Less Is Much More
The Most Admired Company of Taiwan's information services sector, Acer employs a philosophy of simplicity to gain unmatched speed in a breakneck industry.
Less Is Much MoreBy Hsiao-Wen Wang
From CommonWealth Magazine (vol. 407 )
This is a competition of speed and agility.
Global PC giants such as HP and Dell have been recently observing the intensely fought battle over low-price subnotebooks between Taiwan's two main protagonists, and they've been left to wonder: Why has Acer Inc.'s Aspire One, which hit the market six months after Asustek Computer's Eee PC, already caught up with its main rival this year?
Once again the top-ranked information services enterprise in the annual CommonWealth Magazine Most Admired Company Survey, Acer, the world's second largest notebook and third-largest PC vendor, may have been the latecomer in the subnotebook race, but its scale has not slowed down the pace of its expansion. Acer estimates it will ship 5 million units of the Aspire One this year and another 15 million units in 2009, in its declared bid for a 30-percent share in the fast-growing global subnotebook market. Enjoying advantages in its brand and distribution network, Acer has in six months attained the full-year target set by low-price computer pioneer Asus.
"It doesn't matter that we were the second company to get into the market. We can still be the most successful," Acer chairman J.T. Wang says with pride.
Ten Core Decision-makers
In Acer's headquarters in the Taipei suburb of Sijhih sits an unremarkable 35 square-meter arc-shaped room with six big screens occupying half the wall space. It is in this "war room" that Acer's 10 core decision-makers run the company's global operations by remote control, holding video conferences whenever necessary to stay on top of the sales numbers, margins, and cost fluctuations reported by its branches around the world.
"From the days when annual sales were US$2 billion to the US$20 billion we'll do this year, our team has been the same," Wang says. The stability of the core team has been crucial to the company's streamlined, timely, and precise decision-making.
Aspire One is a clear example of this. Last October, Acer insisted it was not considering a low-cost subnotebook, but the company's core team changed its mind in January 2008. Three months later, Acer's executives had samples in front of them, and in July, the Aspire One went on sale, causing a stir in the market.
As PCs have become bulk commodities in a market dominated by entrenched giants, a brand's speed is more valuable than its depth when it comes to expanding market share and entering new markets.
"In the PC market, only Apple and Sony have brand depth, but Apple is a niche market and Sony is still losing money. Speed is definitely the number one advantage," observes Acer founder Stan Shih.
Acer's Gemstone Blue laptop, which has proven a hot seller in Europe and the United States in recent months, is a manifestation of the company's speed and agility. On a trip to Seoul, J.T. Wang and Jim Wong, senior vice president and president of the IT business group, joined Samsung executives for a golfing outing. After their day on the links, Samsung showed them a new full HD LCD panel that Wang and Wong immediately decided they wanted to use.
Within 90 days, Acer submitted its new prototype incorporating the full HD panel to Samsung, three months faster than any other suitor for the new part, and the South Korean electronics giant subsequently gave Acer exclusive rights to the full HD panel for a set period of time. Acer became the first computer company in the world to sell a product with both Blu-ray and full HD, thus winning at the starting gate.
Aside from the management team's chemistry cultivated over the past decade, the ability to simplify confusing market intelligence has also helped Acer make every new marketing campaign count.
Wong, who is responsible for Acer's product and global planning, looks over reports on global markets on a daily basis – at least some of them.
"When a good manager enters his office and sees a stack of papers on his desk, he should throw them in the garbage and then start working," laughs Wong, who only looks at the most important key indicators and news on brand positioning.
"You don't need to have seen the entire globe before drawing a map of the world," Wong says.
Anybody can buy reports from market intelligence units and management companies, but this process of streamlining is not something everybody can master. The management report read by Acer's core executives helps the company mine gold from the market's complex and varied signals and ensures they design the right products.
Acer noticed, for example, that two-thirds of Eee PC users were connecting external hard drives to their subnotebooks, an indication that their storage needs were not being satisfied. Relying also on in-depth consumer and distribution network research, Acer decided not to sell Aspire One to consumers based on its low cost.
Instead, Acer targeted telecom companies and developed an Internet-driven product with a hard drive buried in its base, which bulges mildly like the stomach of a three-month-pregnant woman. Acer entered into a cooperation agreement with T-Mobile to promote the "full mobility" of the subnotebook in Europe, and the German telecom is now offering the Aspire One for 1 euro to customers who sign a two-year service contract. Many analysts gave the thumbs-up to Acer's move, praising the company's prescient marketing, which is founded on its quiet adherence to a "less is more" management philosophy.
Controlling Costs, Streamlining Ops
In Taiwan, industry watchers often deride Acer for being unable to secure the top spot in the computer market in its native land. Acer has calculated that if it wanted to compete with Asus for the top spot in the Taiwanese market, it would have to spend an additional NT$500 million. "But if we spend NT$200-300 million in any overseas market, we could increase our volume by many times more than in Taiwan, so we have allocated our resources abroad," Wang explains.
Acer's "less is more" philosophy is also evident in its general operations. The company has always taken pride in controlling operating costs, and from its financial statements, one sees that its net operating margin is only 2 percent, compared to Lenovo's 3 percent and HP's 8 percent. But its asset turnover ratio is higher than those of Dell or HP.
"Although Acer is not a high-margin brand, its operating efficiency has propelled it to among the ranks of the top companies in the world," says Wan-li Wang, head of Taiwan Research for at HSBC. Behind the impressive numbers is Acer's continuous integration and streamlining of its daily operations.
It may be hard to imagine, but Acer, which tops Russia's notebook market with a 36-percent share, has only 15 people stationed there, while Asus, which trails close behind, has more than 100 deployed in that emerging market.
Like a racecar driver who won't shift gears, Acer pushes forward relentlessly at breakneck speeds. It declared in mid-September that it was aiming to become the world's biggest notebook vendor by 2011, estimating that its operating expense ratio would fall to 6 percent by then from the current 8 percent while operating margins would rise to 4 percent from the current 2 percent.
As those projections make clear, Acer envisions a future of strong growth without a parallel expansion of its operations, sticking to its tried-and-true formula of staying flexible and lean, convinced that less, indeed, can be more.
Translated from the Chinese by Luke Sabatier
Chinese Version: 宏碁 善用減法哲學 邁向NB第一大