High-tech business structure

Summary : High-tech business structure is fundamentally different from the B-School classics. The old style of business was split into three primary areas... he style for a modern Tech business splits it into four areas...


High-tech business structure is fundamentally different from the B-School classics


The old style of business was split into three primary areas: Manufacturing, Sales & Marketing, and Research & Development.  Manufacturing was like the infantry of an army: they delivered mass to the frontlines and were the only way to penetrate a customer’s front.  Sales & Marketing was like cavalry: they brought mobility to the attack; gaining customer attention and serving as the eyes and ears of the organization.  Research & Development was like artillery: they provided long-range fire support.  But in practice, R&D was too far from the front lines to provide any effective support.  This left sales & marketing without the vision to capture the customer’s imagination.  So, market battles devolved into manufacturing slugfests where pricing was the main point of differentiation.


The style for a modern Tech business splits it into four areas: Operations, Account Management, Corporate Marketing, and Product Marketing & Development.  Operations is similar to the old style’s manufacturing.  However operations is broader: it extends across global and vendor boundaries.  Manufacturing was about making something.  Its search for economies of scale often made it self-serving, inflexible, and unresponsive to customer needs.  Operations is about bringing resources together to serve customer needs as fast as possible.  It still plays the role of the infantry in battle, but its different mission statement makes it stronger.


Account Management replaces sales in the new model.  It is more like light infantry, the idea being that it is mobile enough to move between the customer and the various parts of operations to respond quickly to customer needs and problems.  Sales were about selling, then throwing the problem over the wall to shipping and finance.  It was regionally focused, so the same customer effectively saw a different vendor face in each region from whom they were buying.  Pricing was different and service terms were widely different depending on who they bought from.  Sales also had little power to resolve after-sale problems.  But, manufacturing felt little responsibility to respond either, because it was in its own silo.  The customer was left out in the cold.  For Account Management to be successful, it must have the power to reach into the various parts of your organization and quickly align them towards solving customer problems.  Operations must be driven by it.  Field support must report to it. 


Think of Account Management like a good waiter that brings all the chefs and the sommelier to make the customer’s dining experience spectacular.  With Account Management, regions also take a back seat.  In fact, regional managers are eliminated when Account Management is brought to its highest level. 


Corporate Marketing differs from marketing in that its primary focus is on the TING part of marketing.  It is like air cavalry, with two jobs: 1) dropping in resources on the customer’s flanks or in its rear and 2) being the eyes and ears of management.  Its tools are data, advertising, corporate positioning, marketing communications, and even financial relations.


Financial relations have become a new battle ground for marketing because financial analysts can be effectively used to attack the customer’s rear.  ASML pioneered this, gaining much more mind share than their Japanese competitors ever massed in market share throughout the nineties.  Mind share does lead to market share, as they have proven.  If the financial analysts covering your customers believe your product is essential to their competitiveness, it will be nearly impossible for customers to avoid buying from you.


It is important that corporate marketing not be too distant from the customer.  It needs to be driven down into a company’s divisions when it is so large that divisions serve different industries with different customer bases.


Product Marketing & Development is the artillery in today’s battles.  It merges the MARKET part of marketing with product development so that both can be more attuned to addressing long-term customer needs.  Basic research is pushed out to universities and consortia because it has little ROI for companies (the ROI of research is mostly returned to society, not the companies who funded it - - Xerox PARC is a great example).  Product M&D should be out there with customers, building and selling roadmaps to the future.  This is an iterative process: a roadmap must first be built and then sold.  Customers are then used to tear it down so a stronger roadmap can be rebuilt, resold, and then torn down again.  Customers are great at tearing down roadmaps because they understand their needs best.  They may not be able to articulate their needs, but they will usually have an acute awareness of what does not fit their needs.  A company must have a strong internal development group that maintains its technical strengths and that can drive them into products.  So, part of product M&D’s job must be to sell the customer’s view of the roadmap internally before it can be rebuilt.  The rebuilding process takes account of internal strengths, because your people will know best how to architect and build the product. This reiterative process ensures that the roadmap is real and not a paper tiger.  If you wonder how all this works and who has been successful at it, look no further than Novellus and Applied Materials.


For product development to consistently bring home winners, it is essential that heads of R&D wear a marketing hat.  This is a tough job because they must be close enough to the customer to understand their needs but distant enough to drive development rather than develop custom products.  It is important to understand the balance that needs to be struck.  Bob Graham used to say that R&D should be a strategic arm of marketing.  I ascribe to it in part.  It is certainly true when a company is a systems’ integrator like most equipment companies.  But in companies that drive their own technology it is less true.  Take for example most chip makers.  IBM and Intel have been successful over long periods of time by driving semiconductor technology independent of customer need.  That’s because their customer work is in an abstract universe of logic and electrical layouts, while they work in a physical universe of process chemistry, materials, and imaging.  A chip maker’s customer is like an artist using a canvas of silicon.  They have little to say about the development of the canvas, but understand full well the implications of greater performance and lower cost.  There are equipment companies for which this is true.  Two key examples are in lithography and inspection.  Companies like FEI, Canon, and Nikon drive their own technology.  In these instances a key way to deal with the bipolar nature of these companies’ product development process is to split R&D.  Intel does this very effectively, splitting three ways depending on the balance that must be struck between customer driven interaction and independent research and development.  To know which side of the fence you are on, ask the question: To what degree can my R&D teams align to customer needs via a simple long-term mission statement.  If it the answer is to a high degree — like in semiconductor process development, where the mission is follow Moore’s Law — they can be pretty much separated from marketing.  If it is low — like in semiconductor design — R&D must have their own marketing organization that drives them.  R&D greats are people like Martin van den Brink and Sass Somekh.


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