Advantech announces revolutionary restructuring: becomes a Web 2.0-enabled Globally Integrated Enterprise

The 17th Century Marquis of Montrose gave a famous toast in which he told the truth about risk and reward: "He either fears his fate too much, Or his desserts are small, Who dares not put it to the touch, To win or lose it all." At Advantech's 2007 World Partner Conference in Lake Malaren, Shanghai, China, Advantech clearly showed that they understand Montrose's Toast. You could hear multiple pins dropping yesterday as the top leadership of Advantech announced the most ambitious plan to integrate globally of any automation company, large or small. Chaney Ho, who leads Advantech's China business noted that a company needs a strong economic base in a prosperous country to provide the engine for globalization. "For Advantech, greater China provides us that homeland," Ho declared. "Seeing," he went on, "is believing the growth and advance of China. This is our vision. We want to be successful in the global marketplace and share our success with our homeland." Ho talked about the impact of Thomas Friedman's book, The World Is Flat, and noted that in the flat world, there is equal economic opportunity for all. He noted Friedman's claim that the BRIC countries (Brazil, Russia, India, China) and the VISTA countries (Vietnam, Indonesia, South Africa, Thailand, Argentina) will become much more economically consequential as the century progresses. "We are one world," Ho said, "with one dream. We all live in one free world, and we are dreaming for a better life -- a more secure life." Drivers for one world include the growth of the Internet, high availability inexpensive telecommunications, and transportation. Yet many tough issues remain, Ho said, including global warming, natural resource deficiency, drinking water shortages, aging populations, terrorism and increased pollution. "Our earth is our Mother," Ho declared, "and is millions of years old. It is our responsibility to protect our earth." And with this responsibility, he said, comes a set of great opportunities. Green power needs control systems, and Advantech networking and controller systems are designed to fit well. Everyone has one dream, and wants a comfortable life, a comfortable e-life. Advantech's medical computing solutions, point of are solutions, nursing carts, etc., will help to produce that comfortable life. So will Advantech's solutions for intelligent transportation, like ticketing solutions, gate access and security, and digital signage such as that being installed in Korea and Pudong Shanghai International airport. Advantech intends to pursue a nascent market in real estate intelligence, as Ho called the home automation market. From his description, Advantech believes that the building automation and home automation markets will fuse, into this larger market Ho called real estate intelligence. Advantech also sees a major new market in gaming solutions and other entertainment solutions, with kiosks, video game stands, etc. Advantech is also working in the anti-terrorism market, with x-ray instrumentation controls, network security, video surveillance for things like license plate recognition, and patrol car automation for police vehicles. Ho concluded with Dickens' "It was the best of times, it was the worst of times. It was a season of darkness, it was a season of light." Next came Advantech's founder and guiding genius, KC Liu. As Advantech is often compared to National Instruments, KC Liu is often compared to Dr. James Truchard. "Advantech is in transformation," KC declared. "We are moving immediately from a MNC (multinational company) to a Globally Integrated Enterprise (GIE)." In order for Advantech to grow and prosper, Liu noted, it must reorganize itself and become not just a company with offices in many countries, directed, top-down, from headquarters in Taiwan, but a company that is organized in such a way that responsibility and risk are shared in a localized fashion. He quoted the Wikipedia definition of a GIE, and noted six capabilities of a Globally Integrated Enterprise:
  • leverage global assets
  • serve distinct global markets
  • build a specialized enterprise
  • enable collaboration
  • manage value in an ecosystem of increasingly specialized entities
  • address shared risk and control
