In the case of very talented and experienced individuals on the team that is working in silos, it may feel that the team members are running hard on (individual) treadmills and still standing in the same place. I believe this is due to gaps of communication and lack of well-knit collaboration in their efforts. No doubt there will be some progress in work, and it will be mediocre, far from the radical and measurable progress that is required in problems to scale today.

Contrast this to what happens in a relay race? Each runner of the relay segment is assigned the sequence of runs in a pre-programmed fashion. In some cases, there might be change in plans due to dependencies and outcomes observed so far. Then, the runner makes the best of effort to make sure the next person he is passing the baton to gets the most edge to start in next segment. The starter or intermediate runner will not see the instant gratification of the finish line that ends the relay race, and still runs with the long-term goal of the larger team.

The brilliancy of their overall team work in cumulative race segments determines their probability of winning the relay race. The progress is incremental, and measurable in each segment. The delay of one runner can cause a domino-effect, or if it is a tight-knit team, the next couple runners can absorb the delay with some buffer capacity and make the overall team look great. Every segment runner has the shared awareness of this inter-dependency in the sequence of segments. The bonding of the relay runner team becomes really important in the event of an unexpected outcome of a given segment of the race.

Another interesting characteristic of the relay race is the running receiving the baton has mind and eyes on the previous segment runner and starts priming up the legs so that there is little delay in the overlap zone. To execute this well, it requires almost a non-verbal, telepathic ability between the runners exchanging the baton. There is no visual, as the outgoing runner has the back facing to the incoming runner.

For a process-oriented culture at workplace in a mature industry, the sole focus on the mechanics and logistics of the process works great if the problems tend to repeat. Usually, there is a smaller team to handle the recurring problems of more or less similar nature with well-known boundary conditions. Everything falls in place with clockwork-like precision and leads to desired outcomes. There is room for continuous improvement to make the process incrementally smoother and automated.

For innovative workplaces, the problems on the cutting edge are often of the VUCA (volatile, uncertain, complex, ambiguous) category. To grow in such situations:

1. The information needs to fluidly and transparently move up, down and across any hierarchical organization of people.

2. The people forming the team have strong bonding which drive them as a single, cohesive unit to the common purpose or mission statement.

3. The team leadership follows a delegation process with an “eyes-on, hands-off” approach to empower the team.

4. The structure of teams should be agile and malleable enough to collaborate and execute well in any formation required in response to the new information.

The key points above are taken from and explained in detail in a book by General Stanley McChrystal, Team of Teams, and an excerpt with book summary by chapters here.

Also, similar to runners exchanging the baton, does the team member receiving the “baton” prime-up for the upcoming task using pipe-cleaning or similar mechanism for preparation of his or her segment of the race? Is the hand-off received smoothly for future sprints?

Please share your thoughts on these in the comments:

• What can be done in your team culture to target improvements and measurement metrics on one or more of the above 4 points?

• How do you grow and nourish bonding in a diverse team that is more geographically separated than before?

• What are your team objectives for the New Year that make the workplace culture even better than before for sharing and empowering?

One of the basic raw materials in these electronic devices humming with constant streams of data is chips made of pure silicon (with some intentional doping of impurities). Here is a fact: The mass of Earth's crust is 59 percent silica aka silicon and oxygen, SiO2, the main constituent of more than 95 percent of the known rocks.

The chip manufacturing is a highly advanced, complex process that takes the dedicated contract fab companies like TSMC and Global Foundries a few months to complete. At the same time, they are pouring R&D capital into making technology nodes into ever shrinking smaller geometries (nanometer-scale transistors) to increase capacity for the insatiable demands without having to build a new fab (a very costly endeavor). Same 12-inch diameter wafer area with higher transistor density due to smaller geometry yields more devices and better utilization of the fab’s existing and expensive equipment.

Let’s look at gross margins (GM) in the entire supply chain from the fabs to the semiconductor design companies to the leading consumer device companies to the electronic retailers to see where the value is created and added as a value stream analysis. I will preface this by saying it is a simplified view to get an understanding of the semiconductor industry supply chain and value accumulation.

Note that, I have listed a typical gross margin as a general illustration and these are subject to change from company to company. Going with these assumptions, if there is a $15 input cost of the the raw material silica and other direct costs to manufacture a wafer of functional semiconductor devices, it ends up accumulating value in the chain as shown above and ends up as $100 worth of electronic device content in the form of chips that can store and process data from inputs to outputs as demanded by the software components involved in the use-case.

Another way to look at it is for every $100 value of retail semiconductor (electronic device chip) content sold in the world, approximately $30 flows as revenue to the semiconductor fab, $25 flows as gross profit to the chip design company, $25 flows as gross profit to the consumer device design/manufacturer/distributor company and the remaining $20 flows as gross profit to the device retailer.

Now, the consumer device company from the third step above can be further broken down into its own value stream with a supply chain of ECM (Electronic Contract Manufacturer), Design Operations and Distributor partners to see how its revenue is distributed in its own supply-chain value creation. For example, Apple is a consumer device company that designs the product in-house, and does marketing and retailing for most of its sales and utilizes Foxconn as their ECM.

For most semiconductor design companies that have significant R&D in developing new designs for complex customer requirements, it usually makes sense to use a dedicated, high-tech fab company for contract manufacturing in order to:

1. Avoid the high capital structure in semiconductor manufacturing

2. Avoid the R&D costs associated with incredibly fast shrinking process nodes

3. Avoid any idle fab capacity due to new designs in the pipeline and not ready to be manufactured or sporadic demand cycles.

It is a very careful balance in this supply chain for the fabs to maintain expectations of on-time deliveries (OTDs) v/s excessive inventory days. The demand swings into high gear a few months before the launch of major consumer electronic devices around the holiday season. So, it becomes very important to ramp appropriately and quickly without costly delays; and delays might also lead to future order cancellations due to missed delivery dates.

In conclusion, such value chain analysis can be done for any industry and may help to answer questions like if it is beneficial for a company in the middle of the chain to be vertically integrated or not for a better business model. This analysis should consider whether the improvement in its profitability will justify the return on investment required for absorbing more of the value chain. I hope this helps the investor to determine the value-add aspect for investment analysis.