“Those who study genetics… study fruit flies… If you want to understand why something happens
in business, study the disk drive industry.” − Clayton Christensen, The Innovator’s Dilemma, 1997
Min Xiao, Daisuka Itoga, Roshini Das, Surbhi Bordia3/16/2015
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What is Hard Disk Drive?
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Founded: 1979
Employees: 52,000 (2014)
Executive office: Cupertino, CA
Principal products: Hard Disk Drives (HDD)
Revenue: $13.7 billion, 28% margin (2014)
Who is Seagate?
Asia-Pacific
Americas
EMEA
OEMDistributors
Retail
Lead the world in storing, protecting and sharing its digital creations
Revenue
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High Barriers to Entry• Tens of thousands of patents• Capital intensive
High Buyer Power• Cost sensitive• Quality & reliability • Cyclic demand
High Threats from Substitutes• SSD (flash)• Optical Storage• Tape
High Supplier Power• Low profit margin• High precision• Quality & reliability• Large variety
Industry Structure• Rapid product cycle• First mover advantage• “Like-for-like”, price wars• Compete on standards
Nature of Business
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Maturity to Decline?
Good News: Seagate survivedBad News: commoditization, threats from SSD
< 60 years
> 200 companies
2+ companies
45% 40%
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Current Business – Make Everything
Cloud
ServiceGaming
DVR Storage
Client Computing (67%)
Portable External Storage
ConsumerBrand Sharing
Wireless Storage
NAS
Surveillance Camera Storage
Enterprise Storage (13%)
Client Non-Computing (20%)
It was the winning formula. But is it now?…..AHHHH
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Changing Landscape
Political / Governmental• Data-, National-Security• Anti-Trust (MOFCOM)• Environmental, labor regulations
Social / Cultural / Demographic• Mobile, media-rich, wireless• Social networking
Technological• HDD technology slowing down• SSD taking over smart-phone,
tablet, laptop, high-end enterprise• Cloud, Big Data, Internet of Things
Economic• Storage growing 35%/year• Customer shifting from PC OEM to
data centers and NAS
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OOpportunity
SStrength
• Vertical integration• Manufacturing, automation• Engineering know-how • Supplier partnership • Global, close to market
• Consumer brand recognition• Conservative, procedure-
ridden• Reactive, fast-follower• Low differentiation
• Cloud, NAS, surveillance• Out-of-the-box w/ software • Cut-out VARs, OEMs
WWeakness
TThreat
$/GB (Log)15k HDD
7200 RPM HDD
SLC SSD
• “All-flash”
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Grow Out of HDD, Provide Total SolutionStrategic Options Benefits Risks
Dominate Data Centers
• Growing market• Margin• In touch w/ end needs, optimized
system performance (software & hardware)
• Newer business
Focus on NAS, Surveillance
• Growing demand• Brand equity
• Service • Margin• WD first mover
Focus on HDD OEM• Historical• No direct sales• Focus on engineering & manufacturing
• OEMs capturing most profit• Lose touch w/ end customers
Status quo“make everything” • Diversified, hedging bets
• Resources• Manufacturing complexity• Margin
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Dominate data centers before SSD reaches cost parityImplementations – Time is Critical
Now
Realign resources
Build core competences (software & hardware)
Co-create values with customers
Branding
12-24 months
Move up stack
Deliver systems in volume
Expand service
24-36 months
Go direct to end users
Dominate data centers
“You Don’t Adjust. You Just Dominate” – Al Davis
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Supporting Documents
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Value Chain
Korat (Thailand)Wuxi (China)Suzhou (China)
Penang (Malaysia)Korat (Thailand)
Tepurak (Thailand)Korat (Thailand)
Korat (Thailand)Wuxi (China)
Woodlands (Singapore)
Normandale (US)Springtown (N. Ireland)
WAFER
SLIDER
HGA
HSA
Media
Technology Product Design
Component Manufacturing Assembly Marketing,
DistributionCustomer Service
Design CentersShakopee (US)Longmont (US)Science Park (Singapore)
System Integrators
Storage Services
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