In the electronics industry, technology is largely at parity – offerings from electronics companies are similar in general, and every innovation in features or functions that is introduced can be copied quickly. In addition, model supply chains have become tightly linked and highly competitive. These factors have raised the stakes and eroded profit margins for electronics companies. How, then, can electronics companies gain a competitive edge in today’s marketplace?

1. IBM Business Consulting Services
Product styling
The new competitive differentiator in electronics
deeper
Executive brief

2. Product styling
Introduction Led by the personal computer segment, the electronics
In the electronics industry, technology is largely at parity industry built a model supply chain that is tightly linked and
– offerings from electronics companies are similar in highly competitive. Vertically integrated companies became
general, and every innovation in features or functions that outmoded, replaced by companies that specialized in
is introduced can be copied quickly. In addition, model standardized components and software and did business
supply chains have become tightly linked and highly with each another.
competitive. These factors have raised the stakes and
eroded profit margins for electronics companies. How, Though swift at capturing and extending cost reductions
then, can electronics companies gain a competitive edge and efficiencies, this evolved supply chain model led
in today’s marketplace? to product commoditization and standardization. Any
innovation that a company produced could be copied
One of the top differentiating competitive factors that quickly and usually at a lower cost. Therefore, competitive
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is emerging for electronics products is product styling. advantage was fleeting. Rapid technology change and
This trend is creating new opportunities for electronics short product lifecycles contributed to the further erosion
companies. This paper discusses these new opportunities of profit margins.
and recommends actions electronics companies can take
to exploit this competitive differentiator. Ratcheting up the competition – again
What happened in the personal computer segment is
Background influencing the rest of the electronics industry, from TVs
The electronics industry has been transformed due to cell phones. Clear-cut product category definitions
largely to the personal computer segment. For decades, are blurring, and companies that once specialized are
the electronics industry’s primary objective for personal undertaking new ventures. For example, leading companies
computer products was to offer the most power and Dell, Gateway and Hewlett-Packard are competing in
functionality for the lowest possible price. This focus resulted consumer electronics; Microsoft has entered the market for
in tremendous innovation and a proliferation of products at cable television set-top boxes, video game consoles and
prices that virtually everyone could afford. It also began to mobile phone operating systems; and Motorola, which once
erode profit margins for electronics companies. concentrated on cell phones, is reentering the TV business
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after a 29-year absence.
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3. Product styling
These companies are buying many of the same com- But price alone doesn’t win consumers’ hearts. Recog-
ponents for their primary electronics or PC business as they nizing this, Samsung decided to focus on product styling.
are for their new ventures. Therefore, they enter the consumer Today, Samsung is moving uptown.
electronics market equipped with procurement experience
and can produce high volumes and low costs that match Samsung’s brand value has more than doubled since 2000,
or exceed the best traditional consumer electronics players. from $5.22 billion to $10.85 billion. In just two years, from
The result is a heightened competitive environment. 2001 to 2003, Samsung leapfrogged from the number 42
spot on the list of the world’s most valuable brands to spot
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A reflection of this heightened competitive environment number 25. No other company’s climb comes close.
is an ever-shifting positioning and focus of players in
the electronics industry. Former mobile phone leader While increases in brand value can be driven by increased
Qualcomm, for example, recently exited the market advertising spending, low prices or quality, Samsung took
for mobile phone handsets because it couldn’t keep another route and made product styling the centerpiece
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pace with the industry’s rapid cycle times. Compare of its transformation. The results are that, in just five years,
that to Samsung, a former laggard in the mobile phone Samsung’s product designs have garnered 18 prestigious
industry who enjoyed a 51 percent rise in its mobile Industrial Design Excellence Awards (IDEAs) from the
phone sales in 2002, even though it raised prices by Industrial Designers Society of America – a record that is
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more than 10 percent. second only to Apple’s. Obviously Samsung’s focus shift to
product styling has paid off.
