Michiel Ligthart | President and COO | Verific Design Automation
Conventional career advice favors “playing to your strength,” guidance executives at Apple, Amazon, Facebook, Microsoft and Tesla may have missed. Instead, they are charging ahead in the chip development business, a new market segment for all of them. What may seem foolhardy to some industry watchers could be a stroke of genius as their development groups design higher performing, power-efficient computer chips for their specific networking, cloud, automotive and other applications.
To do so, they are hiring experienced, seasoned designers who know the ropes. Whether intentional or not, they are focusing on a development group’s core competencies (aka “playing to your strength”) and outsourcing the rest, a sound strategic business decision. They are able to direct their group’s attention on differentiating their chips and identify ways to quickly reduce design barriers by using third-party blocks of silicon IP, a long-held and common practice of chip designers. Precious project cycle time is spared for what’s important.
Another common practice in the unofficial core competency handbook, though not as well publicized, is the use of commercially available, commodity component software for crucial, but non-differentiating parts of the design tool flow. By picking and choosing component software for various steps in the flow, they are streamlining it and not relying on a single vendor to supply the complete tool suite. More significantly, by adding component software at proprietary steps within an internal design flow, a company can customize their own IP to further differentiate its semiconductors.
Used with a core competency approach, outsourcing becomes a strategic advantage and not just a well-accepted tactic. Either way, outsourcing increases efficiency. It’s also recognized as a way to rein in costs and conserve capital, especially when product development is expensive and only getting more so. The calculated savings of resources runs into the millions of dollars.
Time is of importance as well. By outsourcing one block of third-party IP or one piece of software within the design flow, a company can estimate at least a six- to nine-month head start in new product development. It doesn’t need to recruit and staff a development group for this expertise, a consideration when finding the right experience, skillset and personality matches takes time and resources.
It also can prevent downtime due to unproven or immature software and eliminate high support costs due to bug fix releases and workarounds. What’s more, there’s no need for extensive test and debug of either type of IP or concern for software quality. Removing these design obstacles frees the development group to concentrate on the strategic, differentiated core competency –– the chip.
Some words of caution: Outsourcing is not without risk for not all vendors are created equal. Companies that identified their core competency and are ready to outsource a specific part of their product or design flow should carefully evaluate the vendors. They need to look for vendors with a proven track record and good customer support.
Customer support is essential to making an outsourcing strategy successful. In fact, the relationship between a third-party vendor and its customers is really a partnership and should be treated as such. It means listening to customers and having the available resources to respond to their needs. By working closely with a customer or partner, a company assembles unexpected insight into today’s design challenges, a less obvious advantage.
Concentrating on core competency isn’t just for tech giants such as Apple, Amazon, Facebook, Microsoft and Tesla moving into chip development. It may be even more important for bootstrapped or VC-funded startups and small businesses that need to quickly get their products designed and out into the market ahead of their competitors.
Geoffrey Moore, author of “Crossing the Chasm,” should agree. He wrote an equally compelling book titled, “Living on the Fault Line,” published in 2002. In it, he noted: “Technology that does not differentiate your product from your competitors should be classified as context and outsourced with all possible speed, thereby freeing up time, talent, and management attention to the next wave of core differentiation.”
In Moore’s view, core competencies are activities that directly affect the company’s competitive advantage or activities that differentiate it from the competition. All other activities are context. As he would advise, companies should outsource its context and focus on its core to be strategic and differentiated.
Using the expertise from Moore’s book, three ways to analyze a company’s core competency are:
- Identify the differentiation that makes a company more competitive
- The way the company distinguishes itself from the competition
- Whether the expertise resides in house to build a block of IP or a piece of software for the design flow and how it will be supported
Focus is important for any company and its executives need to be conscious of its core competency to be strategic, differentiated, and competitive. That way, they ensure they aren’t wasting time and talent on non-essential parts of the chip design or design flow, for instance, and “playing to their strength.”
Editor’s Note: Verific supplies component software to EDA, FPGA, and semiconductor vendors implementing or upgrading their design flows, or shipped as part of a commercial EDA product. Since its founding in 1999, more than 60,000 copies of Verific’s software have been shipped by over 90 companies.