As a former National Instruments (NI) employee, I witnessed the company's struggles firsthand. With Emerson Electric's recent $8 billion acquisition of NI, there's hope for a brighter future. In this article, we'll explore key strategies Emerson should implement to bring National Instruments back to prominence in the industrial automation sector. Please note that these insights are my personal opinions, and since I left the company more than four years ago, some of these changes could already be in progress or under consideration.
1 Reinforce Company Culture and Retain Top Talent:
NI's success was built on a strong company culture that fostered innovation and collaboration. This "Built to Last" strategy of developing internal talent created a sense of unity and dedication within the organization. However, after Dr. T's departure, new management shifted gears and started hiring external VPs. While external perspectives can be valuable, these hires often failed to understand NI's unique ecosystem, both in terms of products and partnerships. They brought "silver bullet" solutions without fully grasping the complexities of the company and its environment, leading to implementations with partial success.
To restore NI's former glory, Emerson should:
a) Encourage a balance of internal growth and external hires, ensuring that new management understands and respects the company's culture and ecosystem.
b) Provide thorough onboarding and training for external hires, emphasizing the importance of NI's long-standing values and partnership network.
c) Establish a mentorship program where long-tenured employees can share their knowledge and expertise with new hires, fostering a culture of collaboration and mutual learning.
2 Streamline Product Portfolio:
One of the main challenges with NI's product portfolio is its unnecessary complexity, resulting from the "Good Better Best" strategy that offers at least three variants of the same product. Coupled with the inherent system nature of products like the PXI chassis, which can comprise up to 18 slots, customers face an overwhelming number of possible combinations (3^18) for essentially the same system. This complexity creates additional costs for both NI and customers, as a significant amount of time and effort is spent on tailoring configurations to achieve perceived benefits, which often do not justify the resources invested.
To address this issue, Emerson should:
a) Simplify the product portfolio by reducing the number of product variants, focusing on critical offerings that provide the most value to customers.
b) Consolidate similar products and eliminate redundancies to ensure a more manageable and cost-effective product lineup.
c) Offer pre-configured, optimized system solutions that cater to the most common use cases, reducing the need for extensive customization and streamlining the selection process for customers.
3 Expand Global Market Presence:
In the past, NI reduced its local presence in various geographies in an attempt to cut operational costs. While this move may have resulted in some cost savings, it also led to a lower level of service, as the remaining support staff had to serve a larger customer base. This trade-off affected the company's throughput, ultimately hurting revenue generation and customer satisfaction.
To address this issue and expand NI's global market presence, Emerson should:
a) Reevaluate the balance between cost savings and service quality by reestablishing localized support teams in key markets, ensuring that customers receive timely and personalized assistance.
b) Leverage regional expertise by hiring local staff who understand the unique needs and challenges of customers in their respective markets.
c) Implement a hybrid approach that combines centralized support functions with localized teams, providing cost-efficient yet high-quality service to customers across different regions.
4 Implement Theory of Constraints (TOC) in Sales and Operations:
The Theory of Constraints (TOC) is a management philosophy that focuses on identifying and improving the most critical constraint in a system to increase its overall performance. In NI's case, the main constraint in delivering customer value is the ability to engineer great systems that effectively address customer issues. This can be achieved through the efforts of dedicated, possibly local, application engineers (AEs) and a network of integration partners.
To apply TOC principles, Emerson should:
a) Identify and prioritize the most significant constraints in NI's operations, focusing on improving the engineering capabilities that directly impact customer value.
b) Invest in developing and supporting local AEs and integration partners, ensuring they have the resources and expertise to design and deliver effective solutions to customers.
c) Continuously monitor the performance of the engineering and support network, adapting the strategy as necessary to maintain a high level of customer satisfaction and value delivery.
5 Adapt to the Datacenter-Mobile Revolution:
NI's products are characterized by an I/O system, a data processing unit (CPU or FPGA), a communication BUS and an output format GUI for scientific data. While the company has built on the success of commercial technology with PCIe, PXIe, and CompactRIO, it has missed the datacenter-mobile revolution. To remain competitive and relevant, NI needs to expand its product offerings to address this growing market segment.
To capitalize on the datacenter-mobile revolution, Emerson should:
a) Develop a dedicated product line targeting datacenter and mobile applications, ensuring compatibility and seamless integration with existing NI products and the LabVIEW ecosystem.
b) Invest in research and development to explore new technologies and trends in the datacenter-mobile space, positioning NI as an innovative player in this rapidly evolving market.
c) Establish partnerships with leading companies in the datacenter and mobile industries, leveraging their expertise and market presence to expand NI's reach and bolster its product offerings.
Conclusion:
By focusing on these key strategies, Emerson Electric can breathe new life into National Instruments, reestablishing the company as a leading force in the industrial automation sector. This acquisition presents a unique opportunity for both companies to leverage their combined strengths and expertise, creating long-term value and success for customers, employees, and shareholders alike.