Flexible Business Models with Higher Revenue and Income for Electronics Industry

An IBM study released today reveals that companies in the electronics industry who adopt a flexible, adaptive, on-demand business model can produce up to twice the revenue per employee and more than twice the operating income per employee than less mature companies.

According to the study, The On Demand Outlook for the Electronics Industry, average revenue per employee for electronics companies surveyed for the period 1998-2002 was about US$300,000 for companies implementing on-demand business models vs. US$150,000-250,000 for less mature companies. Average operating income per employee for the same period was US$40,000 (mature) vs. US$17,000 (immature).

The study was based on detailed analysis of publicly available financial and operational data on 24 of the world’s leading electronics companies. It analyzed such attributes as focus on core competencies, use of variable cost structures and business processes, and the ability to predict and pre-empt changes in the marketplace. Overall, it determined that companies that are more advanced in these areas are better equipped to achieve improved financial performance.

The study is accompanied by a new analytical report by IBM Business Consulting Services, which examines the potential business impact of building more flexible and autonomic capabilities into electronics companies’ globally dispersed operations. Adapting an e-business on demand approach, the report contends, can help electronics companies deal with market volatility, solve pain around high and inflexible cost structures, and generate significantly higher revenues per employee.

In that report, entitled “When The Butterfly Flaps Its Wings – Adapting to Chaos and Uncertainty in the Electronics Industry,” authors George Bailey, Matt Porta and Betsy Tong observe that electronics companies can substantially lower their level of exposure to future instability in an already volatile sector.

“Seemingly inconsequential, faraway events-akin to a butterfly flapping its wings-will continue to have marked effects on the electronics industry. While companies have long talked about the promise of networks, real-time data and analysis and action, what’s different now is that the technology is mature enough to truly enable autonomic management of global processes in real-time,” said George Bailey, partner and Global electronics industry leader for IBM Business Consulting Services. “E-business on demand is a powerful, practical program for getting better business results – period.”

Contact: IBM Business Consulting Services, Richard Janes, Tel. +44 207 021 9370, richard.janes@uk.ibm.com