Transformed internal cost center into a top 5 worldwide supplier
A semiconductor division of a Fortune 50 company was chartered as an internal supplier to the company. The most significant barrier to change was the widely held view that the internal semiconductor division was not competitive. The corporate funding model severely limited the division’s innovation opportunities. The product divisions were forced to purchase from the internal semiconductor division creating friction and a cost-based financial model.
ICG led a Guided Business Launch project that transformed the internal semiconductor cost center into a market leader for supplying integrated circuits outside the company. The Evidence Based Execution plan started with a series of customer pilots to understand the value proposition. It became immediately clear that the semiconductor division had a highly competitive technology and quality level. The next learning cycle focused on the elements of the business design. For example the client ran further pilots to understand the required services and cost-offerings necessary for success. The feedback was extremely positive and the profit margins were significant. The final step in the execution plan focused on how to scale the business to retain the value and reduce risks such as losing the internal customer base.
The external business launch triggered a number of changes in the organization and company. The employees of the new semiconductor division gained confidence and pride in their competitiveness, sparking further innovations. The product divisions were now free to purchase integrated circuits from anyone and they were charged market prices by the semiconductor division. The company decided to invest in a world-class facility to support the growing business.
Over a seven year period the internal cost center became the top 5 supplier worldwide. The external business grew to 25% of the overall business generating over $250M in revenue.