Samsung’s secret to success:
Product styling Apple styles its way to prominence
Five years ago, Korea’s Samsung Electronics Company Another turnaround story is Apple, who clawed its way back
was the industry’s lowest common denominator. from the brink of bankruptcy to become the world’s 20th
Samsung’s products were considered low-end and were most valuable brand. Apple’s key to competitive success
sold in Kmart, Wal-Mart and similar discount stores. As is cool styling. From the candy-colored iMacs of 1998 to
such, Samsung’s products had just one major advantage the sleek, white iBooks of today, cutting-edge design has
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over its competitors: a cheaper price. restored Apple’s shine.
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Apple’s market-leading MP3 player, the iPod, delivers Although winning designs occasionally are achieved
basically the same functions as its competitors’ products using current industry processes, producing such
but commands a price premium of as much as 50 percent designs on a consistent basis requires focus, disci-
due to a sleek, clean styling that is both practical and pline and a radically different approach to product
beautiful. Apple recently announced that it has 31 percent development. Tom Kelly, General Manager of the
of the MP3 player market in terms of units sold – but 55 prominent design firm IDEO, touts an approach to this
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percent when measured by revenue. challenge that integrates the concepts of classical
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corporate R&D departments and innovative designers.
The iPod is a prime example of the premium commanded
by superior styling. In the past, when consumer electronics Samsung is one company that is following this approach.
were much more expensive, buying decisions were driven The company has changed its development approach
by price advantages and feature differences. Today, as by doubling its design staff to 350 in the past five years
consumer electronics become less expensive and less and changing its reporting structure to give stylists
differentiated, buying decisions are driven by product greater authority. Designers once reported to engineers
styling. In an industry suffering from price pressure and and product planners, but now command equal levels
lacking strong feature-function differentiation, the trend of authority in the company. Collaboration with the rest
toward price premiums commanded by better and more of the company is considered key. Design teams work
distinctive styling is set to continue. across the company, collaborating with everyone from
blue-sky market researchers and manufacturing experts
Finding the style formula to engineers, thereby tapping the company’s full breadth
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The growing link between innovative style and strong of expertise.
brand value is evident. Other electronics companies that
have benefited from the advantages of superior product Other leading companies, too, have changed their product
styling include IBM with 15 IDEAs, Hewlett-Packard with 12 development models. In setting out to revitalize Apple,
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awards and Microsoft with 11 awards. In spite of this trend, CEO Steve Jobs purposely implemented a new product
however, electronics companies that focus on style remain development model, teaming Jon Rubinstein, a practical
in the minority. electrical engineer, with Jonathan Ive, a trendy British
stylist. Together, the team has led the development of such
Apple hits as the titanium PowerBook G4 laptop and the
sleek new iBook laptops. The two men complement and
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5. Product styling
balance one another, with the engineer vetoing the stylist’s As demonstrated by these companies, superior styling
more outrageous design ideas and the stylist pushing to requires a fundamentally different approach to design
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make every new product a design innovation. than what most electronics companies currently practice.
Styling is no longer an afterthought but a key element
At Sony, lead stylist Teiyu Goto and his team operate with driving the product design. Styling has been given
unprecedented autonomy and authority, answering only to equal footing with software and electronics, resulting in
top management. The styling team wages ongoing battles a strong styling influence in the final product. Processes
with Sony’s engineers so that good styling consistently are revamped to be highly integrated and collaborative.
trumps issues of engineering difficulty. The belief driving Stylists take the lead in capturing customer requirements
this changed product development model is “if we don’t and serve as the final arbiters of what is acceptable.
constantly create something new and grow the business, Market intelligence and manufacturing expertise shape
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Sony is finished.” the look and feel of the final product as much as
hardware and software.
Whirlpool is using advanced mechanical design tools in
its product development model to capture market share. Integrating mechanical design excellence
The company is cost-effectively creating market-specific In the electronics industry, however, styling is more than
variations of its products based on consumer preferences a pretty package. A product must be functional as well
in different countries. For example, Whirlpool developed as aesthetic. The color, shine or shape of a mobile phone
different versions of its new, low-cost washing machine, body may catch the consumer’s eye, but this phone also
which features four long legs for consumers in Brazil, must protect the internal components from wear and
casters for consumers in India, and a foldable top for tear to earn the manufacturer repeat business. To design
consumers in China, based on the company’s market packaging that also meets rigid functional specifications,
research concerning consumer preferences. Whirlpool styling tools must be tightly linked to analytical tools.
produces all three products from the same basic design,
using design software to automatically adapt the design to But rapid changes in consumer tastes and demands are
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specific market preferences. forcing companies to work at an extremely rapid pace.
