1. Elsa Pairaud
Professional Management Skills Assessment
Paris – ISEG SUP 2E – November 4, 2010
Professional Management Skills Assessment
AMD: A Customer-Centric Approach to Innovation

2. Table of Contents
Introduction....................................................................................................................... page 3
AMD’s past and prospective growth ............................................................................... page 5
Differentiating to increase market shares ....................................................................... page 9
Conclusion and recommendations.................................................................................. page 12
Bibliography..................................................................................................................... page 13
Appendixes ...................................................................................................................... page 15
2

3. Introduction
The twentieth century was characterized by many essential innovations that changed the
face of the world and the way people deal with each others.
Television, personal computers, Internet, therefore contributed to make the world global.
Information available anywhere, at anytime and to anybody facilitates exchanges at an
increased rapidity. As David C. Thomas and Kerr Inkson say, “there are seven billion people
in the world from myriad different cultures, but we live in a village where events taking place
ten thousand miles away seem as close as events happening in the next street”1.
The ascension of personal computers, from the first pre-IBM PC in the seventies to the
recent invasion of notebooks on the market, can surely be considered as the most significant
innovation of the last decades. According to a study carried out by the Computer Industry
Almanac Inc., “worldwide PCs in-use has grown from 98 million units in 1990 to over 1.2
billion systems in 2008 and is projected to reach 1.9 billion units in 2014”2.
If the first microcomputer using a microprocessor (Intel 8008) was released in 1972 with
90,000 units sold, the first Personal Computer was actually created in 1975 and included the
monitor, the keyboard and the number pad. It was consequently considered as a fully
assembled PC. The demand for Personal Computers was immediately incredibly high, and
could not stop growing throughout the years: from less than 50,000 units sold in 1975, “the
PC industry has grown to unit sales of over 280 million units in 2009”2.
Such an innovation was possible thanks to the creation, in the fields of microelectronics, of
both the integrated circuit (developed in 1959), and the microprocessor (developed in 1971).
The first innovation enabled the miniaturization of computer circuits, whereas the size of the
computer’s central processing unit (or CPU, processor) could be reduced to the size of a
single silicon chip thanks to the microprocessor.
Components of a Personal Computer are called computer hardware. This hardware will then
be the base for the computer’s operating system and multiple software applications that will
perform functions programmed by the user.
As shown in figure 1 in appendix, the hardware of a modern Personal Computer is composed
of several elements. Featured in the motherboard, the CPU is one of the most essential parts
of the computer’s hardware and is considered as the machine’s brain. The CPU indeed
receives and processes each and every data sent by the Random Access Memory. In order
for the CPU to be able to process those data, its instructions have to be codified to
understand different types of software programming such as C, C++ or Java. There are
1
Working Globally, Second Edition. By David C. Thomas and Kerr Inkson. Published by Berrett-Koehler
Publishers in 2009. Chapter 1 page 5.
2
Computer Industry Almanac Inc. is a company that publishes market research reports for the PC and Internet
industry. Data here were published in the yearly adapted report “Worldwide PC market”, available at
th
http://www.c-i-a.com/worldwideuseexec.htm. Accessed on October the 5 , 2010.
3

4. different types of CPUs on the market, each of them being programmed differently. Power
PC for Mac and x86 for PC are some examples of available CPUs. Those different CPUs are
manufactured by several companies such as Intel and AMD, as we will see in this report. First
microprocessors were created in the United States, in the Silicon Valey, by Ted Hoff at Intel
Corporation3.
Since CPUs are able to process many different data and answer to much diversified
instructions, the potential for developing their architecture and for increasing their
performance is rather important. So, the competition on this field is rather fierce.
We can consequently say that microprocessors are essential components of Personal
Computers and that the development of computer industry is partly linked to innovations in
this field.
In this report, we will therefore focus on AMD’s current and future situation on the
processors market. We will first study AMD’s prospective growth: Could the company’s
success in servers be leveraged to other segments? Then, we will analyze the competition
with Intel: will Intel’s new product plans hamper AMD’s growth plans? Finally, after
analyzing AMD’s positioning with the Power Campaign, we will see how the company tries to
build a competitive advantage thanks to a customer-centric approach: will it yield
commercially viable innovations that are dramatically different than those Intel will develop?
3
From the website The Great Idea Finder, available at
th
http://www.ideafinder.com/history/inventions/compersonal.htm. Accessed on October the 5 , 2010.
4

5. 1. AMD’s past and prospective growth
Since its early beginnings in California in 1969, Advanced Micro Devices, known as AMD, has
been developing computer processors for both consumer and commercial markets. AMD’s
business consists in manufacturing semiconductors, and its strategic business units are
varied: from microprocessors to motherboard chipsets and graphic processors, all designed
for servers, workstations and personal computers.
1 core • Manufacturing
business semiconductors
• Microprocessors
2 SBUs
• Graphic cards
• Computing
• Graphic
3 main
applications
markets
• General Public
Electronics
In the field of microprocessors, AMD develops products based on the x86 architecture. The
company is currently the second largest global supplier for such products behind Intel4.
If AMD was first a licensed second-source manufacturer of Intel’s processors thanks to a
contract with the leader, the Californian firm then developed its own solutions (with the K5
processor, launched in 1996) and signed partnerships with several PC manufacturers like
IBM. The reason for this success was probably AMD’s positioning, consisting in delivering
low-price alternatives to Intel’s products.
But because of entry barriers and competition, increasing market shares and generating
profits has not been easy for AMD throughout the years.
On such a technical market, it appears that the Key Factors to Success are as follows:
4
Business PME website, available at http://www.businesspme.com/articles/informatique/30/amd.html.
th
Accessed on October the 6 , 2010.
5