Advantech, he said, would immediately transform itself from a product-oriented company to a company that is customer-driven, and regional executives would be reconfigured as "hosts" rather than controllers. Product business units will be redesigned into vertical market business units. There will now be three global units: Industrial Automation Group or IAG, Embedded Products Group or EPG, and the Services group, or SAG. There are, Liu said, four major growth engines for Advantech. 1. ePlatform-- amounting to 50% of revenue, with Design To Order Services (DTOS) and Configure to Order Serives (CTOS) pushing the envelope of customer support. 2. Advansus-- a joint venture between Advantech and motherboard giant ASUS. This is Liu's pick for the fastest growth engine with huge opportunities in network appliances, telecom, DMS,etc. Advansus takes advantage of the purchasing and design strength of ASUS, and will leverage ASUS discounts, design templates, and Advantech is already doing design transfer from ASUS, converting commercial motherboards to industrial designs for different vertical markets. 3. Industrial Automation Group -- Advantech's original core business. Liu says his management team still sees great potential for strong focus in this product group, for applications in factory automation, engergy and environment, transportation, industrial communications and networking, and building automation. What growth requires, Liu said, is a focused business unit that is based on the franchise model. 4. eServices and Applied Computing -- self services, medical services, and surveillance are examples Liu proposed for this business driver. "We are re-organizing our channels and our product groups into vertical business sectors, so we can move from providing products to providing solutions," Liu said. "We are immediately going away from being product driven," Liu proclaimed. "We must re-develop ourselves as customer-oriented, not product-oriented, serving our customers, the VARs and system integrators. We see ourselves serving the solution integrators, not becoming an integrator ourselves." Advantech, Liu said, is implementing a global approach to direct marketing (Direct Marketing Force, or DMF). DMF will serve the channels, whether it is a partner channel or a direct channel. "DMF is one team," Liu proclaimed, "and DMF is the 'long tail' approach, and will support channel partners and key account people, not seek to eliminate them, through global CRM and SEM, call centers, sales lead generation and qualification. We seek channel empowerment and channel partner engagement. We will be more globally integrated." Liu went on to talk about the evolution of the ePlatform industry in general, and Advantech in particular. He noted that the original market for ePlatform business had been the General Computing Platform, but that had already morphed into an Application-ready platform... and that now it was time to move even further...to a Services-ready platform. He gave as an example the change from MP3 players to the iPod, with technology and service and content all bundled together. Some potential markets like this that he identified were video surveillance, digital signage, home automation, and eHealthcare. "Please watch this development," Liu said, "we see our future." Advantech intends to produce focus and simplicity via customer-oriented specialization. 2008 will be Advantech's 25th anniversary year, and is a good time to introduce this paradigm-shift to GIE. "Taking the lead in a long race," KC Liu closed, "is all about commitment." After KC Liu, Advantech's COO, Alex Lin, talked about some specifics regarding the advanced globally integrated business partnership theory that will now become Advantech's practice, and then Bart DeVreese and Albert Huang discussed the nutsand bolts of how the new global channel empowerment strategy would work. DeVreese said, "Our ambition is to develop industry leading channel support. We need strong value creating partnerships, and channel sales is now, and will be, our core engine. Our vision," he went on, "is an ecosystem with different types of partners working together." He noted that there are some clearly defined trends in distribution that companies can only ignore at their peril. Customers are now driving channel evolution. Influencers have become a critical link in the value chain. It is no longer possible to define a channel in terms of a single role. Specialization is a must for survival for smaller channel partners (anybody smaller than Arrow Electronics-- ed.) "Get big, get niched, or get out," DeVreese said. Early stage distribution was transactional, DeVreese noted, and limited to moving product down the value chain. Then the "sell to" model evolved to the "sell through" model, and partners were no longer just selling product, but selling added value (services) and becoming more services oriented. The Web 2.0 next generation model for distribution is not selling solutions, as much as it is selling experiences for the customer. It must be configured to the customers' preference, and become a "sell with" model using web-enabled processes. "The traditional two-tier channel model is dead," DeVreese proclaimed. DeVreese went on to define the channel partner roles, as Advantech now sees them, and marked out a very large turf for the channel partners to exist in. You could hear the collective sigh of relief from Advantech's channel partners as DeVreese described as an "ecosystem" the new plan for going forward, as a plan the partners could live with, and even prosper in. "So how to live the reality?" DeVreese asked. "Simplicity, role-based support and continuing to honor loyalty and investment with returned loyalty and investment."