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Product styling

Executive brief

The new competitive differentiator in electronics

Product styling

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IntroductionIn 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?

One of the top differentiating competitive factors that

is emerging for electronics products is product styling.1 This trend is creating new opportunities for electronics

companies. This paper discusses these new opportunities

and recommends actions electronics companies can take

to exploit this competitive differentiator.

Background The electronics industry has been transformed due

largely to the personal computer segment. For decades,

the electronics industry’s primary objective for personal

computer products was to offer the most power and

functionality for the lowest possible price. This focus resulted

in tremendous innovation and a proliferation of products at

prices that virtually everyone could afford. It also began to

erode profit margins for electronics companies.

Led by the personal computer segment, the electronics

industry built a model supply chain that is tightly linked and

highly competitive. Vertically integrated companies became

outmoded, replaced by companies that specialized in

standardized components and software and did business

with each another.

Though swift at capturing and extending cost reductions

and efficiencies, this evolved supply chain model led

to product commoditization and standardization. Any

innovation that a company produced could be copied

quickly and usually at a lower cost. Therefore, competitive

advantage was fleeting. Rapid technology change and

short product lifecycles contributed to the further erosion

of profit margins.

Ratcheting up the competition – againWhat happened in the personal computer segment is

influencing the rest of the electronics industry, from TVs

to cell phones. Clear-cut product category definitions

are blurring, and companies that once specialized are

undertaking new ventures. For example, leading companies

Dell, Gateway and Hewlett-Packard are competing in

consumer electronics; Microsoft has entered the market for

cable television set-top boxes, video game consoles and

mobile phone operating systems; and Motorola, which once

concentrated on cell phones, is reentering the TV business

after a 29-year absence.2

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These companies are buying many of the same com-

ponents for their primary electronics or PC business as they

are for their new ventures. Therefore, they enter the consumer

electronics market equipped with procurement experience

and can produce high volumes and low costs that match

or exceed the best traditional consumer electronics players.

The result is a heightened competitive environment.

A reflection of this heightened competitive environment

is an ever-shifting positioning and focus of players in

the electronics industry. Former mobile phone leader

Qualcomm, for example, recently exited the market

for mobile phone handsets because it couldn’t keep

pace with the industry’s rapid cycle times.3 Compare

that to Samsung, a former laggard in the mobile phone

industry who enjoyed a 51 percent rise in its mobile

phone sales in 2002, even though it raised prices by

more than 10 percent.4

Samsung’s secret to success: Product stylingFive years ago, Korea’s Samsung Electronics Company

was the industry’s lowest common denominator.

Samsung’s products were considered low-end and were

sold in Kmart, Wal-Mart and similar discount stores. As

such, Samsung’s products had just one major advantage

over its competitors: a cheaper price.

But price alone doesn’t win consumers’ hearts. Recog-

nizing this, Samsung decided to focus on product styling.

Today, Samsung is moving uptown.

Samsung’s brand value has more than doubled since 2000,

from $5.22 billion to $10.85 billion. In just two years, from

2001 to 2003, Samsung leapfrogged from the number 42

spot on the list of the world’s most valuable brands to spot

number 25. No other company’s climb comes close.5

While increases in brand value can be driven by increased

advertising spending, low prices or quality, Samsung took

another route and made product styling the centerpiece

of its transformation. The results are that, in just five years,

Samsung’s product designs have garnered 18 prestigious

Industrial Design Excellence Awards (IDEAs) from the

Industrial Designers Society of America – a record that is

second only to Apple’s. Obviously Samsung’s focus shift to

product styling has paid off.

Apple styles its way to prominenceAnother turnaround story is Apple, who clawed its way back

from the brink of bankruptcy to become the world’s 20th

most valuable brand. Apple’s key to competitive success

is cool styling. From the candy-colored iMacs of 1998 to

the sleek, white iBooks of today, cutting-edge design has

restored Apple’s shine.6

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Apple’s market-leading MP3 player, the iPod, delivers

basically the same functions as its competitors’ products

but commands a price premium of as much as 50 percent

due to a sleek, clean styling that is both practical and

beautiful. Apple recently announced that it has 31 percent

of the MP3 player market in terms of units sold – but 55

percent when measured by revenue.7

The iPod is a prime example of the premium commanded

by superior styling. In the past, when consumer electronics

were much more expensive, buying decisions were driven

by price advantages and feature differences. Today, as

consumer electronics become less expensive and less

differentiated, buying decisions are driven by product

styling. In an industry suffering from price pressure and

lacking strong feature-function differentiation, the trend

toward price premiums commanded by better and more

distinctive styling is set to continue.

