Mapping the Telecom Value Chain

1、Mapping the Telecom Value ChainMapping the Telecom Value Chain:A Roadmap for Communications NetworksProfessor Charles FineMassachusetts Institute of TechnologySloan School of ManagementCambridge, Massachusetts 02142May 2001 /.clockspeed4Tel: 1-617-253-3632, Fax: 1-617-258-7579 Excerpt

2、s from1. Fruit Flies & Temporary Advantage2. Value Chain Design & 3-DCE3. eBusiness Phenomena: Business Model InnovationTelecom Value Chains:A fruit fly exampleMapping the Telecom Value Chain:A Roadmap for Communications NetworksEvolution in the industrial world:INFOTAINMENT is faster than M

3、ICROCHIPS is faster than AUTOS evolve faster than AIRCRAFT evolve faster than MINERAL EXTRACTIONTHE KEY TOOL:Cross-INDUSTRYBenchmarking of Dynamic ForcesValue Chain Design in a Fast-Clockspeed World: Study the Industry FruitfliesEvolution in the natural world:FRUITFLIES evolve faster than MAMMALS ev

4、olve faster than REPTILESTHE KEY TOOL:Cross-SPECIES Benchmarking of Dynamic ForcesCiscos End-to-End Integration for its Fulfillment Value ChainCisco CustomersContractManufacturersComponentSuppliers &Distributors? New product development on-line with supply base? Technology Supply Chain Design: I

5、nnovation through Acquisition? Single enterprise information system ? Dynamic replenishment, direct fulfillment, merge in transit? Customer orders through Cisco Connection onlineFinished Product flows direct to customer via logistics supplierOrder info flows direct to Cisco and suppliersCiscos Strat

6、egy for Technology Value Chain DesignIntegrate technology around the router to be a communications network provider.2. Leverage acquired technology with - sales muscle and reach- end-to-end IT- outsourced manufacturing- market growth3. Leverage venture capital to supply R&DVolatility Amplificati

7、on in the Supply Chain:“The Bullwhip Effect”CustomerRetailerDistributorFactoryTier 1 SupplierInformation lagsDelivery lagsOver- and underorderingMisperceptions of feedbackLumpiness in orderingChain accumulationsSOLUTIONS:Countercyclical MarketsCountercyclical TechnologiesCollaborative channel mgmt.

8、(Cincinnati Milacron & Boeing)Equipment-80-60-40-200204060801001961196319651967196919711973197519771979198119831985198719891991% Change, Year to Year% Chg. GDP% Chg. Vehicle Production Index% Chg. Net New Orders Machine Tool IndustrySupply Chain Volatility Amplification:Machine Tools at the tip

9、of the Bullwhip;Upstream Volatility in the Supply Chain: The Machine Tool Industry as a Case Study,; E. Anderson, C. Fine & G. Parker Production and Operations Management, Vol. 9, No. 3, Fall 2000, pp. 239-261.“We are experiencing a 100-year flood.” J. Chambers, 4/16/01INDUSTRY CLOCKSPEED IS A C

10、OMPOSITE: OF PRODUCT, PROCESS, AND ORGANIZATIONAL CLOCKSPEEDSTHE AutomobileMANUFACTURING COMPANYorganizationAutomobile INDUSTRY CLOCKSPEEDTHEAutomobileproduct technologyTHEAutomobilePRODUCTIONPROCESS process technologyAutomobile CLOCKSPEED IS A MIX OF ENGINE, BODY & ELECTRONICSAutomobileENGINEsl

11、ow clockspeedBODYmedium clockspeedELECTRONICSfast clockspeedISSUE: MOST AUTO FIRMS OPERATE AT ENGINE OR BODY CLOCKSPEEDS; IN THE FUTURE THEY WILL NEED TO RUN AT ELECTRONICS CLOCKSPEED.Dynamics between New Projects and Core Capability Development:PROJECTS MUST MAKE MONEY AND BUILD CAPABILITIES CORE C

