A large multi-product company can be beaten in segments by smaller companies if...

Summary : It is a basic principle that a large multi-product company, which should have all the advantages, can be beaten in segments by smaller companies if the large company’s product groups have poor inter-divisional communication and coordination

It is a basic principle that a large multi-product company, which should have all the advantages, can be beaten in segments by smaller companies if the large company’s product groups have poor inter-divisional communication and coordination

The early eighties saw the emergence of several multi-product companies: GCA, Eaton, General Signal, Perkin-Elmer and eventually Applied Materials.  This maxim differentiated the last from the first four companies.  In the first four, groups ran independently in varying degrees with the belief that competitive advantage could be gained from central finance and management.  However, with the exception of GCA’s stepper and track groups there was little inter-group communication and coordination.  All were beaten by smaller competitors.

In contrast, Applied Materials had multiple channels of communication that resulted in coordinated design, product, and marketing strategies.  What is unique here is Applied’s use of business processes to force coordination.  Designs were mechanically forced into coordination with its platform strategy.  Platforms like the P5000, Endura, and Centura kept product groups from reinventing the wheel and focusing on customer process needs.  When a customer needed an integrated solution, Applied could easily respond.  Business groups were forced into coordination with the account management sales strategy that Applied adopted from Boeing in the late eighties.  There are no sales people with this method.  One account manager coordinates all customer services so that the customer sees a common interface worldwide.  The customer does not see separate sales, service, marketing, or delivery groups.  The account manager can even push the right buttons in operations to get things done. 

Applied did matrix this with separate functional groups for productivity reasons and even they will admit that this matrix is difficult to manage.  When Applied does trip up, invariably it is the result of behind-the-scene politics getting in the way.  However, they have far better responsiveness than an equally sized company would have organized along functional lines.  They never trip up because they are unresponsive to customers, which is the bane of all companies organized along functional lines.

The way Applied uses this method is that the account manager is essentially the CEO of an operation that brings all its resources to bear on one customer.  Applied has gone further than anyone with the account management method, even eliminating regional managers.  The regional offices still exist and are needed.  The difference is that instead of a regional manager, the account managers from the region where the customers are make the decisions and run the facility as a team.  Because the P&Ls are localized to the accounts, they never encounter the typical problem of not being able to get a demo tool to the region because corporate or operations is slow moving or in the way. 

This is why Applied is so hard to beat and so easy to be beaten by.  When they attack competitors, large or small, they focus on each account like it is a treasured niche to drive a wedge between their competitor’s feuding camps.  They were once small, but they became a giant in this way.

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