This paper presents a multi-part strategic analysis of Cincom Systems, an enterprise software company founded in 1968 and headquartered in Cincinnati, Ohio. Drawing on academic frameworks including the TOWS Matrix, Hofstede's Cultural Dimensions Model, Management by Objectives, and Porter's Five Forces, the analysis examines Cincom's competitive strengths in complex manufacturing and Aerospace & Defense markets, its vulnerabilities against open-source and SaaS competitors, and its strategic opportunities in Web Services. The paper also addresses broader strategic management topics—forecasting techniques, culture-strategy compatibility, internal versus external growth strategies, entrepreneurial culture, and privatization—applying them to Cincom and to industry cases such as Kmart and Sears.
Cincom Systems was founded in 1968 and is in the business of providing enterprise application software to manufacturing, manufacturing services, and marketing services organizations globally. As a result of this primary business focus, Cincom has moved aggressively into offshore application development while also creating partnerships with Microsoft and SAP, an enterprise systems provider and leader in the field of Enterprise Resource Planning (ERP) systems. The primary mission of the company is to create enterprise software applications that enable companies to become more efficient and profitable over time. This includes streamlining their quote-to-order process, manufacturing and execution systems, and service systems as well.
The organizational culture relies heavily on knowledge and in fact cherishes it; the company itself resembles a very large, multistory library. The CEO and founder is an avid reader and maintains one of the most extensive book collections in the Cincinnati, Ohio area, where the company is headquartered. The primary strategic objectives and long-range plans of the organization are currently focused on growing its Acquire Suite of channel management, sales configuration, and product configuration applications, in addition to growing ERP system sales. The role of partnerships within Cincom is to serve as the technological foundation for development, as evidenced by the company's heavy reliance on Microsoft as the core platform for the Acquire product line.
At present, Cincom is struggling to gain the necessary traction in smaller businesses that rely on channels for the majority of their revenue. The small and medium business (SMB) marketplace is difficult to penetrate, as there are entrenched approaches to managing channel partnerships and relationships that small business owners are reluctant to abandon. There is significant resistance to change in smaller organizations as a result. Conversely, Cincom has excelled in the area of complex manufacturing processes where engineer-to-order workflows—used for creating one-of-a-kind products—are the dominant need. Companies such as Trane Air Conditioning and American Power Conversion, where the production of highly customized capital equipment dominates operational requirements, represent the markets where Cincom is excelling today with its Acquire suite of channel management and product configuration software.
The reliance on manufacturing complexity as the core pain point underlying its unique value proposition has helped Cincom weather the economic downturn better than many of its competitors. In addition, Cincom excels in the Aerospace & Defense market, where its ERP suite of applications known as CONTROL is used for manufacturing resource planning (MRP), enterprise resource planning (ERP), and interlinking manufacturing workflows with pricing and logistics. Cincom concentrates on manufacturing workflows that are difficult to accomplish with off-the-shelf enterprise software. The Cincom suite of applications is highly customizable for complex manufacturing processes, which explains its success in more capital-intensive industries.
Cincom's strengths, weaknesses, opportunities, and threats emanate from its unique approach to defining customer engagements from a customer-centric perspective first, and then selectively applying software to areas where automation can provide the greatest financial impact. Cincom's greatest strengths include a short delivery cycle for installing and implementing ERP systems, deep expertise in the key success factors related to ERP system integration (Ngai, Law, & Wat, 2008), and a solid methodology for mapping process performance to system implementation success over time—a critical success factor in the development of effective ERP systems (Law & Ngai, 2007).
The weaknesses the company faces include difficulty implementing ERP systems for small and medium enterprises, an area fraught with challenges related to change management and limited system integration possibilities from a design standpoint (Poba-Nzaou, Raymond, & Fabi, 2008). Cincom also struggles to compete against open-source ERP systems that have gained traction in the SMB segment (Johansson & Sudzina, 2008). Another weakness is the company's limited ability to counter competitive threats from vendors relying on the Software-as-a-Service (SaaS) platform, since Cincom is entirely based on licensed, on-premise software.
Despite these weaknesses, the company has significant opportunities, including the ability to move quickly into Web Services, which would drastically reduce ERP implementation timeframes and open entirely new revenue streams (Fei & Olson, 2007). There is also the opportunity to create distributed order management systems that combine service offerings and pricing within the same order as products—a key requirement for manufacturers relying on indirect channels and resellers (McGaughey & Gunasekaran, 2007). Threats include continued industry consolidation, as evidenced by Oracle's ongoing acquisitions, most recently BEA Systems, as well as the threat of open-source software capturing additional market share in segments where Cincom currently excels (Johansson & Sudzina, 2008).
Despite these threats, Cincom's competitive position is exceptionally strong relative to the smaller enterprise software companies it faces throughout the complex manufacturing and Aerospace & Defense markets. Its competitive position has been further strengthened by the partnership with Microsoft for development of the Acquire enterprise sales portal and associated applications. The most pressing strategic issue for the near term is the ability to remain focused on pricing and avoid dropping licensing fees in response to open-source and SaaS-based competition, as doing so would significantly impact the company's financial viability. The growth of Web Services for ERP represents both the greatest potential threat and the greatest opportunity in the coming five years (Fei & Olson, 2007). Web Services in enterprise computing is unquestionably the unifying dimension through which Web 2.0 technologies (O'Reilly, 2005) will impact the enterprise, and Cincom will need solid strategic plans to transform this risk into an opportunity.
The Internet set the foundation for Web 2.0 technologies (O'Reilly, 2005) and, with them, the growth of the groundswell effect—a phenomenon in which anyone with access to a computer and the web can voice opinions about products and services through blogs or social networks. This has been called "the groundswell effect" (Bernoff & Li, 2008) and has significantly leveled the playing field in how companies interact with their customers. For any strategic planner, this dimension of globalization is made even more complex by the fact that many nations are reacting to the pervasiveness of the web and globalization with a retrenchment to core values, especially in Islamic countries (Woodward, Skrbis, & Bean, 2008). This illustrates how complex, rather than simple, the world is becoming from a strategic planning standpoint.
Globalization is consequently forcing strategic planners to focus more intently on navigating significant cultural differences between countries. The Cultural Dimensions Model (Hofstede, Neuijen, Ohayv, & Sanders, 1990) and its continued refinement by Geert Hofstede (1993) illustrate how deeply divided regions of the world remain. For strategic planning purposes, these cultural dimensions must be taken into account regardless of the product or service being delivered. These concepts of cultural relevancy, combined with the pervasiveness of the web and its egalitarian influence on customers' ability to express themselves freely, are significantly changing the competitive landscape of virtually every industry. This translates into the most challenging environment ever for a strategic planner.
"Balancing qualitative and quantitative forecasting approaches"
"Culture-structure alignment, TOWS Matrix value and limitations"
"Internal vs. external growth, MBO effectiveness, creativity, privatization"
"Retail competitive dynamics, brand strategy, and Walmart's dominance"
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