Finding the style formulaThe growing link between innovative style and strong

brand value is evident. Other electronics companies that

have benefited from the advantages of superior product

styling include IBM with 15 IDEAs, Hewlett-Packard with 12

awards and Microsoft with 11 awards.8 In spite of this trend,

however, electronics companies that focus on style remain

in the minority.

Although winning designs occasionally are achieved

using current industry processes, producing such

designs on a consistent basis requires focus, disci-

pline and a radically different approach to product

development. Tom Kelly, General Manager of the

prominent design firm IDEO, touts an approach to this

challenge that integrates the concepts of classical

corporate R&D departments and innovative designers.9

Samsung is one company that is following this approach.

The company has changed its development approach

by doubling its design staff to 350 in the past five years

and changing its reporting structure to give stylists

greater authority. Designers once reported to engineers

and product planners, but now command equal levels

of authority in the company. Collaboration with the rest

of the company is considered key. Design teams work

across the company, collaborating with everyone from

blue-sky market researchers and manufacturing experts

to engineers, thereby tapping the company’s full breadth

of expertise.10

Other leading companies, too, have changed their product

development models. In setting out to revitalize Apple,

CEO Steve Jobs purposely implemented a new product

development model, teaming Jon Rubinstein, a practical

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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balance one another, with the engineer vetoing the stylist’s

more outrageous design ideas and the stylist pushing to

make every new product a design innovation.11

At Sony, lead stylist Teiyu Goto and his team operate with

unprecedented autonomy and authority, answering only to

top management. The styling team wages ongoing battles

with Sony’s engineers so that good styling consistently

trumps issues of engineering difficulty. The belief driving

this changed product development model is “if we don’t

constantly create something new and grow the business,

Sony is finished.”12

Whirlpool is using advanced mechanical design tools in

its product development model to capture market share.

The company is cost-effectively creating market-specific

variations of its products based on consumer preferences

in different countries. For example, Whirlpool developed

different versions of its new, low-cost washing machine,

which features four long legs for consumers in Brazil,

casters for consumers in India, and a foldable top for

consumers in China, based on the company’s market

research concerning consumer preferences. Whirlpool

produces all three products from the same basic design,

using design software to automatically adapt the design to

specific market preferences.13

As demonstrated by these companies, superior styling

requires a fundamentally different approach to design

than what most electronics companies currently practice.

Styling is no longer an afterthought but a key element

driving the product design. Styling has been given

equal footing with software and electronics, resulting in

a strong styling influence in the final product. Processes

are revamped to be highly integrated and collaborative.

Stylists take the lead in capturing customer requirements

and serve as the final arbiters of what is acceptable.

Market intelligence and manufacturing expertise shape

the look and feel of the final product as much as

hardware and software.

Integrating mechanical design excellenceIn the electronics industry, however, styling is more than

a pretty package. A product must be functional as well

as aesthetic. The color, shine or shape of a mobile phone

body may catch the consumer’s eye, but this phone also

must protect the internal components from wear and

tear to earn the manufacturer repeat business. To design

packaging that also meets rigid functional specifications,

styling tools must be tightly linked to analytical tools.

But rapid changes in consumer tastes and demands are

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

Product styling

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process and infrastructure is achieving rapid custom-

ization without compromising time-to-market or quality. The

only practical solution is to build multiple products on a

common platform, enabling design re-use and morphing.

To achieve seamless blending of mechanical design with

software and hardware engineering requires the ability to

iterate rapidly, continually moving toward optimum styling

without sacrificing performance metrics (e.g., rigidity, heat

dissipation, water resistance). Analysis and testing of

designs against real-life requirements must be performed

quickly and accurately, with the results fed back into the

design and engineering chain.

Increasingly, complex mathematical analysis must be

performed at the earliest stages of design to meet

critical – and increasingly narrow – market windows

without sacrificing quality. Only the most sophisticated

mechanical design systems support such cutting-edge

requirements. Engineering data must be seamlessly

linked to mold development to achieve the speed and

accuracy required to enable the supply chain to deliver

parts that are right the first time.

Learning from proven processesUnlike the electronics industry, automotive and aerospace

manufacturers traditionally have focused heavily on

mechanical design, including styling. As a result, these

industries have already developed sophisticated

processes, process automation and Product Lifecycle

Management (PLM) tools that dramatically reduce the time

required to develop products. These tools, which include

solutions not only for exterior styling but also for testing

and manufacturing analysis for a large number of product

variations using digital mock-ups, can be applied to the

electronics industry as well.