Global distribution complicates the equation, introducing
enormous product variations and the need to manage
them. A key challenge in building a better styling business
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6. Product styling
process and infrastructure is achieving rapid custom- solutions not only for exterior styling but also for testing
ization without compromising time-to-market or quality. The and manufacturing analysis for a large number of product
only practical solution is to build multiple products on a variations using digital mock-ups, can be applied to the
common platform, enabling design re-use and morphing. electronics industry as well.
To achieve seamless blending of mechanical design with Style-conscious companies don’t have to build physical
software and hardware engineering requires the ability to prototypes but instead can use digital mock-ups to
iterate rapidly, continually moving toward optimum styling engineer and test models and evaluate manufacturability.
without sacrificing performance metrics (e.g., rigidity, heat Strong mechanical design solutions allow companies to
dissipation, water resistance). Analysis and testing of significantly reduce design cycle times while eliminating
designs against real-life requirements must be performed design errors that previously remained undetected until
quickly and accurately, with the results fed back into the manufacturing began.
design and engineering chain.
These same solutions allow reuse of standard items and
Increasingly, complex mathematical analysis must be parts catalogs. Inventories of existing designs can be re-
performed at the earliest stages of design to meet used as the starting point for new styles, enabling rapid
critical – and increasingly narrow – market windows morphing from the old product to the new. The system
without sacrificing quality. Only the most sophisticated automatically adjusts all related parts and systems each
mechanical design systems support such cutting-edge time a change is made, facilitating customization of a
requirements. Engineering data must be seamlessly single style for multiple markets. Analysis is performed
linked to mold development to achieve the speed and early in the design cycle, speeding the team’s arrival at
accuracy required to enable the supply chain to deliver an optimum combination of performance, look and feel.
parts that are right the first time. Some tools even allow designers themselves to perform
basic analysis, facilitating early identification of the most
Learning from proven processes promising design approaches.
Unlike the electronics industry, automotive and aerospace
manufacturers traditionally have focused heavily on A few electronics companies have begun to apply
mechanical design, including styling. As a result, these these tools to their own competitive challenges. Audio
industries have already developed sophisticated powerhouse Clarion, for example, is focusing on continuing
processes, process automation and Product Lifecycle innovation and improvement of its product lines using
Management (PLM) tools that dramatically reduce the time PLM solutions. According to Toshiyuki Nakazaki, Clarion
required to develop products. These tools, which include Malaysia’s Director of Research and Development,
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7. Product styling
establishing new market categories requires insight Recommendations
in recognizing consumer trends, a shorter product Electronics companies that want to increase their competitive
development turnaround time and producing high-quality edge should consider upgrading their styling capabilities. As
products. He adds, “The adoption of PLM solutions has a first step, management should perform an analysis. The
been instrumental in capturing, managing and sharing following key activities should drive this process:
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corporate know-how.”
• Assess the skills required for implementing industry-
leading styling capability. Organizations that have made
Similarly, Taiwan-based Acer Inc., a personal computer
the transformation, including Apple and Samsung,
manufacturer, is using PLM tools to promote collaboration
typically have needed to increase staffing levels and
among its internal teams and suppliers. The solution
upgrade staff skills.
automates all project, document and product structure
• Assess the organizational alignment to position styling
management as well as Bill of Materials (BOM) and
on a par with other development teams.
workflow processes administration.
• Review business processes so that, when integrated,
Acer’s IT Business Group follows a strategy it describes mechanical, electrical and software design activities
as “empowerment through innovation.” This strategy is come together in a competitive cycle time.
intended to keep Acer in a top position within the highly • Identify the number of derivative products that can be
competitive worldwide IT industry by employing advanced successfully launched from a single platform. Help
collaboration systems to continually enhance the ensure that design analysis tools can keep pace with
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company’s innovation competitiveness. variations, each of which must be individually tested.