12、APABILITIESNEW PROJECTS(New products, new processes, new suppliers)Leonard-Barton, Wellsprings of KnowledgeClockspeed drivesBusiness Strategy CadenceThe Strategic Leverage of Value Chain Design:Who let Intel Inside?1980: IBM designs a product, a process, & a value chainIntelMicrosoftIBMCustomers

13、The Outcome: A phenomenonally successful product designA disastrous value chain design (for IBM)Intel InsideLESSONS FROM A FRUIT FLY:THE PERSONAL COMPUTER1. BEWARE OF INTEL INSIDE (Regardless of your industry)2. MAKE/BUY IS NOT ABOUT WHETHER IT IS TWO CENTS CHEAPER TO OUTSOURCE3. VALUE CHAIN DESIGN

14、CAN DETERMINE THE FATE OF COMPANIES AND INDUSTRIES, AND OF PROFIT AND POWER4. THE LOCUS OF VALUE CHAIN CONTROL CAN SHIFT IN UNPREDICTABLE WAYSAutomotive Power Dynamics of Technology Value/ContentAutosSteel -styling -structural integrityElec.AutosElectronics -$/vehicle -customer interfaceSteel1965200

15、5. . . as the most integral subsystem in the automobile, driving shifts in the relative strategic and financial importance of various members in the supply chain?Will electronics replace sheet steel . . . Strategic Design of Automotive Electronics Value ChainsToyotaChryslerMercedesSupplierVisteonFor

16、dAuto OpnsDelphiGMNAOSupplierCustomersDenso Inside?JCI Inside?Delphi Inside?Vertical Industry Structure with Integral Product ArchitectureIBMDECBUNCHMicroprocessorsOperating SystemsPeripheralsApplications SoftwareNetwork ServicesAssembled HardwareAll ProductsAll ProductsAll Products(A. Grove, Intel;

17、 and Farrell, Hunter & Saloner, Stanford)Computer Industry Structure, 1975-85Horizontal Industry Structure with Modular Product ArchitectureComputer Industry Structure, 1985-95MicroprocessorsOperating SystemsPeripheralsApplications SoftwareNetwork ServicesAssembled HardwareIntelMacTIetcMicrosoft

18、MacUnixHPSeagateetcIntelMacTIetcIntelMotoAMDetcEpsonetcMicrosoftNovelletcLotusAOL/NetscapeEDSetcMicrosoftetcHPDelletcIBMCompaqetc(A. Grove, Intel; and Farrell, Hunter & Saloner, Stanford)THE DYNAMICS OF PRODUCT ARCHITECTURE AND VALUE CHAIN STRUCTURE:THE DOUBLE HELIX MODULAR PRODUCTHORIZONTAL IND

19、USTRYINTEGRAL PRODUCTVERTICAL INDUSTRYFine & Whitney, “Is the Make/Buy Decision Process a Core Competence?”PRESSURE TO INTEGRATEPRESSURE TO DIS-INTEGRATEORGANIZATIONALRIGIDITIESHIGH-DIMENSIONALCOMPLEXITYNICHE COMPETITORSPROPRIETARY SYSTEM PROFITABILITYSUPPLIERMARKET POWERTECHNICAL ADVANCESTHE DO

20、UBLE HELIX IN OTHER INDUSTRIESTELECOMMUNICATIONS- “MA BELL” was Vertical /IntegralBABY BELLS & LONG LINES & CELLULAR are Horizontal/ModularTodays Verizon is going back to Vertical /IntegralAUTOMOTI VE-Detroit in the 1890s was Horizontal/ModularFord & GM in the mid 1900s were Vertical /In

21、tegralTodays Auto Industry is going back to Horizontal/ModularTELEVISION-RCA was Vertical /Integral1970S THROUGH 1990S were Horizontal/ModularTodays media giants are going back to Vertical /IntegralBICYCLES-Safety Bikes to 1890s boom to Schwinn to Shimano InsideTELECOMS: IN THE BEGINNING,THERE WAS V

