New IBM Study Examines Business Alternatives for Electronics Industry, Advocates New Models to Manage Volatility and Uncertainty

Analysis Finds Linkage Between Flexible, On-Demand Business Models and Employee Productivity

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SOMERS</span></strong><strong><span>, </span></strong><strong><span>NY</span></strong><strong><span>, </span></strong><strong><spa - 12 Aug 2003: IBM Business Consulting Services today launched a new electronics industry report which examines the current volatile state of that industry, and the potential business implications of building more flexible and autonomic capabilities for electronics companies. Taking such an approach, the report contends, can help electronics companies deal with market volatility, solve problems around high and inflexible cost structures, and generate significantly higher revenue per employee.

In the report, entitled "When The Butterfly Flaps Its Wings - Adapting to Chaos and Uncertainty in the Electronics Industry," authors George Bailey, Matt Porta and Betsy Tong observe that electronics companies can substantially lower their level of exposure to future instability in an already troubled sector.

"Seemingly inconsequential, faraway events-akin to a butterfly flapping its wings-will continue to have marked effects on the electronics industry. While companies have long talked about the promise of networks, real-time data and analysis and action, what's different now is that the technology is mature enough to truly enable autonomic management of global processes in real-time," said George Bailey, partner and Global electronics industry leader for IBM Business Consulting Services. "These kinds of e-business on demand business strategies represent an increasingly practical program for getting better business results."

The report outlines an electronics industry that has undergone a fundamental shift from its "innovate for value" roots, to one which has matured significantly, and which is increasingly susceptible to any number of market and geopolitical variables. In this new environment, the report contends, electronics companies need to build more flexible autonomic business models that better enable them to manage these variables. Specific recommendations include:

An accompanying IBM analysis of electronics industry data finds that companies that adopt a flexible, adaptive, on-demand business model can produce up to twice the revenue per employee and more than twice the operating income per employee than less mature companies. For example, average revenue per employee for electronics companies surveyed for the period 1998-2002 was about US$300,000 for companies implementing adaptive business models vs. US$150,000-250,000 for less mature companies. Average operating income per employee for the same period was US$40,000 (mature) vs. US$17,000 (immature).

Those conclusions were based on a detailed analysis of publicly available financial and operational data on 24 of the world's leading electronics companies, in which IBM practitioners examined such attributes as focus on core competencies, use of variable cost structures and business processes, and the ability to predict and pre-empt changes in the marketplace. Overall, IBM determined that companies that are more advanced in these areas are better equipped to realize improved financial performance.

More information is available at .

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