Councils

Thriving not Surviving

By Praveen Gupta

Can you quantify innovation? Sam Luncante, HP’s director of design and brand experience thinks you can.

In an interview with Business Week, Lucante explained “Another big discussion item is how do you walk through this creative process? For the longest time ideation was about throwing out as many ideas as you can. We’ve realized pretty quickly it’s really not about a bunch of ideas, it’s about really good strategy, alignment with business, diagnostics, and deep customer understanding. And when you’re ready to talk about ideas, bringing people to the table who are informed is what it’s all about.

“Then, the ideas are no longer just about the product, they’re about new business models and how you go to market, and what’s your supply chain like. You can see it’s a much different world than it used to be.”

Praveen Gupta, president of Accelper Consulting, an IPC member, agrees. He would like to form an IPC Innovation Council to facilitate – as Lucante explained “bringing people to the table who are informed.” The following is Gupta’s reasoning for an industry council.

Kudos to the entire industry! Really, I cannot believe how quickly all segments of the industry have improved.

I remember when I joined Motorola as a product engineer; we had recently learned how to make computer chips. The chip sizes were 256, 512, and 1024 bits. You’re right, plain bits, no kilo, mega, giga or tera.

Someone said that if the automotive industry had improved at the same rate the electronics industry has improved, you could drive from San Francisco to New York on a teaspoon of gas.

The latest improvement can be seen in the price of a DVD player which I bought five years ago for $349. Now you can purchase a smaller, sometimes better and certainly cheaper DVD player for under $30.

It has been a great ride for consumers. However, it’s been a dangerous drop for producers. Every year, we worry about price erosion and are concerned about the rapidly rising high costs of production. As the industry succeeds, members of the supply chain starve and struggle to survive. We have all asked the question: “What’s next?”

The answer lies within us – within the industry. We must recognize that cost is always going to be driven down by customers. However, it is up to us how we increase the value to price ratio for the customer. Instead of reducing prices, the industry must initiate this reversal. We should plan to deliver value to our customers, not the lowest price product or services.

Healthy competition means challenging each other to deliver better value to customers. We must increase the numerator as well as the denominator in the value equation, while increasing the ratio. Let’s look at the equation:

If we continue to entice customers with the lowest price only, we become limited in offering enhanced features, capability, and services. This starts a downward spiral which eventually hurts suppliers as well as customers. On the other hand, if we offer customers innovative features or value, customers are willing to pay a premium. For example, Motorola’s innovative RazorTM phone commanded a significant premium over lower priced cell phones.

We outline the current state of the industry because we want to get your attention to see the current struggle as an opportunity to go to new heights.

The new plateau is to reverse the trend from cheapest or cost based to value based. We must learn from the companies who develop innovative solutions for their customers and then do the same.

Innovation requires understanding our customers’ needs, and finding ways to help them achieve their objectives. We must find a way to add value upstream in order to get rewarded. If we just supply the lowest price options, then we are not adding value, we are trading value. This requires care for customers, and innovative thinking. Although I grant you it is not easy to do.

IPC would like to start a dialogue to create value for the industry. We must focus on what we can do differently that adds value – new design, process, and service ideas. This way we have a chance to thrive rather than survive.

I would like to form an Innovation Council representing all constituencies through IPC representing all constituencies. We would like to hear from you about your expectations and participation. Tell us ways to make this dialogue more value-added to you, as our customers, in order to help us all. To get started, please send your thoughts to Tony Hilvers, vice president of industry programs, at TonyHilvers@ipc.org or 847-597-2837.

Praveen Gupta is president of Accelper Consulting and active in IPC committees and certification programs.