Stanford researchers have collected data that for the first time will allow them to draw worldwide comparisons among computer firms, electronics manufacturers, manufacturers of industrial instruments, and large-systems makers. Known as the Excellence in Electronics Survey, the project draws together an unprecedented amount of data on what makes firms succeed, focusing on manufacturing and research and development, but including information on all functions of a business unit. The study involved firms in consumer electronics, computer manufacturing, and industrial electronics.
"The survey is done at the business unit level to give information on smaller and more homogeneous units than is available through annual reports or other sources," Haim Mendelson, James Irvin Miller Professor of Information Systems at the Business School, told computer industry leaders when they gathered at Stanford in September for an update on the Computer Industry Project.
Mendelson said that preliminary analysis of data from the electronics survey showed differences not only from one industry segment to another, but also between same-industry firms in different geographical areas. He reported that the average life cycle of products was 35 months in the computer industry, 40.4 months in consumer electronics, and 71 months in industrial electronics. Preliminary analysis shows that the U.S. computer industry is more robust than previously believed.
Mendelson also described a trend toward vertical disintegration of firms, with U.S. and European firms showing a rapid move toward levels of vertical disintegration that in the past characterized Asian Pacific companies. Overall, approximately 50 percent of the firms in the survey reported plans to decrease their level of vertical integration, whereas about 20 percent reported a planned increase over the period from 1991 to 1994.
Sales income per employee climbed rapidly in the computer industry, from about $130,000 per worker in 1986 to $178,000 in 1991 when adjusted for inflation. There was a less dramatic increase among industrial electronics firms during the same period and virtually no change in consumer electronics.
The data summarized in the table below also show the impact of organizational change and a shift away from business units organized by function and toward units organized around product or customer segments.
The data described by Mendelson came from a survey prepared and administered jointly by Stanford, McKinsey & Co., and the University of Augsburg, Germany. Mendelson headed the Stanford effort.
The survey, which took two years to complete, was no simple task. "It's a comprehensive questionnaire that takes a company about two weeks to fill out," Mendelson said. Project teams visited the companies involved, worked with them to interpret questions, and later conducted interviews to clarify finer points. Ten Stanford doctoral students, as well as participants from McKinsey and Augsburg, made site visits.
What's the advantage for a company to participate in a survey that takes weeks to fill out? "It induces you to structure your thinking about what you are doing," said Mendelson, "and some companies found this was helpful."
Perhaps equally important, participating in the survey meant that companies could benchmark themselves against others. "At the end of the process, participants received statistics on other companies in the same segment." A number of follow-up meetings were held with company executives to discuss the findings and offer recommendations.
The findings reported at the September meeting are preliminary, Mendelson said, with more detailed studies to follow. His main concern is not to compromise the quality of the analysis by doing it too quickly. Researchers are continuing to improve the data - conducting additional follow-up interviews in some cases.
1988 1991 1994
Companies organized by:
Function 92% 74% 57%
Product 7% 23% 28%
Customer 1% 3% 14%
Geographic region - - 1%
- Cathy Castillo
December, 1993