Style-conscious companies don’t have to build physical

prototypes but instead can use digital mock-ups to

engineer and test models and evaluate manufacturability.

Strong mechanical design solutions allow companies to

significantly reduce design cycle times while eliminating

design errors that previously remained undetected until

manufacturing began.

These same solutions allow reuse of standard items and

parts catalogs. Inventories of existing designs can be re-

used as the starting point for new styles, enabling rapid

morphing from the old product to the new. The system

automatically adjusts all related parts and systems each

time a change is made, facilitating customization of a

single style for multiple markets. Analysis is performed

early in the design cycle, speeding the team’s arrival at

an optimum combination of performance, look and feel.

Some tools even allow designers themselves to perform

basic analysis, facilitating early identification of the most

promising design approaches.

A few electronics companies have begun to apply

these tools to their own competitive challenges. Audio

powerhouse Clarion, for example, is focusing on continuing

innovation and improvement of its product lines using

PLM solutions. According to Toshiyuki Nakazaki, Clarion

Malaysia’s Director of Research and Development,

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establishing new market categories requires insight

in recognizing consumer trends, a shorter product

development turnaround time and producing high-quality

products. He adds, “The adoption of PLM solutions has

been instrumental in capturing, managing and sharing

corporate know-how.”14

Similarly, Taiwan-based Acer Inc., a personal computer

manufacturer, is using PLM tools to promote collaboration

among its internal teams and suppliers. The solution

automates all project, document and product structure

management as well as Bill of Materials (BOM) and

workflow processes administration.

Acer’s IT Business Group follows a strategy it describes

as “empowerment through innovation.” This strategy is

intended to keep Acer in a top position within the highly

competitive worldwide IT industry by employing advanced

collaboration systems to continually enhance the

company’s innovation competitiveness.15

RecommendationsElectronics companies that want to increase their competitive

edge should consider upgrading their styling capabilities. As

a first step, management should perform an analysis. The

following key activities should drive this process:

• Assess the skills required for implementing industry-

leading styling capability. Organizations that have made

the transformation, including Apple and Samsung,

typically have needed to increase staffing levels and

upgrade staff skills.

• Assess the organizational alignment to position styling

on a par with other development teams.

• Review business processes so that, when integrated,

mechanical, electrical and software design activities

come together in a competitive cycle time.

• Identify the number of derivative products that can be

successfully launched from a single platform. Help

ensure that design analysis tools can keep pace with

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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ConclusionElectronics companies’ use of product styling to gain

competitive advantage requires an iterative process that

adds steps to the typical product development process.

The give-and-take between styling and mechanical design

and electronics engineering must be ongoing, without

lengthening design cycles. In fact, modern tools and

processes that accommodate a highly iterative process

serve to reduce design cycles while increasing innovation.

Electronics manufacturers now have a chance to apply

these proven processes to their competitive challenges.

By doing so, electronics companies can be more:

• 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.

It’s proven that consumers today pass over less stylish

offerings and willingly pay a substantial premium for stylish

products.16 Therefore, electronics companies that want to

gain a competitive edge today should shift their focus to

product styling choices for consumers.

Few markets are more competitive than the electronics

industry. The successes achieved by Samsung, Apple and

Sony with styling-driven products are not exceptions or

anomalies; they exemplify the emerging business model.

In an electronics industry with razor-thin margins, the price

premiums earned from superior styling could mean the

difference between profit and loss.

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About the authorsPaul Brody is an Associate Partner with IBM Business

Consulting Services and a member of the Product Life

Cycle Management and Supply Chain Management

practices. He can be reached at pbrody@us.ibm.com.

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.

Contributors

Gray Bachelor, Electronics Industry Strategy, IBM Product

Life Cycle Management

Tom Friel, Solutions Marketing, IBM Product Life Cycle

Management

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About IBM Business Consulting ServicesWith consultants and professional staff in more than 160

countries globally, IBM Business Consulting Services is

the world’s largest consulting services organization. IBM

Business Consulting Services provides clients with business

process and industry expertise, a deep understanding of

technology solutions that address specific industry issues

and the ability to design, build and run those solutions in a

way that delivers bottom-line business value.

References1 “When the Butterfly Flaps Its Wings.” IBM Institute for

Business Value executive brief, 2003.2 Pringle, David, Drucker, Jesse and Ramstad, Evan.

“Cellphone Makers Pay a Heavy Toll for Missing Fads.”

The Wall Street Journal, October 30, 2003.3 Ibid.4 Ibid.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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