Strategic Challenges for Hi-Tech Firms

1. Strategic Challenges for Hi-Tech Firms Ankit Agrawal October 25th, 2007

2. Challenges for small businesses and start-ups • Financing • Marketing • Small product and service portfolio • Retention of intellectual property • High competition • Easy target for acquisition

3. Financing • Short performance histories • Small-scale operations • Weak access to supply and distribution markets • Long development times • Uncertain growth rates • Low survival rates • No collateral

4. Current Challenges for businesses • the need to improve, constantly; customer service • the need to optimize operations • dealing with the myriad of regulations that are around the world, and regulatory compliance is a growing issue • managing risk in the business

5. 5 reasons why hi-tech start-ups and SMEs fail 5. Poor financial control 4. Inability to market product or services effectively 3. Mistaken estimate of market demand for product or service 2. Lack of management ability 1. Inadequate planning of the business

6. Small Business Failures Source: “The Business Planning Guide”, David H. Bangs

7. Hi-tech market A high tech market is considered as: • Set of actual or potential customers • For a given set of products of services • Who have a common set of needs or wants and, • Who reference each other when making a buying decision Unfortunately, people intuitively understand every part of this except for the last point which is key to successful hi-tech marketing.

8. Hi-tech Marketing Model 34% 34% 16% 13.5% 2.5% Early Adopters Early Majority Late Majority Innovators Laggards Techies Visionaries Pragmatists Conservatives Luddites Early Market Mainstream Market Geoffrey A Moore. Crossing the Chasm.

9. Hi-tech Marketing Model • Innovators • Pursue new technology products aggressively • Early adopters • Buy into new concepts early, but are not like technologists • They are driven by a business goal and not a technology goal • Early Majority • One-third of the main technology adoption cycle and winning their business is key to the success of hi-tech marketing • Late Majority • Although this constitutes another one-thirds of the buying market, as the product matures the profit margin decreases along with the selling costs with all the R&D costs amortized • Laggards • Rather not have anything to do with a technology and would only buy a product when it is embedded so deep into another product that they remain oblivious to its existence. E.g. microprocessor as part of a breaking systems

10. The Technology Adoption Life Cycle The Chasm Early Adopters Early Majority Late Majority Innovators Laggards Techies Visionaries Pragmatists Conservatives Luddites Geoffrey A Moore. Crossing the Chasm.

11. Strategic Management • Is crucial to building a successful business. • Involves developing a game plan to guide a company as it strives to accomplish its mission, goals, objectives, and to keep it on its desired course.

12. IBM e-business On Demand Solutions

13. What is e-business? EB = EC + BI + CRM + SCM + ERP • Where, • EC = e-commerce • BI = business intelligence • CRM = customer relationship management • SCM = supply chain management • ERP = enterprise resource planning

14. E-business contd. • EC - uses digital technologies to enable buying/selling • BI - collecting primary/secondary information • CRM - strategy to satisfy customers and build long-lasting relationships; high interaction with customers • SCM – delivery of products efficiently and effectively; high interaction with distributors • ERP – optimize business processes and lowering costs • Order entry and purchasing • Invoicing and inventory control

15. E-business On-demand 2nd generation of e-business Source: Adapted from the Gartner Group.

16. E-business On Demand: More than Just Getting Better

17. IBM’s value proposition • Higher motivation • Retention of right people • Clarity of purpose • More money • Follow the money • Beat synergies • Fill performance gap • Right business model • Customer focus • Value driven • Right sourcing • Faster • Radical prioritisation • Expert / goal directed project management • Lower risk • Ready for day 1 • IBM team capability and experience

18. Some of IBM’s list of clients

19. IBM’s vision is to drive strategy development at the business and technology intersection…where innovation happens Unique Positioning at the Intersection of Business and Technology Business Strategy Driven by Technology Insights Diamond Cluster IBM E-Business Strategy Firms Key – Global Strategy Revenue: AT Kearney ACN Large >1bn McKinsey Deloitte Medium 500m – 1bn BAH Bain BCG Small >500m Business Strategy Plan Plan & Implement Source: Kennedy Information 2004, Showing 2003 Global Strategy Revenue.

20. Helping clients respond to these tough questions How to grow and innovate? How to integrate technology and execution into the strategy? How to develop new Business & Operating Models? Key Client Questions • Setting the strategic innovation agenda • Risk identification and development plans for growth into new markets and geographies • Viability of new ventures and business models • Planning for rapid product/service launches • Growing and maximizing profitability across existing customer segments • Leveraging pricing Strategy for revenue growth • Design of strategies and business models that take advantage of new and emerging technologies • Integrated business and technology to drive value and growth • Strategy formulation that integrates execution planning into the strategy formulation process • Identification of organizational/cultural/ leadership barriers to strategy implementation • Creation of alignment and synergies around critical actions for success • Design of new business and operating models based on differentiation and areas of core competencies • Definition of roles in an environment increasingly characterized by value nets / ecosystems Examples of issues we have resolved

21. Porter’s Competitive Strategy Competitive Scope Broad Target Narrow Target Competitive Advantage Lower Cost Differentiation

22. Issues facing SMEs These three characteristics pose challenges for SMEs operators 1. Corporate and Business Strategy 2. Business and organization structure 3. Operations 4. Marketing

23. 1. Corporate and Business Strategy • No clear direction and strategy • Inadequate planning process • Lack of capability to identify what are the key drivers • Unaware of risk • Assist in strategic and business planning preparation and provide strategic and business plan development training • Identify value driver and business opportunity • Provide guideline for risk management • Run business more systemically • Able to compete strategically • Understand the key value driver • Manage resource more efficiently

24. 2. Business and organization structure • Unorganized business and organization structure • Rely too much on one person/small group of people • Assist in designing business structure taking into account finance and IT perspectives • Assist in developing organization structure • Ensure effective communication, co-ordination and integration of effort across departments • Improve decision making process

25. 3. Operations • Asymmetric information between front and back offices • Outdated technology • Low labor productivity • Inconsistent product quality • Insufficient skill development • Assist in identifying key operational value drivers • Advice on business process improvement • IT implementation • Enhance manage and control capability • Manage cost more efficiently • Improve day to day operations • Synchronize information across departments

26. 4. Marketing • Overlook the importance of marketing strategy • Limited marketing budget which in turn hampering competitive position • Lack of channel of distribution • Export incapability • • Incorporate marketing strategy into business planning process • • Enhance SMEs’ bargaining power through capital enhancement such as: • strategic investors • loan from financial institution • Able to reach target group • Obtain higher revenue

27. E-business On Demand is a journey • E-business on demand does not happen overnight Access Enterprise Integration On Demand Access Publish Transact Integrate Internally Integrate Externally Adapt Dynamically

28. Future Opportunities

29. Thank You