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IT Strategy

The Money Lender and His Wife (Quentin Metsys, 1514)

Searching for Value in the Internet of Things

By Internet of Things (IoT), IT Strategy 4 Comments

The Internet of Things is Not About Things, Nor is it About the Internet

It seems not a day goes by without seeing breathless headlines predicting the magnitude and the impact of the Internet of Things (IoT).  For instance, Morgan Stanley estimates that by year 2020 there will be 75 billion devices. Harbor Research, at the end of the spectrum, forecasts an order of magnitude lower estimate: 8 billion. Cisco offers 50 billion, Gartner counters with 26 billion, and IDC is right in the middle with a forecast of 30 billion connected devices.

Do you get a feeling that they may not really know? Perhaps they are talking about different “things”? And, at the end of the day, does the number of connected devices really matter? And to whom? Read More

PLM Service Providers Ready To Deliver Greater Value

By IT Strategy, Mergers & Acquisitions, PLM No Comments

What Do Recent Mergers and Acquisitions of PM Services Companies Mean for Manufacturing Companies?

Recently we have been witnessing a wave of mergers and acquisitions of PLM services companies. Here are some examples, listed chronologically:

  • In October 2013, Accenture announced the acquisition of the PRION Group – a consulting and systems integrator that specializes in Siemens PLM software.
  • Later that month, Accenture announced plans to acquire PCO Innovation, another PLM consulting group.
  • In April, 2014, KPIT Technologies reported the acquisition of I-Cubed, a PLM product and services company specializing in PLM data migration. Only a few months earlier, I-Cubed acquired Akoya, a should-cost analytic software company.
  • On May 21, 2014, Kalypso, an innovation consulting company announced it had merged with PLM consulting firm Integware,

I don’t think the increased activity in of mergers and acquisitions focusing on PLM services, or the fact that Accenture all of a sudden is paying attention to PLM is a mere coincidence. Rather, it is an indication of a gradual change in how enterprises view product lifecycle management, the role of PLM software in the enterprise, and, with those, new opportunities for PLM related growth. Read More

Boards Not Thrilled With CIOs

By IT Strategy No Comments

According to a survey conducted by the National Association of Corporate Directors (NACD) and reported by CIO Magazine, many board members are dissatisfied with quality of information they get from their CIOs. Directors want the CIO to give them more and better information, especially about IT risk.

According to the report, only 13% of board directors are satisfied with IT briefings. About 35% said they were unsatisfied with the quality of technical information and 27% were unsatisfied with its quality.

This survey highlights that despite so many surveys, discussions and articles, there is often a discrepancy between the business perspective of the board and the role it sees IT is serving in the organization. IT management needs to demonstrate deep understanding of the business and define its role in terms that go beyond keeping the servers humming and provisioning software and mobile devices. As enterprises explore new technologies and business opportunities in cloud computing, social media and big data analytics, IT leadership has an excellent opportunity to deliver significant new business value.

The burden does not lie exclusively on the shoulders of the CIO. Corporate boards must include the CIO in devising a robust strategy and implementation roadmap of these new technologies. The potential complexity and the nascent nature of many of the new overly-hyped technologies require that the CIO organization is involved throughout in order to reduce both technology and business risks.

As the report shows, the main chasm between the board and the CIO is exactly in these areas: technology and risk. It’s time the two organizations start working together.

 

I-Cubed Acquires Akoya, Adds Cost Analytics Capabilities

By IT Strategy, Manufacturing, Mergers & Acquisitions, PLM One Comment

Cost Analytics Helps Getting More From PLM Data

I-Cubed, a product lifecycle management (PLM) and data migration services company headquartered in Raleigh, NC, announced today the acquisition of Akoya, a provider of cost analytics and supply chain optimization software for an undisclosed sum (both companies are privately held).

Akoya, based in Chicago, provides patented product cost analytics software that helps manufacturers reduce product cost and optimize purchasing and inventory decisions. Akoya’s analytic software uses 3D CAD information coupled with extensive financial and purchasing data to estimate parts cost and identify cost-savings opportunities before the design is frozen.

The software helps manufacturers make smart design/cost tradeoff decisions, reduce product costs by identifying pricing inefficiencies in the suppliers’ network, improve accuracy of manufacturing quotes, and similar manufacturing and supply chain related decisions.

Most manufacturing companies undertake periodic cost optimization and supplier rationalization efforts. These business-critical activities tend to use manual processes using financial, quality and supplier information, typically involving multitude of spreadsheets and data sources. Although the analysts performing these tasks are very experienced, manufacturers find it increasingly difficult to apply the cost optimization process consistently throughout  the elongated and fragmented supply chains of the global economy. Furthermore, as the experienced workforce is slowly retiring, manufacturing companies will have to rely on analytic and decision support tools to replace some of the diminishing expertise.

