Staples seeks bigger role in IT services

Seems that Staples is headed to becoming the CDW for small business.  It will be interesting to how CDW responds; if they do.

I had a small business; so, whenever I see a small business owner or an entrepreneur, I usually ask a lot of questions about their business. I still hear that the banks are gumming it all up.  Credit lines have been slashed and there still is [practically] no new credit available to small businesses.  Unfortunately, small businesses feed the the economy and will fuel the recovery.

So, what’s my point?  With Staples targeting the small business IT market at this time, will they have the perseverance and forethought to stay the course until that segment recovers?  Right now, small businesses just don’t have the cash.  Even if they do, the owners are still in “survival mode” so they are hording it for a rainy day.  Staples’ value proposition has to show that the Staples solution/package is cheaper (not just better) than having your sister’s kid doing it out of her basement. The devil will be in the details.

Now if Staples does hold out for the long haul and presents a “win-win” package, then buy their stock.

Staples seeks bigger role in IT services

Retailer is creating a new business unit

By Patrick Thibodeau

February 16, 2010 06:13 AM ET

Computerworld – Staples Inc., the Framingham, Mass.-based retailer with 1,872 stores in North America, is expanding its IT services capabilities in a move that will take it right inside the data center.

The company has been working deliberately in recent years to expand its services capabilities. In 2006, Staples bought Thrive Networks, a managed services provider, and in 2008 it acquired Corporate Express, a supplier of office products to businesses and institutions, for $4.8 billion. The new unit, Staples Technology Solutions, “is the combined entity of those two groups,” said Joe Kalinowski, the vice president of finance for the technology solutions unit.

Staples, which has 91,000 employees, reported total net sales last quarter of $6.5 billion. “Technology was a logical extension…,” said Kalinowski.

Staples officials said they’re aiming for all sizes of clients with consulting services, data center services such as disaster recovery and data center media management. The company also has printer management services and has built its own software for managing operations.

From the Thrive Networks acquisition, Staples developed managed services for smaller firms of less than 250 employees, though some large customers use the services, too, said Jim Lippie, vice president of Staples Network Services.

The company, which has 3,000 clients, runs a 24-by-7 network operations center that can offer managed services for all major small-business technologies, including the Linux and Macintosh operating systems. Staples can install agents on hardware to monitor performance and dispatch people for on-site work.

Bob Laliberte, an analyst at the Enterprise Strategy Group in Milford, Mass., said Staples’ printer services are already reaching into large enterprises, while many of its other services are aimed at SMBs, including customers with whom it already has supply contracts. “I think they are looking at this as an extension of their brand and services,” he said.

Staples sees local resellers and IT services shops as its primary competitors.

Patrick Thibodeau covers SaaS and enterprise applications, outsourcing, government IT policies, data centers and IT workforce issues for Computerworld. Follow Patrick on Twitter at Twitter @DCgov or subscribe to Patrick’s RSS feed Thibodeau RSS. His e-mail address is pthibodeau@computerworld.com.

Read more about servers and data center in Computerworld’s Servers and Data Center Knowledge Center.

via Staples seeks bigger role in IT services.

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13 Reasons You will Never Get a Job | via “The Job Genius”

Its so easy to ascribe blame to external forces but sometimes it is actually you (me). The author presents 13 points that make for a good self assessment.  Maybe its time to look in the mirror…

13 Reasons You will Never Get a Job

Filed under: Change is Good, Changing Careers, General, Motivation, Networking — Tags: Lack of education, Motivation, Personal Branding, Personal development — admin @ 2:28 pm

Yes I know that 13 is an unlucky number and even that may deter some of you from reading this. Just this once how about being a contrarian? That’s right, go against the grain. Make a difference in your life. Okay let me be perfectly honest with you. Nobody owes you a job. And to make it worse most job seekers are faced with a perfect storm of barriers that never existed in the past. Those barriers include huge competition for a single position, social media, applicant tracking systems, the complete elimination of entire job descriptions and industries, not to mention a totally overwhelmed HR and recruiting department. You have to be prepared to put your best foot forward. Your most prepared foot. And the one that completely differentiates you from the flock.

Although “experts” are skirting the issue and giving you false hope, I don’t have any problem telling you that you are likely going to stay unemployed, unhappy and a complete burden on society if you continue to do the things I’ve outlined below. Consider it a wake up call; consider it an opportunity. Because statistics show that only a very small percentage of you will take any action. Interesting, that’s about the same percentage of people in the world who are independently successful.

Your choice, it’s a new world with new rules so you have to be ready to do new things.

These 13 reasons outline opportunities that most people will never take advantage of. That’s good news for some of you because the difference between successful people and unsuccessful people is that successful people will do what unsuccessful people will not. Here you go (don’t kill the messenger).

1) You spew facts vs. stories. There’s an old adage in sales and marketing that stories sell and facts tell. People can relate personally to stories and the more you know about the company and person that you are interviewing with the better you can get that person to relate to what you are talking about. Stories evoke emotions and get people connected. And being personally connected is the differentiator you need. Think about the book series, “Chicken Soup for the Soul”. It is just a compilation of short stories about real life. It’s also the best selling book series of all time. But what if instead of telling a heart wrenching story about a paraplegic who learns to walk again and fights all odds to win a dog sled race in the Antarctic all alone, it was just a series of facts like, “Man rides sled across the snow”? One of the most powerful things you can do is call up former employees and employers and just shoot the breeze with them. Write down all the wonderful, “remember when” stories as well as the stories of success and challenge that make you unique. You need other people to jog your memory. If you can give your story personality and feelings, then you will gain instant rapport with anyone you talk to. Instant differentiator, you win.

