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Survey of U.S. Tech Executives Shows Only One-Third Formally Track and
Assess Competition Despite Growing Concerns About Competitive Intensity
Source: CMO Council
A new world order of competition is
emerging in the global technology and telecommunications industries. But
most North American companies are not keeping pace with the changes,
according to a new study conducted by two executive thought leadership
organizations, in cooperation with global management consulting firm A.T.
Kearney. In fact, two-thirds of the more than 300 North American
executives surveyed say they have not even instituted formal practices for
tracking and analyzing their competition.
The study,
Crunch Time: The Competitiveness Audit, was conducted in late
2004 and early 2005 for the Business Performance Management (BPM) Forum
and Chief Marketing Officers (CMO) Council. Its findings were recently
announced at the A.T. Kearney Global
Tech+Telecom Competitiveness Summit. The study shows North
American executives are acutely aware of increasing global competition.
Approximately 90 percent of survey respondents said they expect
competition in their sector to intensify in the next two years. Less than
one percent anticipate a decline.
The study underscores a dramatic
realignment of global competition, including the rapid rise of China and
India as important new centers of competition. In fact, U.S. executives
point to China as a source of competition over the next two years nearly
as often as they do other U.S. companies.
North American companies are increasingly
turning to offshore operations and outsourcing as a means of coping with
overseas competition, the study found. While respondents cite the cost of
skilled labor as the most important factor driving offshoring decisions,
it’s not the only one. Access to local markets, innovation capacity and
speed, and access to intellectual capital also were identified as
important drivers.
“U.S. companies risk falling behind global
forces that are reshaping the competitive landscape in technology and
telecommunications,” said John Ciacchella, a vice president in A.T.
Kearney’s High Technology Practice. “The shift from enterprise to
consumer, new global players from China and India, industry consolidation,
and next wave technologies, such as VoIP, digital media, 3G, broadband to
the home and WiFi/WiMax – are all factors driving big dislocations in the
market. U.S. executives clearly feel the pressure of these changes and
most rate their efforts to respond as fair to good. This is not good
enough. Too few are putting in place the formal processes needed to
adequately assess, act and measure their progress in this more intense
competitive environment.”
Respondents said their competitors have
become larger, more agile, more numerous – and decidedly more
international. Yet, only about one third indicate their companies have
instituted formal processes or developed a formal function for assessing
their company’s competitive position in their industry. Some 54 percent of
respondents said “informal discussions as a part of business meetings”
constituted their approach to measuring competitiveness. Surprisingly, the
lack of a structured and disciplined approach to competitive assessment
was even more pronounced among larger companies with revenues of $500
million or more.
Of those respondents who rated the
competitive preparedness of their companies, about 47 percent rated it as
good or above average, and 53 percent rated it as average or below.
North American executives point to a series
of trends influencing the competitive landscape. Chief among them:
emerging technologies, industry consolidation, new entrants into their
markets, and the emergence of new geographic markets.
Asked to identify the three countries where
they expect to see the greatest competitive challenges over the next two
years, approximately 63 percent named the United States, 59 percent named
China, and 45 percent named India. Korea and the United Kingdom were tied
for a distant fourth at 14.6 percent each, followed by Germany with 13.5
percent. Indicative of the shifting balance of power in the global
technology industry, only 11.5 percent identified Japan, which had long
been considered a technology powerhouse.
Respondents to the A.T. Kearney Crunch Time
survey identified three disciplines as nearly equal in importance to
improve competitiveness: product and service innovation, improving
customer intimacy and experience, and strengthening overall strategic
positioning. Three other disciplines – managing operational complexity,
managing a company’s organization, culture and leadership, and optimizing
capital deployment and governance – were rated as significantly less
important.
“Many overseas technology companies excel
today in the very disciplines that North American executives say are
crucial to driving competitive performance in their industry sectors,”
said Donovan Neale-May, executive director of the BPM Forum. “Indian IT
outsourcing companies like Infosys and Wipro have built exceptional
customer intimacy and dependency with North American customers. Chinese
companies such as Lenovo and Huawei have established strong strategic
positions and brands in markets traditionally dominated by U.S. companies.
Korean multinationals, such as Samsung, are now leaders in product
innovation.”
While respondents say product and service
innovation remain the most critical elements of competitive success in
technology and telecommunications, their approach to innovation appears to
be conservative. Asked to identify the most important actions their
companies are taking to improve product innovation, some 71 percent
pointed to improvement of existing products and services, followed by
bundling product and service offerings (52 percent) and continuous
investment in R&D (48 percent). Investments in new products and services
outside of the core business ranked fifth, with only 29 percent of
respondents choosing this as one of their top three actions.
“At a time when emerging competitors are
going global and consolidation is happening in both software and hardware
markets, U.S. companies are trying to protect their core business first
and foremost,” said Ciacchella. “The question is whether this approach is
too conservative when traditional market segmentations like PCs, TVs,
phones, music players, enterprise software, etc., are breaking down due to
the impact of new technologies and companies are using these technologies
to change the marketplace. For instance, Apple with music, Microsoft with
the recently released media center for home entertainment and Delphi with
myXM. U.S. companies will need to be more innovative in how they leverage
these technologies not just to make their products better, but to
fundamentally change the customer experience.”
The report also questions the low priority
executives give to managing operational complexity and optimizing capital
deployment as requirements for competitive success. Both of these factors
have tremendous impact on a company’s ability to expand and grow, the
report says. |