22、ERTICAL INTEGRATIONAND MARKET POWERTELEPHONENETWORKVOICECOMMUNICATIONAT&TCABLE & BROADCASTNETWORKSVIDEOENTERTAINMENTCable Operators &Network BroadcastersDATANETW0RKSCORPORATE DATAIBM, DEC, ETC.CONTENTINFRASTRUCTUREDAVE CLARK,LCS, MITIP BEGAT CONVERGENCE & LOSS OF MARKET POWERTHE HOUR

23、GLASSSHOPPING, PORTALS, SEARCH, MUSIC, VIDEOS, JOKES, CHAT, EMAIL, PORNOGRAPHY, DATA, ETC., ETC.CONTENT(How ephemeral?)IP FIBER OPTIC NETWORKS, CABLE MODEMS, DSL CONNECTORS, SWITCHING SUBSTATIONS, ETC., ETC.INFRASTRUCTURE(How to achieve ROI>CoC?)IP ALLOWS CONTENT AND INFRASTRUCTURE TO BE DEVELOPE

24、D INDEPENDENTLYDAVE CLARK,RPCP, MITControlling the Channel Through Closeness to Customers:consumer research, pricing, promotion, product developmentRetailerRetailerRetailerCustomersP&GControlling the Chain Through Distribution:The End of P&G Inside ?Controlling the Channel Through Closeness

25、to Customers:Chain ProximityRetailerRetailerRetailerCustomersP&GWalMartWalMart Private LabelControlling the Chain Through Distribution:Beware of Walmart OutsideBattle for Channel Control - Proprietary Systems v. Closeness to CustomersIntelCompaqDellGatewayCustomersAMDNexgenVolatility Amplificati

26、on in “The Bullwhip Effect” and Clockspeed Amplification in “The Speedup Effect” CustomerRetailerDistributorFactoryTier 1EquipmentWeb Site DeveloperChip makerEquipmentMakerPC MakerInventories & Orders fluctuate more as you look upstream, tough on suppliers, but Clockspeeds accelerate as you head

27、 downstream, closer to the final customer CompetitiveIntensity fromReduced TradeBarriers andInternet CommerceTechnologicalInnovation inComputing &Communications+Mutually Reinforcing Clockspeed Drivers: Technological Innovation & Competitive IntensityIndustry &OrganizationClockspeedsIndus

28、try &OrganizationClockspeeds+Media Supply Chains: An Industry at LightspeedVideo/Audio:Movies & Art & News & SportsWireless: -broadcast TV -CDMA, TDMA, GSM -satellite/microwaveLand-basedTelco: -copper POTS -fiber-DSLCustomersTelevisionCable NetworksPC/laptopThe boxThe Pipe (Access, M

29、etro, Backbone)The ContentCommunication:voice & video & emailEducationInternet, et alShoppingWired PhonePagerNews/articles/books(newspapers & magazines)VCRRetail Outlets -Borders: -Blockbuster -Seven-ElevenWireless phoneDelivery (e.g., Fedex)PDABankingALL COMPETITIVE ADVANTAGE IS TEMPORA

30、RYAutos: Ford in 1920, GM in 1955, Toyota in 1990Computing: IBM in 1970, DEC in 1980, Wintel in 1990World Dominion: Greece in 500 BC, Rome in 100AD, G.B. in 1800Sports: Bruins in 1971, Celtics in 1986, Yankees no end The faster the clockspeed, the shorter the reignFruit Flies & Temporary Advanta

31、ge2. Value Chain Design & 3-DCE3. eBusiness Phenomena: Business Model Innovation4. Telecom Value Chains:A fruit fly exampleMapping the Telecom Value Chain:A Roadmap for Communications NetworksVALUE CHAIN DESIGN: Three Components1. Insourcing/OutSourcing(The Make/Buy or Vertical Integration Decis

