreement around standards
 |






 

Industry Case: „he race for the world VCR market


3
 

 


 
 


å `ide selection of VHS brands and models, relative to Beta,

convinced software suppliers to back VHS and w/in two years
market battle between Beta and VHS was over.
å Philips launched V2000 18 months after VHS - D.O.A.!
å Matsushita sold several million VCRs around the world,
continuing to reduce costs and improve features
 |






 

Industry Case: „he race for the world VCR market


3
 

 


 
 


å Centered around well-defined parameters of value, cost, price

and service
å Maximize efficiency and productivity
å Craft appropriate market positioning strategy
å Building worldwide supplier network
å Preempting competitors in critical markets.
 |






 

!  
  #$% &#&% 

å „oday, a „V set is the focal point of the average living room; In
the future, digital „Vs and their accompanying devices will be
hidden until they are turned on.
å Home media center have a single control unit that incorporates
receivers, tuners, decoders, a CPU, and an embedded OS and an
embedded camera and microphone for video e-mail and voice
mail.
å Display innovations: First step - gas plasma; Next - streamlined
displays based on light-emitting polymers.
å Speakers will continue to shrink in size, following the trend in
today's satellite speaker systems.