2) You don’t present solutions. Let’s be real, an employer wants to hire someone to solve a particular problem. Either they don’t have enough of something or they want to fix/change something. And if they had all the solutions then they wouldn’t need you. So after you have thoroughly researched and analyzed the company, its culture, the competition, the industry and the people you are interviewing with then you better know what solutions they need and be able to communicate it. If you don’t, it’s okay because somebody else will. One great tool is to actually perform a S.W.O.T. analysis on the department, industry or company you are interested in. S.W.O.T. stands for Strengths, Weaknesses, Opportunities and Threats. Just Google it if you need a template to help guide you. And believe me, any employer worth working for will be completely impressed not only by your research but by your diligence.

3) You’re lazy. Anything worth doing is worth doing well. Abe Lincoln said that if he had 8 hours to chop down a tree then he would spend the first 6 sharpening his axe. Unfortunately most people don’t want to put forth the time and effort to do what they need to do to secure an interview and a job. The facts are clear that the vast majority of jobs are attained by some sort of active networking practice. And not by posting your resume on-line or applying for job after job. Yet most people are not willing to do what it takes to establish and nurture (you don’t just make a connection and then magic happens) the right networks. When I suggest that people actually call companies and build a rapport with associates in order to seek referrals, they look at me like I’m crazy. But that one additional step can mean the difference between having or not having network contacts, job referrals, insight, interview process feedback and much more.

4) You’re boring. Surveys of recruiters and Human Resource managers show that the number one trait that job seekers lack is high energy. The bottom line is that people want to be around other people who are upbeat, exciting and at the very least, energetic. The perception is that high energy people are on the ball and exude confidence; low energy people are lazy, unmotivated and no fun. Regardless of whether that is true or not, you had better have a gut check about your output. And I’m not just talking about the live interview where your handshake needs to be strong and secure (ladies included) and your voice confident and strong. During your phone interview, your energy is even more important because no one can see the bright expression of excitement that is hidden by technology. The only way to portray confidence and high energy on the phone is to have the proper inflection, tonality and great volume. With blue tooth and other type headsets, it’s more and more important to speak up. And after all, if you’re not excited about what you have to offer, why should anyone else be? And please get some honest feedback from someone about how you sound. True story; I was actually offered a job because of a message I left on an answering machine. It wasn’t the message itself; it was the energy, passion and drive that delivered it.

5) You don’t add up. Have you ever talked to someone and they just make you turn your head and say, “hmm”? Well how do you know if someone isn’t saying that about you? Here’s the best way to tell. If you have anything to hide, have covered something up, or speak in half truths or your resume doesn’t match what you say or what you wrote on your application. If any of those things are true, people will say, “Hmm”
about you. The biggest lies we tell are the one’s we tell ourselves (think of your kids who will honestly say they didn’t get into the cake, all the while covered in chocolate icing). No job, guaranteed. Be honest and be consistent. There are no perfect people in the world. In fact the only people with no problems are well, dead people. What differentiates people is how they handle those problems. So turn your past issues into opportunities. Employers are looking for solution providers so be one.

6) You only speak one language. I’m not talking French or Spanish. I’m talking about the three ways that people communicate and learn. People
learn and disseminate information in one of three ways; auditory,
visual and kinesthetic. Without a full dissertation, this is what I’m talking bout. Auditory learners can grasp information just by you talking to them. Visual learners need some form of pictures or stories to create the picture before they “get it”. Kinesthetic learners need to be an active participant before the information gets through their thick skulls (that’s me). These interviewers would most benefit from a Socratic type interview where they were guided to come up with their own conclusions about why you are the “man” for the job.

Oh and by the way most people are visual. I just happen to be kinesthetic. Which means that I am so dense that you can talk ‘till you
are blue in the face and I won’t get it. I know what you are saying, “So what”? Well let’s say that that there is an even distribution of the population (33.33% each) that prefers to communicate in one of the three styles. And you prefer to communicate in one of the other. So you are visual and the interviewer is auditory. You show graphs and pictures but don’t really “explain” why you are the best candidate (stories are also like pictures). Have you ever wondered why you have a passionate message that just doesn’t produce the results that you are looking for? Well this is the number one reason. Why do you think that Google paid like a gazillion (I’m sure that’s the official term) dollars for YouTube? Because video appealed to the masses in a way that written text never could. So the solution is always to appeal to the interviewers preferred style. How do you do that? We’ll it would be great if you could give them a test to determine their preferred style but the fact is that you just don’t know. So the only solution is to ALWAYS communicate in all three styles. And if you do…..wow you will do what 99% of job seekers not only don’t know how to do but they are also not willing (see lazy above) to do. Hey what’s the big deal anyway…being unemployed is not that bad. I’m sure that Obama will extend your jobless benefits and eating out is so over rated.

7) You’re a quitter. If I hadn’t just had two glasses of wine complements of Delta on my first class upgrade I would have said that you need to have more perseverance. (Disclaimer: I am not condoning the use of alcohol to enhance your creative abilities) But let’s be
real here. Most people quit too soon. Studies show that 81% of professional sales people take 5 calls to close a sale. But a full 90% give up prior to making that critical 5th call (48% quit after the first call and another 24% quit after the 2nd call). I can think of a significant number of hires who scored the position just because they were the one who stayed front and center with me. And not just when I had a position open, no these candidates made regular contact regardless of whether anything was available. And you know the best part is that I really appreciated those candidates staying top of mind with me. Why? Because it kept me from having to weed through hundreds of unqualified candidates.

8) You don’t take advantage of opportunities right in front of your face. Right now I am sitting on a two hour plane ride from Kansas City back to my home in Atlanta. I had an idea pop into my head to write this article after talking to a couple of job seekers who are close to 100% guaranteed not to get employment anytime soon (see reasons 1-13). Oops the battery on my laptop is completely dead and Delta just doesn’t have the foresight like the Virgin Atlantic visionaries to add AC; even in first class (yeah I’m spoiled, so). I am actually writing this entire article on my iPhone because my laptop battery died (I thought about writing a book about writing a book on my phone). I have never understood how someone can spend hours on a plane and not at least have something to read, let alone work on. But in all seriousness, opportunities are all around us every day. Most of the time we are just not prepared to take advantage of them. They say that luck is when preparation and opportunity cross paths and that is so true. Here’s a great example. And this story came from an article in the Atlanta Journal almost a year ago. Yes I was prepared for the opportunity and cut the article out and filed it under, “opportunities”. Anyway the article is about a marketing executive who was a little down on his luck (not enough business) so he decided to create some by actually scheduling flights (mostly first class) to no-where in particular. Why? Because most decision makers were on flights and in first class. The result was that David Topus, marketing and business consultant, landed a 3 year business relationship with former Delta CEO, Leo Mullin, countless contacts and even a 100k deal because of a seat assignment mix up. Now I understand that most people don’t have the means to spend a couple of grand on a first class ticket just on the chance that they will meet someone, but you are missing the point. David just created networking opportunities that exist for all of us, every day. Instead of a first class flight, the opportunity you create could come from a Chamber Networking function or a MeetUp group that you start, or god forbid strike up a conversation with someone in line at the grocery store. The differentiator is that David took an active role in his networking whereas most people think that “showing up” is good enough. Seriously, the whole “90% of life is just showing up” has really screwed up a lot of folks. In the very best of markets maybe that has a hint of truth; with the results only lasting short term. In this market it has no relevance what so ever.

9) Your resume sucks. Alright I’ve reviewed more resumes than I can count. Do you want to know the bottom line? Okay here you go. You know that resume writer that you paid big bucks for? Fire them and hire an editor instead (at a fraction of the price). Your resume won’t get you the job or interview but it can certainly lose it for you. So use this as a rule of thumb. Don’t make it too long, too complicate (go for it if you are a PhD in Neuroscience and are applying for the same but still be careful because a recruiter is likely screening your resume) or too messy. It doesn’t matter how good a candidate you are if your resume shows how poorly you can hire a proof reader or do it yourself. And here’s some very valuable information (you can send me a check if you want) that will completely differentiate you from the rest of the world. Go back and read number 6 above. Take out some words (no fluff in the resume please) and add a few graphs or charts that are easy to read. It will immediately catch someone’s eye and it will resonate with another 33 1/3% of the population who are visual learners (come on, we all like to look at the pictures).

10) You need immediate gratification. An article in The New Yorker highlighted a 1960’s study that showed there is a direct correlation between a child’s ability to delay immediate gratification and success. In fact the 30% of kids who could delay getting a marshmallow for just 15 minutes scored on average 210 points higher on SAT scores. The 70% who could not delay immediate gratification struggled making friends and handling stressful situations. To put this in perspective, the job seeker that needs immediate gratification is the one who posts their resume every day, they do mass mailings of cover letters, and they mindlessly apply for job after job. The job seeker who can delay immediate gratification will do their due diligence by researching companies, individuals, industries and competitors. They will put together a package of solutions and take the time to build relationships as well as practice until their message is clear and value oriented.  So what’s it going to be? One marshmallow now or two in 15 minutes?

11) You’re a taker, not a giver. If you are always looking for what a company is going to do for you and what your benefits will be then you are thinking backwards and you are doomed to fail. Everyone’s favorite radio station is WIIFM (what’s in it for me) so it’s only natural to be a little selfish. The only problem is that your potential employer listens to the same station and they have the upper hand. So if your mission is not to add value to individuals and organizations then you’ve added one more reason why you may never get a job in this economy. The best way to learn how to add value is to make a list of the common concerns an employer might have about hiring someone and answer them. Employers are really only concerned about 3 things. If you can do the job. If you will do the job. If they like you. Answer the objections before the interviewer has had a chance to ask you about them and you are in baby. Other great ways to add value is by doing a S.W.O.T. Analysis or actually preparing a summary of how you will attack the position in your first 90 days (please include items related to soliciting the help of other people in the company).

12) You’re going it alone. Here’s the bottom line. Two heads are better than one and you only have one (if you do in fact have two, skip this section). Napoleon Hill in his masterpiece, Think and Grow Rich, described it a little more elegantly. He said that a mastermind is “The coordination of knowledge and effort of two or more people, who work toward a definite purpose, in the spirit of harmony.” And also, “No two minds ever come together without thereby creating a third, invisible intangible force, which may be likened to a third mind.” In fact he also stated that nothing of greatness was ever achieved by a single man. Yet so often, especially when we are down and out, we tend to play turtle and hide in our shell. You should be doing just the opposite by joining forces with accountability partners who will challenge you to do things that you would never do on your own. And of course, you should return the favor. If you want to know where to find an accountability partner, don’t worry, they are everywhere and likely looking for you as well. See number 8 above.

13) You aren’t prepared. I had to add this in just to make it an even 13 reasons that you will never get a job (only if you are actually a participant in one or more of them). Brian Tracy, the world famous sales trainer said that for every minute you spend planning, you save 10 minutes in execution. That’s a 1000% return on your energy. To put that in perspective, if you do the proper planning and preparation then you can have one interview and get the job or you can be poorly prepared and continue to interview over and over and over again. Get it? So what should you be preparing? In a word, everything. Interview questions (with your accountability partner), reviewing your resume (with your accountability partner), interviewing other people (because you learn when you teach), researching companies, individuals, industries, trends etc and practice relating the information over and over until you are good at it and you exude confidence (because you will when you know your stuff). I could go on and on but I think you get the point. Everything you do, you should plan and prepare for.

There you have it. 13 reasons why you may not ever get a job in this economy. I hope that is not the case. I hope this has been a wake up call for you because these are also 13 ways that you can differentiate yourself from most every other job seeker. It’s a buyers market and you better have the right product for anyone to be interested. Dents, dings and scratches need not apply.

via The Job Genius.

Time to rethink offshoring? – McKinsey Quarterly (Sept 2008)

This is a recent reprint of a “McKinsey Classic”.  Every so often, they release a Premium content ($$$) report for free.  I love this one because its short, crisp, and rich with information. A quick read with a lot of wallop. LEAN practitioners and Total Cost of Ownership fans will enjoy it.

Total Cost of Ownership fans will like seeing how seemingly secondary factors can drive the analysis to different conclusions.  Anyone remember “sensitivity analysis” (no, it has nothing to do with HR).  Can’t tell you how many major business decisions I’ve seen made where there were reams of data and analysis yet no one did a correlation or sensitivity analysis.

If you’re into LEAN then this indicates the premise that you need to be close to the customer.  The customer PULL the time to satisfy must be as short as possible….

Time to rethink offshoring?

SEPTEMBER 2008 • Ajay Goel, Nazgol Moussavi, and Vats N. Srivatsan

Source: Business Technology Office

Changing economic conditions may have undermined some of the benefits of offshoring. For managers of global supply chains, this could be the time to reevaluate.

The production of high-tech goods has moved steadily from the United States to Asia over the last decade. The reasons are familiar: lower wages, a stable global economy, and rapidly growing local markets. These factors combined to make nations such as China and Malaysia favored manufacturing locations. In the last two years, however, the favorable economic winds that carried offshoring forward have turned turbulent. The new conditions are undermining some of the factors that made manufacturers of every stripe, including those in high tech, move production offshore.

For executives managing global supply networks, the question now is whether or not conditions are moving toward a tipping point. Is this the moment to consider sharply scaling back offshore production plans and bringing manufacturing back or close to the United States? Is there a more measured response that better suits the new circumstances? Before executives change their strategies, however, they must determine the total landed cost of each product produced offshore and better understand the shifting trade-offs between cost savings from offshoring (such as lower wages) and rising logistics charges.

Oil prices, and consequently the cost of shipping, have risen to heights few foresaw even just several years ago. Since 2003, crude oil has soared from $28 to more than $100 a barrel. The economics research institution CIBC World Markets estimates that in 2000, when oil prices were near $20 a barrel, the costs embedded in shipping were equivalent to a 3 percent tariff on imports. Today, that figure is 11 percent—meaning that the cost of shipping a standard 40-foot container has tripled since 2000.

The oil spike not only affects exports from Asia but also sharply increases the price its manufacturers pay for raw materials. It now costs about $100 to ship a ton of iron from Brazil to China—more than the cost of the mineral itself. Wage inflation, coupled with a weaker dollar, adds to the challenge: in dollar terms, annual wage inflation in China has averaged 19 percent since 2003 (Exhibit 1). An average production worker, paid $1,740 a year in 2003, makes $4,140 today. By contrast, wage inflation in the United States has averaged only 3 percent. The wage differential between Mexico and China has also narrowed significantly. In 2003, Mexican workers made over twice what their Chinese counterparts did; today that gap has narrowed to 1.15 times. Combined, these trends are reshaping the competitive landscape for offshore manufacturing in a number of locales.

To develop a clearer picture of the changing environment, we analyzed a number of products manufactured for the US market and mapped the optimal region to manufacture them by straightforwardly comparing the wage savings from offshoring with the cost of logistics. Exhibit 2 shows the optimal regions for products with a range of different unit manufacturing costs (all related to the transformation of raw materials into one unit of finished goods in US dollars) and various product weights (which affect logistics costs). We have chosen breakeven curves for China, a traditional low-cost manufacturing location, and for Mexico, a near-shore location

However, these curves are shifting amid the economic dislocations. Products that were once profitably made in areas where the local costs are lowest (dark-gray area) are therefore moving into the near-shoring zone (light-gray area)—or in some cases may now be suitable for production in the United States (blue area). A midrange server, for example, made profitably in China three years ago, has slipped below the breakeven line because of higher wages and freight costs. The server now could be produced more economically at a plant closer to consumers (in Mexico, for example, where the mix of logistics and labor costs is more favorable).

To estimate the trade-offs more precisely, supply chain managers also need a true picture of landed costs. These include the cost of raw materials, carrying inventory, managing product returns, and other hidden charges2 not typically considered in the simple trade-off between offshore wages and logistics described previously.

As an illustration, we studied the total landed cost for a midrange server, comparing scenarios in Asia and the United States (Exhibit 3). Five years ago, in 2003, manufacturing this product in Asia rather than the United States provided a 60 percent savings in labor costs. We have indexed that labor savings to $100. When we calculated total landed costs, however, we found that 36 percent of those labor savings were offset by freight, shipping-related charges, inventory, product returns, and other hidden costs. That gave Asian production a $64 landed-cost advantage. Today, economic conditions have reversed it. After factoring in the higher labor and freight costs, we find that the former offshore savings have turned negative—a burden of an extra $16. The labor savings, $100 in 2003, are now only $45 because of wage inflation. In addition, freight costs have risen by $21 and product returns by an additional $4 because of higher oil prices.

As these examples suggest, changing economic conditions may have undermined your supply chain advantage. This may be an appropriate moment to reevaluate the location of your manufacturing facilities. Take the total landed-cost analysis to the next level of detail and determine if bringing some production back home or to near-shore locations will help counterbalance the higher costs of shipping and freight. At the same time, consider the long-term geographic distribution of demand for your products. In rethinking your global supply chain, you must carefully evaluate the importance of speed, the availability of skilled talent, the potential for further productivity gains in Asia, one-time transition costs, the local import and tax implications, and organizational interfaces. Q logo

About the Authors

Ajay Goel and Nazgol Moussavi are consultants and Vats Srivatsan is a principal in McKinsey’s Silicon Valley office.

Notes

1Exhibit 2 shows, for example, that the total cost of manufacturing a 60-pound high-tech product would have to be at least $260 to counterbalance the higher logistics costs of producing in Asia.

2Hidden costs include reworking errors, incremental financing, and exchange-rate risk.

via Time to rethink offshoring? – McKinsey Quarterly – Operations – Supply Chain & Logistics.

The Case for Backshoring

Finally, leaders are starting to recognize that offshoring is not “the magic pill”.  One has to look at the total cost of these offshoring efforts; not just labor cost and rent.  As a LEAN practitioner,  the wholesale transfer of just about any and every service or manufacturing effort has never made sense.  Yes, in some cases its the way to go; but, for a long time there it seemed like it was just the fashionable thing to do…it was a mantra…what all the cool kids were doing.   Whenever I would ask why are you doing that, they would at me like I had two heads. I just wanted to know the info so that I could build a model or rule of thumb for future use (the engineer in me is rearing its head).  Well, we’ll see were this goes; maybe there is hope.

The Case for Backshoring

Which manufacturing operations should return to the United States?

For years, the NCR Corporation simply followed the pack. Like many other large U.S. manufacturing companies, in the past couple of decades the maker of automated teller machines (ATMs) relied heavily on outsourcing to trim factory costs. By hiring Singapore’s Flextronics International Ltd. to make much of its equipment in cheaper offshore locations in the Asia/Pacific region and South America, NCR could slash hundreds of millions of dollars in plant expenses and be reasonably certain that its ATMs met quality standards.

But recently, NCR has rejected this strategy — at least to a degree. In 2009, the company decided to reclaim responsibility for making one of its most sophisticated lines of ATMs from Flextronics in Brazil and instead manufacture the machines in Columbus, Ga., not far from the NCR innovation center, where its new technology is on display. The reason: The company was concerned that outsourcing distanced its designers, engineers, IT experts, and customers from the manufacturing of the equipment, creating a set of silos that potentially hindered the company’s ability to turn out new models with new features fast enough to satisfy its client banks. “I think you’ll see more of this occurring,” says Peter Dorsman, NCR’s senior vice president in charge of global operations, who says he has been contacted by dozens of U.S. companies studying whether they should make similar moves. “You’ll see a lot more people returning manufacturing to America.”

NCR’s change in direction has raised the possibility that U.S. manufacturers are getting serious about “backshoring” some of the production they shifted overseas in the wholesale offshoring movement that started in earnest in the 1990s. General Electric Company Chief Executive Jeff Immelt recently attracted attention for remarks he gave to a West Point leadership conference calling for U.S. companies to make more products at home. Demonstrating Immelt’s commitment, GE announced in the summer of 2009 that it would build two new plants in the U.S. — a factory in Schenectady, N.Y., to make high-density batteries and a facility in Louisville, Ky., to produce hybrid electric water heaters currently made in China. Dow Chemical Company CEO Andrew Liveris similarly has appealed for a renewed focus on manufacturing in the United States.

Backshoring is primarily an American phenomenon, because U.S. manufacturers have been much more aggressive about outsourcing than their Asian or European counterparts. Japanese companies experimented with outsourcing high-end items to factories in Southeast Asia and China, but quickly changed course after growing concerned about the loss of intellectual property and about disrupting the link between research and manufacturing. As a result, Japanese companies generally farm out only the manufacturing of commodity products.

Cynics might conclude that pronouncements about the need for manufacturing in the U.S. are simply aimed at currying favor with the Obama administration, which is worried enough about the issue that it named former investment banker Ron Bloom as manufacturing czar. Moreover, although cases such as NCR and GE are noteworthy, many U.S. jobs are still going offshore. For example, the Whirlpool Corporation recently announced the closing of an appliance factory in Evansville, Ind., amid plans to move less-skilled jobs to Mexico. And in the financial-services and information technology sectors, there is no letup in sight in the rush toward India. IBM, for example, has more than 90,000 employees in its Indian outsourcing operations.

But the logic behind backshoring is compelling enough that it cannot be easily dismissed as a mere short-term aberration. Higher transportation costs as well as rising wages and raw materials prices in China, inevitable by-products of the huge gains that the developing country’s GDP has made despite the global recession, have frightened some U.S. companies away from Asia. An apt illustration: Wright Engineered Plastics Inc., a Santa Rosa, Calif.–based maker of injection molds, has expanded its West Coast plants and decreased its use of Asian facilities because many of its key customers have shifted their own manufacturing operations back to the U.S. in light of prohibitive increases in the prices for raw plastic in China.

Moreover, some companies are amplifying materials and logistics savings from backshoring by modernizing their U.S. plants to outpace Chinese facilities. Such is the case with Diagnostic Devices Inc., a maker of blood glucose monitoring systems. In August 2009, the privately held company based in Charlotte, N.C., announced that it was moving the manufacturing of its Prodigy line of audible glucose monitors to North Carolina, ending a five-year agreement with a contract manufacturer in China under which Diagnostic Devices sent components overseas and then had the finished devices shipped back to the United States. By automating its U.S. factory with robots and other high-tech hardware and software, and by taking advantage of lower shipping fees for a mostly local customer base, Diagnostic Devices reduced its production budget by 40 percent. And there is an added bonus, according to a company spokesman: “We will also have far more control over and protection of our intellectual property, which you don’t have in China.”

NCR’s decision to backshore goes well beyond dollars and cents — and, in fact, may provide the most convincing rationale for the gains that backshoring can produce. The ATMs being made in Columbus now are NCR’s most sophisticated, capable of scanning checks and cash and eliminating the need for the customer to fill out a deposit slip. This feature has provided a welcome revenue lift for NCR — bringing in as much as US$50 million a year, significant for a company with $5 billion in annual sales. But these machines likely never would have been developed had large customers like JPMorgan Chase and Bank of America not persistently prodded NCR to move in that direction. That type of potentially profitable interaction between NCR and its customers is difficult, and launching desirable new products is slowed considerably, NCR’s Dorsman says, when the manufacturing facilities are offshore. “We take our cue from our customers,” says Dorsman. “They are heavily involved in the development process. And with this new approach we’re taking, we can get innovative products to the market faster, no question.”

NCR also found that having Flextronics manufacture high-end ATMs in Brazil — and relying on the vendor’s third-party suppliers, many of which NCR was unfamiliar with — left important internal constituencies in the dark, further slowing and complicating new product launches. Hardware and software engineers, sourcing executives, manufacturing and operations staff, and customer service managers all had trouble applying their expertise throughout the many remote handoffs between separate organizations.

Despite backshoring’s growing appeal, it’s hard to call it a trend yet. Indeed, most Western CEOs remain convinced that offshoring and outsourcing are still the least expensive approach for manufacturing products — and notwithstanding recent anecdotal evidence to the contrary, their position is rigid. For example, Boeing CEO James McNerney Jr. still clings to a radically outsourced supplier model for the company’s wildly ambitious 787 Dreamliner aircraft even though the plane is more than two years late and is facing numerous customer cancellations because of supplier glitches in distant factories. Of course, CEOs are also attracted to offshore destinations because the manufacturing tax breaks offered by governments in many developing countries are more generous than those granted by the United States.

Author Profile:

via The Case for Backshoring.

But what may be at stake in the schism between offshoring and backshoring is a company’s long-term ability to innovate. The making of commoditized staples like shoes, clothing, and consumer electronics will mostly remain in Asia. Backshoring will be more prevalent at the high end of the technology spectrum, in industries such as telecommunications and health care that are sensitive to quality and fast product cycles or in cases in which companies feel they can profit from getting immediate and ongoing feedback from U.S. customers. Those aspects of manufacturing, many experts believe, are where the best opportunities for earnings growth lie. “That’s where we can be competitive,” says Ron Hira, associate professor of public policy at Rochester Institute of Technology and coauthor of the 2005 book Outsourcing America: The True Cost of Shipping Jobs Overseas and What Can Be Done About It (with Anil Hira; AMACOM).

Ford SYNC: stream Pandora and tweet hands-free in your Ford

As they say: “It’s not your father’s Ford.”

A few weeks ago, I did a post about the automobile becoming a new application platform.  Take note in this article that the package includes “OpenBeak for safe and hands-free tweeting while driving“.

For those of you in the corporate tech world.  What will your road warriors and traveling executives expect? (Well,  your execs may not be driving Fords but I’m sure that the other manufactures will follow suit very soon.)

Ford SYNC Will Soon Stream Pandora Radio

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Jennifer Van Grove 21

2010 is shaping up to be the year Ford SYNC forever alters how we experience digital content in our vehicles. Today, the automotive company is breaking even more ground with the news that the next evolution of SYNC will support third-party mobile applications. Get ready to stream Pandora and tweet hands-free in your Ford.

Ford is essentially paving the way for running SYNC-supported mobile applications in your car, courtesy of the Ford SYNC API. It will start with support for Pandora () for streaming online music, Stitcher for listening to podcasts in your car, and OpenBeak for safe and hands-free tweeting while driving. The bottom line is that you’ll be able to wirelessly control your smartphone applications in your car via the SYNC system with voice commands and steering wheel buttons.

The remarkable development — scheduled for release in 2010 — is ground-breaking when it comes to technology made available in cars, and certainly outshines the $1,200 Pioneer device with Pandora support. It’s all made possible thanks to Ford’s SYNC API, which will spawn support for the apps mentioned above and also eventually create a much larger application ecosystem.

The development also marks the sophistication and evolution of mobile applications. It seems like a dream to envision all our favorite apps functioning in our cars, and yet it’s a reality that Ford is bringing courtesy of its SYNC system.

via Ford SYNC Will Soon Stream Pandora Radio.

China grew >10% in 2009; about to surpass Japan

While getting gas (petrol for our international readers) this morning, I heard on NPR (National Public Radio) that China released it’s numbers this morning. Their economy grew by over 10%! There was a discussion about whether China would beat-out Japan in 2010 to be the #2 economy in the world; the US being #1. Well, I have to say: not bad for a bunch of communists. Oh, did we all forget? One consistent thing that I hear about China is that things happen gradually. So I’m wondering when their form of government will catch-up to their economy.

Now you may ask yourself: how did the Chinese do that in 2009—the year of pain and intense pucker-factor? Well, their Government pumped $1.44 Trillion (with a capital “T”) into their banks which in turn pushed it into the hands of the consumer and small business. Hey, didn’t we do that in the US? Why yes; yes we did. Except that the US banks horded the cash and kept a tight lid on credit. So, small businesses (which really fuel the economy and have the greatest affect on unemployment) still can’t get any credit, which means that they have diminished working capital and are stuck in survival mode. Also, this morning on the TV I saw a snippet with my idol Warren Buffet . He said that the current US “Stimulus Package” was like “taking 1/2 a Viagara” and that now we need to do the rest. Man, I love this guy!

In the interest of full disclosure; I have owned Berkshire-Hathaway for over 15 years.

Banks Hording Cash as of July 2009

Some Asian companies take a different approach to M&A outside their borders – McKinsey Quarterly

Great article on a different approach.  BUT… it’s important to note that the approach is different because the business strategy and expected results are different.  These companies are seeking to expand into new markets were they have no presence or prior experience.  Also, the business case is not about synergies and reducing cost/increasing margin.  Different underlying strategy drives different tactics.

So, question: “which approach should be used?”

Answer: “it depends”.

Hey… if it were easy, then they would pay you so much.

A lighter touch for postmerger integration

Some Asian companies take a different approach to M&A outside their borders.

When it comes to acquisitions, some Asian companies are forging a novel path through the thicket of postmerger integration: they aren’t doing it. Among Western companies, the process can vary considerably from deal to deal, yet it’s an article of faith that acquirers must integrate quickly. Otherwise, the logic goes, they may lose the momentum of a deal before they can capture the synergies that justified it.

But in Asia, a sizable proportion of acquiring companies aren’t rushing to become hands-on managers. With over 1,900 deals, valued at $145 billion, in 2009 alone, the trend is worth noting.1 In a recent review,2 we estimated that roughly half of all Asian deals deviated significantly from the traditional postmerger-management model, which aims for rapid integration and the maximum capture of synergies. Over a third of the Asian deals involved only limited functional integration and focused instead on the capture of synergies in areas such as procurement, with an overwhelming emphasis on business stability. An additional 10 percent attempted no functional integration whatsoever.

By the standards of developed markets, at least, this approach is counterintuitive. When potential synergies aren’t captured in an initial postmerger shake-up, they become all the more elusive the longer an acquirer waits. Replacing an existing management team person by person through natural attrition, for example, could take years. Delaying integration could risk losing prominent customers to competitors or undermine confidence in a merger.3 So why buy a business and then leave it substantially alone?

The answer is that some Asian acquirers often have priorities that are quite different from those of their Western counterparts. More accustomed to organic growth than to M&A growth, executives at Asian companies are understandably keen to minimize the short-term risk of failure. Their calculus trades the benefits of immediate synergies for the advantages of expanding into new and unfamiliar geographies, product lines, and capabilities. These inexperienced acquirers also gain some breathing room as they learn how to operate effectively in new and unfamiliar situations. In many cases, they are acquiring a complete business in a new geography, so value creation depends on the stability and growth of the business—not, for instance, on broad cost reduction efforts. Yet this Asian approach also leads to the accumulation of some difficult choices around integration.

It is probably too early to judge the implications for value creation. Traditional M&A wisdom dictates that a hands-off approach to postmerger management is seldom the best long-term choice. Later on, Asian acquirers that have taken this approach will probably need to pursue more comprehensive integration programs, which will be all the more challenging as a result of the delay. However, if acquirers do eventually integrate successfully, they will have lowered the short-term postacquisition risks without seriously compromising longer-term benefits.

Different motivations

Companies in Europe and the United States share a common approach to integration, growing out of their need to meet the requirements for adequate internal controls as publicly listed companies and for quarterly reports. Investors typically expect rapid evidence that managers are actively coordinating the integration effort so that it will produce synergies. Slow and cautious are words rarely heard in integration-planning sessions, though a rising debate among Western analysts weighs the risks created by the pressure to demonstrate short-term earnings.

By contrast, Asian acquirers often feel much less pressure to show short-term results to the capital markets. The reason is less frequent reporting requirements or different ownership structures, such as family or state control. Contrary to common perceptions, these deals are seldom purely financial portfolio investments: all but 5 percent of those we examined had a clearly articulated commercial rationale, similar to what might be expected in a Western acquisition, for how they would generate synergies. For half of the deals, the disclosed rationale was expansion into a new market (including a new geography),4 an adjacent business line, or a related business area.5 For a further 20 percent, it was the acquisition of a new organizational capability, and for an additional 18 percent, access to scarce resources, vertical integration to ensure security of supply, or both.

The more hands-off approach allows an acquirer to step into geographies or businesses where it has limited experience and where its managers perceive a high likelihood of difficulties in a full integration. The acquirer therefore faces a difficult trade-off between maximizing returns and minimizing the risk of failure. In all these cases, a prudent acquirer with little or no experience in the target’s geography or industry may well decide that the benefits of rapid integration are outweighed by the risks of damaging the sources of value that inspired the deal.

Consider, for example, a Chinese industrial company’s acquisition of a European business in 2006. Although the track record of active restructuring in past acquisitions in the sector suggested that this one could produce significant synergies, the Chinese acquirer was equally aware of the downside. Its president believed that it was unnecessary to assign a Chinese team to manage the newly acquired company in Europe, observing that many Chinese acquirers that did so had failed in their overseas ventures.

A light touch

Many of the acquisitions we examined follow a similar model: the acquirer attempts to minimize integration activity and disruption to the target, leaving most of its operations and organization intact. As unobtrusively as possible, the acquirer focuses on the few synergies that its managers feel will capture most of the available short-term value. We have observed several core elements of this approach.

A ‘minimalist’ governance structure

The acquirer generally aims to achieve effective oversight of its acquisition rather than to substitute its own judgment for that of the existing line management by micromanaging. Successful examples of this approach have involved the creation of a board or supervisory committee that combines the incumbent’s and acquirer’s management, as well as select external appointees—much as a private-equity firm might restructure an acquisition’s board.

This approach can be implemented in different ways. Consider the following three examples, each an Asian cross-border deal in the telecom sector.

  • The acquirer replaced the acquired company’s board with a newly created advisory subcommittee in its own board. This subcommittee, focusing solely on the acquired company’s performance, consisted mostly of independent directors and the acquired company’s CEO.
  • The acquirer appointed its own country CEO as chairman of the acquired company’s board and otherwise let the acquisition’s top team run the business—none of the acquirer’s other managers were transferred.
  • The acquirer insisted that the CFO of the acquired company report daily on progress in strategic planning. The CFO criticized this approach, feeling that it gave the acquisition no “time to perform.”
Keeping the core top team intact

Asian acquirers usually build the leadership team of an acquired company from its incumbent management, along with select local hires. They avoid inserting their own staff—especially people who lack language skills or local experience—into key roles. In the case of the Chinese industrial company mentioned earlier, the acquired company’s management team remained in place with only very minor changes: indeed, the acquirer asked the team to develop its own business plan independently and to provide input to the overall business unit strategy at the group level. The acquired company’s CEO continues to bear responsibility for developing and delivering its business strategy, though he meets periodically with top executives of the parent company to get input and approval.

A similar approach is evident in the way a major Asian bank acquires smaller ones in other countries around the region. Rather than impose management teams and operating models early on, executives at the bank make a priority of keeping intact the acquired companies’ management teams and planning and management processes. When the major bank replaces top-team members who are not aligned with a deal’s strategic objectives, it searches for local executives rather than parachuting in its own people. As is common in such deals, the bank’s executives manage acquisitions primarily through collaborative discussions with existing management teams. The discussions focus on the performance potential and priorities of the business and avoid intrusive scrutiny or pressure for fast results.

A few key performance indicators

Asian acquirers that take a hands-off approach to deals typically manage them by tracking a very limited set of key performance indicators (KPIs). The integration approach of the Chinese industrial company shows an extreme form of this model. Executives of Asian acquirers focused on a few top sources of synergy, delivering impressive results in a small number of initiatives (such as joint sourcing) rather than dissipating their attention across a broad portfolio of projects. The executives managed the business through only five KPIs, as well as through a broader dialogue over the acquisition’s objectives and strategic direction during the quarterly and annual planning processes.

The amount of data the acquirer monitors depends a lot on the sector: in some industrial deals we examined, a scorecard with as few as five to ten metrics was the basis for performance discussions. By contrast, in some consumer-facing businesses, acquirers used a very detailed and rich scorecard. The extent of the data tracked is perhaps less important than getting clarity early on about what should be tracked. In a 1997 acquisition by one Japanese high-tech company, for example, no clear process was established up front for tracking the business plan. Consequently, when the acquired company’s progress faltered, the parent company’s executives were slow to pick up the warning signs and intervened too late.

Limited back-office integration

Asian acquirers do conduct an initial review of an acquired company’s back-office functions to coordinate KPIs and catch data reliability issues. But the full-scale migration of the acquirer’s enterprise-resource-planning platforms is not the default option. Instead, if a much more limited data extraction system can generate the required management information, Asian acquirers find this approach faster, cheaper, and more likely to succeed.

Light touch does not mean no touch. In most cases, acquirers created teams—made up of both their own and the acquired company’s staff—to examine specific, limited synergy capture opportunities, such as technology transfer or cross-selling. This approach provides an important learning opportunity for both sides, without staking too much on the outcome.

Western readers might ask whether this Asian approach merely produces a transitory structure that will inevitably lead to full integration. At this stage, it’s too early to tell. Of the deals we reviewed, none of those that had limited the initial integration subsequently proceeded to a full-blown, traditional one. Moreover, none had concrete plans to do so—even in some cases where several years had passed since the acquisition. And while all the acquirers in the deals we reviewed were satisfied that this approach had achieved enough synergies to justify their acquisitions, they had implicitly accepted limiting any readily quantifiable upside for the time being. They might conceivably continue owning these businesses indefinitely without fully integrating them—or they might eventually implement full integration. However, given the increasing volumes of cross-border deals by these acquirers, and the greater willingness amongst Asian companies to step outside their borders, we are likely to continue seeing more such deals.

About the Authors

David Cogman is a principal in McKinsey’s Shanghai office, and Jacqueline Tan is a consultant in the Hong Kong office.

Notes

1 In 2008, $680 billion worth of deals were completed within and emanated from the region. Of those, 2,300 were outbound acquisitions valued at $208 billion.

2 We conducted in-depth case studies of 120 acquisitions for controlling stakes from the beginning of 2004 through the third quarter of 2008. The analysis was stratified to ensure a representative sample of the Asian acquirers by deal size and country of origin.

3 See Martin Hirt and Gordon Orr, “Helping China’s companies master global M&A,” mckinseyquarterly.com, August 2006.

4 China Mobile’s 2007 acquisition of Pakistan Telecom, for example.

5 Such as the integrated petroleum company Petronas’s 2003 acquisition of the shipping company American Eagle Tankers (AET).

via A lighter touch for postmerger integration – McKinsey Quarterly – Corporate Finance – M&A.