32、ion)2. Partner Selection(Choice of suppliers and partners for the chain)3. The Contractual Relationship(Arms length, joint venture, long-term contract,strategic alliance, equity participation, etc.)IMPLEMENTATION OF VALUE CHAIN DESIGN:EMBED IT IN 3-D CONCURRENT ENGINEERINGPRODUCTPROCESSVALUE CHAINRe

33、cipe, Unit ProcessDetails,StrategyPerformanceSpecificationsProduct Architecture, Make/Buy componentsTime, Space, AvailabilityTechnology, &Process Planning Manufacturing System, Make/Buy processesIntegral product architectures feature close coupling among the elements - Elements perform many func

34、tions - Elements are in close spacial proximity - Elements are tightly synchronized - Ex: jet engine, airplane wing, microprocessorModular product architectures feature separation among the elements - Elements are interchangeable - Elements are individually upgradeable - Element interfaces are stand

35、ardized - System failures can be localized- Ex: stereo system, desktop PC, bicycleARCHITECTURES IN 3-DINTEGRALITY VS. MODULARITYVALUE CHAIN ARCHITECTUREIntegral value-chain architecture features close proximity among its elements - Proximity metrics: Geographic, Organizational Cultural, Electronic -

36、 Example: Toyota city - Example: Ma Bell (AT&T in New Jersey) - Example: IBM mainframes & Hudson River Valley Modular value-chain architecture features multiple, interchangeable supplier and standard interfaces - Example: Garment industry - Example: PC industry - Example: General Motors glob

37、al sourcing - Example: Telephones and telephone serviceDESIGNING ARCHITECTURES FOR PRODUCTS & VALUE CHAINS: THE NEED FOR ALIGNMENTINTEGRALMODULARPRODUCTARCHITECTUREVALUE CHAIN ARCHITECTURE(Geog., Organ., Cultural, Elec.)Jet enginesMicroprocessorsMercedes vehiclesPersonal Computers BicyclesChrysl

38、er VehiclesCiscoINTEGRALMODULARPolaroidNortelAutomotive Supplier ParksDESIGNING ARCHITECTURES FOR PRODUCTS & VALUE CHAINS: MODULARITY VS. OPENNESSINTEGRALMODULARARCHITECTURALSTRUCTUREARCHITECTURALPROPRIETARINESSPentium Chip Mercedes VehiclesSAP ERPPalm Pilot software & accessoriesPhones &

39、; serviceWeb-based ERPCLOSEDOPENIBM MainframesMicrosoft WindowsChrysler VehiclesLinuxINFORMATION ARCHITECTURE MUST REFLECT BUSINESS MODELIn/Outsourcing: Sowing the Seeds of Competence Development to develop dependence for knowledge or dependence for capacity+Amount of Work Done In-houseknowledge+/or

40、 supplyAmount of InternalLearningInternal Capability+Amount ofWork Outsourcedknowledge+/or supplyAmount of SupplierLearningSupplier CapabilityDependenceIndependence+Japanese industry size & capabilityJapaneseappeal assubcontractorsU.S. industry size & capabilityU.S. firmsappeal assubcontract

41、orsBoeing outsources to Japan(Mitsubishi Inside?)JapaneseIndustry Autonomy+-+Technology Dynamics in the Aircraft Industry: LEARNING FROM THE DINOSAURSSOURCEABLE ELEMENTSPROCESS ELEMENTSSUBSYSTEMSPRODUCTSI4 V6 V8ENGINEERING ASSYTEST CONTROLLER VALVETRAIN BLOCKStrategic Make/Buy Decisions: Assess Crit

42、ical Knowledge & Product ArchitectureDEPENDENT FORKNOWLEDGE & CAPACITYINDEPENDENT FORKNOWLEDGE & DEPENDENT FORCAPACITYBEST OUTSOURCING OPPORTUNITYWORST OUTSOURCING SITUATIONCAN LIVE WITH OUTSOURCINGA POTENTIAL OUTSOURCINGTRAP ITEM IS MODULAR ITEM IS INTEGRAL Adapted from Fine & Whitn

43、ey, “Is the Make/Buy Decision Process a Core Competence?”INDEPENDENT FORKNOWLEDGE & CAPACITYBEST INSOURCINGSITUATIONOVERKILL IN VERTICAL INTEGRATIONStrategic Make/Buy Decisions: Also consider Clockspeed & Supply Base CapabilityAdapted from C. Fine, Clockspeed, Chap. 9DEPENDENT FORKNOWLEDGE &

44、amp; CAPACITYDEPENDENT FORCAPACITY ONLYDECOMPOSABLE(Modular)INTEGRALClockspeed Suppliers Few ManyFast SlowClockspeed Suppliers Few ManyFast SlowClockspeed Suppliers Few ManyFast SlowClockspeed Suppliers Few ManyFast SlowOKWatchit!TrapBestOutWorstOKINDEPENDENT FORKNOWLEDGE & CAPACITYClockspeed Su

45、ppliers Few ManyFast SlowClockspeed Suppliers Few ManyFast SlowOver-killBest InQualitative analysis of strategic importance uses five key criteriaCustomer Importance: High Medium LowTechnology Clockspeed: Fast Medium SlowCompetitive Position: Advantage Parity DisadvantageCapable Suppliers: None Few

46、ManyArchitecture: Integral ModularPossible Decisions (Knowledge & Supply): Insource Outsource Partner/Acquire Partial Insource Partial Outsource Invest Spin Off Develop SuppliersCompetitive Position: Advantage Parity DisadvantageCriteria are applied differently for Products than for SubsystemsVa

47、lue chain elements with high customer importance and fast clockspeed are generally strategic (unless there are many capable suppliers)Competitive position is seldom the primary consideration for strategic importance, rather it serves as a “tie-breaker” when other criteria are in conflict When many c

48、apable suppliers exist, knowledge may be considered commodity and development should be outsourcedArchitecture is considered a constraint for the sourcing decision model, controls the level of engineering that must be kept in house for integration purposesModel developed by GM Powertrain, PRTM, &

49、; Clockspeed, Inc.Sourcing Strategy Decision Tree - High Customer Importance PathCustomerImportance?TechnologyClockspeed?CompetitivePosition?HighLow FastSlow CapableSuppliers?NoneMany CompetitivePosition?Architecture?FewStrongMinimal Outsource -Invest Minimal Outsource - Invest Integral Minimal Outs

50、ource - Equity / Acquire and PartnerMinimal Outsource - Equity / AcquireModular Architecture?Integral Minimal Outsource - Equity/Acquire & PartnerOutsource AllModular WeakCapableSuppliers?NoneMany FewMinimal Outsource - Invest for Parity, Develop Suppliers Architecture?Integral Mostly Outsource

51、- Specify & IntegrateOutsource AllModular CapableSuppliers?NoneMany FewMinimal Outsource - Maintain Internal Knowledge (possibly develop suppliers) Architecture?Integral Partial Outsource (less integral components)Outsource AllModular StrongWeakPartial OutsourcePartial Outsource - Invest in Inte

52、rnal CapabilityHigh Customer Importance Path Model developed by GM Powertrain, PRTM, & Clockspeed, Inc.Sourcing Strategy Decision Tree - Low Customer Importance PathCustomer Importance?HighLow TechnologyClockspeed?FastSlow CapableSuppliers?NoneMany CompetitivePosition?FewStrongDevelop Suppliers and OutsourceDevelop Suppliers and Outsource AllOutsource AllWeakCapableSuppliers?NoneMany Architecture?FewIntegral Partial Outsource Spin-off and Develop Suppliers Modular Outsource AllAr