In the account up to now I have shown how the challenges that all PC-manufacturers have to face on the world markets have completely changed. The high degree of standardization of the PC development and its determination by the technological development, especially the microprocessors, and, finally, the pressure to continually shorten the product life cycles force the companies into making far-reaching changes in their strategies. If we also consider the un
relenting competition to drive other companies out of the market, which has allowed the price of a PC to fall ca. 40% in the course of a year, then it becomes clear how little time the com
panies have for restructuring.
In the last years there has been a vivid discussion what direction such a restructuring should go, what the new aims are and what strategies to choose. In the analysis of these aspects the authors did not agree.
First of all the analysts differ in identifying the reasons for the differences in the competitiven
ess between the companies in the three main economic blocks: America, Europe, and Japan.
Unfavorable market structures, state interference (Borrus, Johnson et al) or the special com
pany network of the big Japanese firms in the semiconductor and computer industry (Gerlach, Seitz) are considered the most important factors that explain the strength of the Japanese com
petitors.
Discussing the strategies to strengthen the weakened American and European market positions some authors propose to shift from hardware to software (Ferguson 1990) or to build strategic alliances to overcome the European crisis in these sectors (Seitz 1991).
As a result of our analysis of the changes in the computer industry we strongly believe that a crucial point which will decide the future competitiveness of the companies is the organization of the process "concept to market", that means the entire course of bringing a product to the market. Our preliminary studies suggest that this point - like others such as unfavorable mar
ket structures, governmental intervention, faulty strategic decisions in the last ten years, etc. - is a primary reason for the differences in the competitiveness of the PC manufacturers in Eu
rope, the USA and Japan.
Somewhat simply formulated, we can observe the following obstacles and blockades for a shortening of the throughput times in the process chain "concept to market", especially in the European and "old" American companies (like DEC and IBM).10
A marked fixation on departments and functions. Effective project work on the basis of an orientation on common interests is frequently blocked through the fact that the repre
sentatives of the individual departments want to optimize the interests of the respective function areas (sales, development, production) at the expense of the other participants.
The project team members remain in defensive postures, in assignments of blame and thus often torpedo the common discussion. The process to bring a product to the market is often organized according to functions not to products.
A strict hierarchy. The process is heavily bureaucratized and formalized. The people responsible for different areas frequently tend to cover themselves in all activities with their superiors, and managers, for their part, tend to drill their engineers to consider departmental interests in the first place. Few independent decisions are made under these circumstances. Courage and personal initiative are not rewarded. Job rotation as a means to get to know the needs of other functions and phases only on occasion.
Massive status differences. The orientation on common interests is made more difficult through the fact that different categories of engineers have a different standing in the company, or claim this for themselves. Development engineers consider themselves as representatives of technological progress and often see production engineers as mere practicians under these conditions. A serious consideration of the respectively different goals and interests is only possible with difficulty.
These behaviors appear and are strengthened by the pay and promotion systems in such com
panies. Promotion takes place within the departments, which is why the individual engineers and workers must also distinguish themselves by their supervisors in accordance with depart
mental interests. Broad knowledge, e.g. beyond the individual areas of responsibility, is not rewarded. Job rotation in the sense that e.g. a product development engineer works for several months in the manufacturing or process planning department, and vice versa, as a means to be enabled to take into consideration the necessities of the other functional units happens only on occasion but is not fostered systematically.
In European companies, the rules for decision-making are generally too rigid. Areas of responsibility are unclear, especially in regard to miscellaneous ex post changes. This leads to each side blaming the other and delegating the responsibility for correcting the defect
else-In fact, these are the main hypotheses developed by the project team which have to be verified by empi
rical research in the near future.
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where. The consequence of this is that it takes a long time for customer wishes to be taken up and realized in product innovation. European manufacturers have a fixation for technology and count on the technological optimization of their products, but they run the risk of bypas
sing customer needs with their product development. As can be seen in figure 6 they are con
siderably late in presenting new PC models onto to the market
It remains to be determined whether this first category of PC manufacturers also differs from their competition in the extent and design of their use of information technologies (CAE, CAD/CAM or tools like "Design for Manufacturability and Assembly DFMA and Design for Testability DFT). There are many indications that in view of the comparatively minor impor
tance of personal communication among those taking part in the process these technologies would have a higher priority in these companies than in the Japanese companies or in the companies in California's Silicon Valley.
The strength of the "new" American computer manufacturers and semiconductor companies like Apple, Sun Microsystems, AMD or LSI Logic is - that is the leading hypothesis — in the specific network relations in Silicon Valley. In the center of these network structures is not, like in Japan for instance, the company, but rather the region:
"A variety of regional institutions - including Stanford University, several trade orga
nizations and local business organizations, and a myriad of specialized consulting, market research, public relations, and venture capital firms - provide technical, finan
cial, and networking services which the region's enterprises cannot afford individually.