Akoya offers a good mix of packaged analytic tools, access to raw material information and historical cost data, and high level of manufacturing and supply chain expertise. The process of tapping into a manufacturing company product development process and supply chain planning is highly consultative, and requires deep understanding of CAD model data and the PLM/PDM tools that manage it, which is I-Cubed’s core expertise.

Through the acquisition, Akoya will get the necessary resources and experience to grow its business from the small initial base of a handful of customers that include Caterpillar, John Deere and American Axle. Akoya’s customers should expect to get an experienced resource-rich company that will not only scale as needed, but can also offer additional product management and software integration services.

The acquisition is a logical expansion of I-Cubed’s PLM-related service offerings. The company currently provides an array of services focusing on product data quality, especially for PLM software upgrades and migration, and the additional analytic capabilities from Akoya will give existing and new customers a richer set of product data related services.

 

How To Win Without Differentiation

By IT Strategy No Comments

All companies are trying to differentiate their products and services from those of the competition. They believe that strong differentiation is a necessary part of the business strategy to create and grow a market, because, the logic goes, if their products or services are just like the competitors’, why would the customer buy from them? How will they attract and retain buyers?

I am frequently asked to provide market assessments, conduct SWOT analyses and help companies formulate a go-to-market strategy that would differentiate their product or service offering from the competitors and tell it in a credible and compelling way. The problem is that many companies do more or less the same thing, the same way, in the same market, and that they are unable to credibly differentiate their offerings from other companies.

In an HBR article titled You Can Win Without Differentiation, Freek Vermeulen discusses the question of differentiation. Vermeulen argues that when companies are unable to differentiate their offerings effectively, the only option they have is to drop prices and hope to make up some of the loss by increased sales volume, a tactic that is easy for the competition to match. While both consumers and suppliers are very sensitive to pricing, a differentiation and competitiveness strategy based on price alone is fragile, especially when there is ample supply of competitors and substitutes. In this kind of zero-sum competitive game, the ultimate winner of price wars is the consumer.

I believe there are other options for product companies to consider before lowering prices and engage in fierce price competition. For instance, product companies should certainly compete on quality, warranty coverage, delivery terms and service levels. In this type of differentiation, the buyer can make a reasonable comparison between features, functionality, warranty terms and pricing.

However, if you sell services rather than products, this is not as straightforward. Vermeulen uses the example of management consulting firms, such as McKinsey and Accenture, where there is no simple and obvious way to articulate and differentiate their capabilities and make a succinct, credible and reliable connection between capabilities and business outcome. Furthermore, the skills, capabilities and services these firms sell are common commodities across the industry and therefore do not form an effective barrier to entry.

DifferentiationWhen value differentiation is too vague and difficult to demonstrate, price competitiveness does not work. Potential buyers seek other ways to drive their decisions, and, as Vermeulen points out, they rely on other factors, such as the seller’s brand, status in industry, and prior relationships. In other words, the buyer switches from assessing and comparing features and costs to differentiating based on the brand’s credibility and trustworthiness.

This is where I see many companies, especially software and professional services vendors, struggle. It appears to be especially painful for companies transitioning from providing a general set of enterprise IT tools and services and wanting to ride the momentum of new technologies such as cloud computing, big data and mobility, and apply them task-specific functions in vertical industries.

Establishing credibility in vertical markets can be difficult. The buyer’s functional leadership and the employees need to have trust in the vendor to have deep understanding of their process and appreciation of the subtleties of day to day operation.

So here are some suggestions:
Don’t

  • Don’t assume that your experience and tools can be easily transformed from one business segment to another. Some do; most don’t. Take the time to develop a detailed credible business case that you can deliver.
  • Don’t oversell technical wizardry. Buyers of enterprise software and services consider your product roadmap and long-term commitment to the space as much as they do to your product features and engineering skills.
  • Don’t try to prove industry knowledge and demonstrate empathy by highlighting the industry’s poor performance which you are going to turn around over night. Your audience already knows this all too well. Focus on the solutions.

Do

  • Develop deep expertise and position in your target industries and business functions. Not through “desk research” and generic stories, but rather by demonstrating successful implementations, publicizing customer case studies that are real, specific and credible, and becoming an industry insider.
  • Focus on establishing and nurturing long-term strategic relationships with your key customers.
  • Seek partnerships with systems integrators and service providers, especially in industries that are complex and narrowly focused, as these often have a culture that is difficult for outsiders to penetrate.

One last parting thought. The strategy you use to define and demonstrate your company’s differentiation to potential buyers is not necessarily the one you discuss with Wall Street and industry analysts.  This is a subject for a future blog post. In the interim, you can review another HBR article by Todd Zenger: Strategy: The Uniqueness Challenge.

Further Reading: