Many Tech And Telecom Companies Not Prepared To Compete In Global ArenaMany Tech And Telecom Companies Not Prepared To Compete In Global Arena

Most American technology and telecommunications companies haven't yet put into place new processes and practices to compete in a rapidly evolving global marketplace, according to results from a study released last week.

The report, "Crunch Time: The Competitiveness Audit," is based on a survey conducted in late 2004 and early 2005 of more than 300 CEOs and business-line executives at North American technology and telecommunications companies. The study was conducted by organizations such as the Chief Marketing Officers Council, the Business Performance Management Forum, and consulting firm A.T. Kearney.

"My expectations are that companies would've been further along by now in executing" new strategies, processes, and practices to compete in a fast-changing global market, says John Ciacchella, a VP in A.T. Kearney's high-technology practice. But many still are struggling with how to compete at a company level across different markets based on processes that already are in place, which might not give them the agility to innovate, adapt, and compete effectively globally, he says.

"It's time for companies to be establishing beachheads in the new global market," he says. "Typical boundaries are changing, yet companies tend to think of competition in terms of product and market segments," he says. "But if market and product segments are breaking down, they need to change."

Only about one-third of companies have instituted formal processes or developed a formal function for assessing their competitive position in their industry, according to the study. About 54% say "informal discussions that are part of business meetings" constituted their approach to measuring competitiveness.

While most respondents said that product and service innovation remain the most critical elements of competitive success in technology and telecommunications, the study revealed that companies' take a conservative tack toward innovation. Only 29% of the respondents chose investments in new products and services outside their core businesses as one of their companies' top three "actions" to improve product innovation.

Seventy-one percent of the respondents choose improvement of existing products and services. Fifty-two percent named bundling product and service offerings, while 48% picked continuous investment in R&D.

Besides rapidly growing competition overseas, particularly from China and India, another key factor driving "a new world order" is the increasing importance of focusing on consumer markets, rather than enterprises, which was the focus in the 1990s, Ciacchella says. "Last year, for the first time ever, the number of integrated circuits in consumer applications exceeded those in enterprise and defense applications," he says. Similar market shifts took place during the 1970s, when technology emphasis shifted from defense to enterprise markets, and also when Japanese electronics and automakers "hit our shores with high- quality, lower-cost" products, he says.

Other key factors fueling market shifts are emerging technologies such as voice over IP, mobile technologies, and home broadband, as well as digital media such as video and photography, Ciacchella says.

One strategy that companies are taking to cope with overseas competition is increasing the use of outsourcing and offshore operations. The respondents say the cost of skilled labor offshore was the most important factor driving them toward offshore operations. Other important drivers to offshore operations are access to local markets and intellectual capital, as well as innovation capacity and speed.

Ciacchella predicts the role of CIOs will change as global competition heats up and more companies outsource functions. CIOs will increasingly need to "help integrate technology into the business manager's products," he says, to fuel companies' competitive innovations.