By socializing costs and risks and pooling technical expertise these institutions allow Silicon Valley's specialists to continue to innovate and react flexibly." (Saxenian 1990, p. 96)
The basis of these intensive network contacts between the employees in the companies and institutions is frequently the trust which was developed through various common professional experiences. For engineers in Silicon Valley, their profession is much more important than the respective company. The establishment of many new technology-oriented companies opens up continuously new work contacts for the engineers, which brings about a diverse exchange of know-how.
Especially important for getting products to market quickly are the highly specialized supplier firms. Long-range business plans and confidential sales estimates as well as information about the cost structure are exchanged with privileged supplier firms (around 20% of all suppliers of a firm). According to the literature (Quinn et al. 1990) the degree of vertical integration in development and production in the successful American companies in Silicon Valley, like Apple or Sun Microsystems, is, with an estimated 20-25%, even lower than in the Japanese companies.
The market leaders, e.g. Sun Microsystems in workstations, concentrate solely on the design of hardware and software, and in the production on the construction of the prototype, the tests, and the final assembly. They buy everything else from privileged suppliers, with whom they coordinate their conceptual work closely. Teams of engineers of the companies generally work together in a common plant, so that the borders between these firms disappear. Such privile
ged suppliers are closely tied into the logistic chain of the end producer.
Florida and Kenney (1990) are much more skeptical regarding the stability of the "Silicon Valley model". In addition to the dissipation of resources the authors see structural problems due to the high fluctuation of technically qualified personnel. Thus the companies would lose the possibility carrying out product development with a stable engineering staff over long periods of time. They see short-range marketing success with brilliant product innovations to be at the fore of all efforts, not the preservation of competitive strength in future-oriented technologies.
I see a second weakness of these companies to he in their neglecting production, which is generally carried out by companies in the Far East. Whether this underusage of production knowledge will become a medium range problem on the interface between product develop
ment and production remains to be studied.
Florida and Kenney see decisive advantages for Japan precisely in these points. They see the network structure there to be totally different in that it also ties in the individual workers. The suppliers are not the extended arm of the "big head" in research and development, but are al
ready included as equal partners in the planning of the products and production. Thus 90% of all parts in these high-tech companies come from outside suppliers.
The primary competitive advantages of Japanese companies can, from a labor policy point of view, be sketched out as follows. The high degree of vertical integration in the Japanse elec
tronic companies gives the PC manufacturers special advantages over their competition in two respects. On the one hand, the Japanese PC manufacturers are guaranteed short acquisition ti
mes and a high quality of electronic components - and this plays an enormous role in the time competition. According to first interviews for European manufacturers there are substantial deficits precisely in this point. The second main advantage lies in the transfer of technologies and production knowledge between the product areas within the holding. For example, the consumer electronics area works together closely with the PC area in the development of new types of monitors or in the miniaturization of components and equipment. This is certainly a basis for the enormous advantages of Japanese manufacturers in the production technologies.
The basis for the success of the cooperation between the product areas and the reason why capabilities which were developed in one part of the company can be completely utilized in
other areas is a broad qualification of the employees, especially their capability for coopera
ting and communicating with all other areas and their respective agents.
The personnel policy and especially the personnel development system in Japanese companies is, according to Imai et al. (1985), well suited first, to align newly recruited personnel to the needs of the company and second, to guarantee "multileaming" at all levels. That means a broad based learning process for all employees as long as they work for the company. This helps to realize a continual exchange of know-how between the employees at all levels (departments, functions, company divisions).
A second instrument, which is enormously important for breaking down status differences between the employees, is job rotation. Thus in Japanese computer companies engineers, who want for instance to keep working in product development, are sent into production at least for some months, in order to become accustomed to the special aspects and needs in the produc
tion field. Moreover, an intensive communication and cooperation is said to be secured in the course of a development project through the fact that the fixation on hierarchy should be much less marked in everyday work than in European companies, and various problems can be discussed and decided on the spot.
A further factor for avoiding marked differences in status is, according to Imai et al., the group orientation of the Japanese employee. What Imai et al. do not elaborate further in this text is the principle in Japanese companies where the employees are assessed in the twice yearly per
sonnel appraisal less according to their individual know-how than according to how they dealt with their tasks in the groups. A strong group pressure and subtle control mechanisms make the development of individual interests, in the Western understanding, difficult.
"Management uses selection of team members, openness in working environment, sha
ring of information, group-oriented evaluation, and sharing of values as a mechanism for implanting subtle control within the product development process." (Imai et al, p.
357)
Aspects like cooperation, joint problem-solving, participation in group activities within and outside work, as well as involvement in arrangements for continual improvement (Kaizen) are much more important for the assessment of the employees than their individual abilities and qualifications.
11 To be honest this is one of the most difficult aspects to do research on in Japanese companies. In contrast to Western firms interpreneurs in Japan tend to unterestimate or play down "political" aspects in the cor
poration between f.i. the different functional units or hierarchies. So this argumentation is shaky.