• Assess infrastructures for mechanical design. The
newest tools have significant productivity advantages
over older systems and leverage best-in-class capa-
bilities developed originally for the automotive and
aerospace industries.
These actions will help position companies to make the
transformation to a company that is driven by product
styling and responsive to market demands.
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8. Product styling
Conclusion It’s proven that consumers today pass over less stylish
Electronics companies’ use of product styling to gain offerings and willingly pay a substantial premium for stylish
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competitive advantage requires an iterative process that products. Therefore, electronics companies that want to
adds steps to the typical product development process. gain a competitive edge today should shift their focus to
The give-and-take between styling and mechanical design product styling choices for consumers.
and electronics engineering must be ongoing, without
lengthening design cycles. In fact, modern tools and Few markets are more competitive than the electronics
processes that accommodate a highly iterative process industry. The successes achieved by Samsung, Apple and
serve to reduce design cycles while increasing innovation. Sony with styling-driven products are not exceptions or
anomalies; they exemplify the emerging business model.
Electronics manufacturers now have a chance to apply In an electronics industry with razor-thin margins, the price
these proven processes to their competitive challenges. premiums earned from superior styling could mean the
By doing so, electronics companies can be more: difference between profit and loss.
• Focused on consumer preferences
• Responsive to market dynamics
• Variable in product options offered
• Resilient in the face of rapidly shifting consumer
preferences.
Product styling, of course, is not a substitute for other
measures of quality, such as features, functions,
durability, usability and reliability. But styling does
provide another choice for consumers, and it’s one the
marketplace has embraced.
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9. Product styling
About the authors Contributors
Paul Brody is an Associate Partner with IBM Business Gray Bachelor, Electronics Industry Strategy, IBM Product
Consulting Services and a member of the Product Life Life Cycle Management
Cycle Management and Supply Chain Management Tom Friel, Solutions Marketing, IBM Product Life Cycle
practices. He can be reached at pbrody@us.ibm.com. Management
Dr. Hagen Wenzek is an Associate Partner and leads
the Global Electronics Industry team for the IBM
Institute for Business Value. He can be reached at
wenzek@de.ibm.com.
Tom Osterday is the IBM Global PLM Solutions Executive
for the Electronics Industry and can be reached at
osterday@us.ibm.com.
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10. Product styling
About IBM Business Consulting Services References
1
With consultants and professional staff in more than 160 “When the Butterfly Flaps Its Wings.” IBM Institute for
countries globally, IBM Business Consulting Services is Business Value executive brief, 2003.
2
the world’s largest consulting services organization. IBM Pringle, David, Drucker, Jesse and Ramstad, Evan.
Business Consulting Services provides clients with business “Cellphone Makers Pay a Heavy Toll for Missing Fads.”
process and industry expertise, a deep understanding of The Wall Street Journal, October 30, 2003.
technology solutions that address specific industry issues 3
Ibid.
and the ability to design, build and run those solutions in a 4
Ibid.
way that delivers bottom-line business value. 5
“The Top 100 Brands.” BusinessWeek Online, August 6,
2001 and August 4, 2003.
6
Ibid.
7
Martell, Duncan, “Apple rolls out cheaper iPod, claims
top mkt share” Reuters, San Francisco, January 6, 2004.
,
8
IBM Business Consulting Services analysis, 2004.
9
Kelly, Tom et al. “The Art of Innovation.” 2001.
10
“Pink-Haired Designers, Red Cell Phones – Ka-Ching!”
BusinessWeek Online, June 16, 2003.
11
Tam, Pui-Wing. “Designing Team Helps Shape Apple
Computer’s Fortunes.” The Wall Street Journal,
July 18, 2001.
12
Guth, Robert A. “Details, Details.” The Wall Street Journal,
October 1, 2001.
13
Jordan, Miriam and Karp, Jonathan. “Machines for the
Masses.” The Wall Street Journal, December 9, 2003.
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14
“Clarion Accelerates Product Development with PLM
Technologies.” IBM case history, 2003.
15
“Acer Inc. Seeks Shortest Time-to-Market in Industry with
Product Lifecycle Management Solutions from IBM and
Dassault Systemes.” IBM press release, January 2004.
16
IBM Business Consulting Services analysis, 2004.
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