6. Technological
know-how in
processors
development
Microprocessors
market
Partnerships Financial
with PC capacity to
manufacturers invest in R&D
Thanks to its progressive ability to master those factors, AMD managed to raise its market
shares to around 15% in 2009, while Intel’s shares amount to around 80%5.
AMD’s success truly started in 2003 when the company developed 64bits extensions
(replacing 32bit computing). This technology was first launched with the processor Opteron,
which was server-oriented. Athlon64 then brought Opteron to Personal Computers’
architecture. One of Opteron’s core advantages was that it was compatible with previous
32bit architectures. Contrary to Intel’s Itanium, it could therefore support existing software.
But developing an efficient microprocessor is not enough to enable gaining market shares. It
is actually essential to make sure PC manufacturers will build platforms for this specific
microprocessor.
However, AMD did not at this time benefit from particularly high quality brand awareness.
As Henri Richard, executive vice president at AMD in 2007 says, “we lacked credibility and
had no history in the segment. We couldn’t be a player in the server market without the
support of the tier-one OEMs that controlled it”6.
This is the reason why AMD decided to focus on a go-to-market strategy, aiming at building
agreements with OEM (original equipment manufacturers) to build platforms with AMD
microprocessors inside. This strategy was named MAID, for Microsoft, AMD, IBM and Dell,
the current market leader. Many barriers existed with those manufacturers, mostly because
of Intel’s leading position on the market. Thanks to its “Intel Inside” campaign, Intel was
indeed known by both manufacturers and end users, and its image was everywhere on the
5
AMD, Intel post solid Q3 results; now for the hard part. Accessed on Connect:
http://proquest.umi.com/pqdweb?did=1972135541&sid=11&Fmt=3&clientId=63894&RQT=309&VName=PQD
th
Accessed on October the 6 , 2010
6
From “AMD; A customer-centric approach to innovation” by Elie Ofek and Lauren Barley, published on
January 31, 2007. Page 6, page 4, page 8, page 10.
6

7. computing market (ads, Intel Inside logo...). Thanks to this marketing campaign, Intel
managed to “persuade end-users of the processor’s importance in the computer purchase
decision”6. It was consequently rather difficult for AMD to tackle such a dominated market.
Nevertheless, thanks to better performance at a lower price, AMD managed to tackle several
research labs and universities. This first step enabled AMD to build serious brand awareness
for Opteron. Thanks to a diversified offer in performance, Operon soon tackled each part of
the market: the Opteron 100 (one processor) and the Opteron 200 (two processors) for a
volume strategy with OEMs’ desktop series and the Opteron 800 (four processors) for niche
markets such as research labs. Opteron could therefore be considered as a very
comprehensive offer.
The next step was to convince Microsoft. The company indeed “showed little inclination to
create an operating system for Opteron, which would cost hundreds of millions of dollars to
develop. Microsoft had already designed an operating system for [Intel’s] Itanium and was
working on Vista”6. But AMD’s strategy was to bring diversity on a market where Intel had no
sustainable competitor. Competing with Linux, Microsoft was aware of the need for lower
prices. This is the reason why AMD, with its price-reducing strategy, appeared to be the best
alternative to Intel’s products.
“End users and OEMs understand competition is a good thing. All they were waiting for was a
credible alternative in servers. [AMD] brought much more – we brought a fantastic opportunity
for the market to break free”.
Henri Richard6
The next step was to convince OEM’s to use Opteron. If they were first frightened by 64bit
(where they ready?), AMD managed to communicate on Opteron’s advantage: it was
compatible with 32bit architecture and gives a great path to the future of 64bit computing.
As a result, in 2004, both Sun and HP were using Opteron-based server platforms. Dell joined
in 2006.
Then, AMD had to think about continuing to innovate. Could its success in servers with
Opteron be leveraged to other strategic segments such as corporate desktops and
notebooks?
During the past ten years, those two last segments experienced a sharp growth. As you can
see on the figure 2 in appendix, built from data featured on the report about Worldwide PC
market by Computer Industry Almanac this year, the market is considerably changing. As we
can see, Server segment, that AMD tackled with Opteron, is steadily growing but remains
quite insignificant compared to Desktop PCs and Mobile PCs. The mobile PC segment gathers
all laptop, notebook, netbook and emerging tablet PCs. Those markets consequently
represent very large opportunities for processors developers such as Intel and AMD.
The server segment was indeed rather small in volume and could not offer satisfying growth
perspectives, especially compared to desktop and mobile segments. With Athlon64, the
company had already offered a product on such a market, but its market shares remained
7

8. rather low. Actually, this market, gathering corporate desktops and
notebooks, was at this time totally dominated with Intel thanks to its “Intel
Inside” strategy. In the early 2000s, almost every PC featured this logo, which
made end-users believe that choosing a computer also relied on choosing a
processor. But comparing processors is not really relevant, since their Intel Inside logo
(www.intel.com)
performance depends on their architectures. Most of the time consumers
only using PCs for Internet, simple games and office automation software are not sensible to a
change in processors.
What opportunities to grow for AMD?
First, it seems that the server segment, on which AMD is already well established, will
continue to grow steadily partly because of home PC servers. According to the report
published by Computer Industry Almanac, those home PC servers will enable to coordinate
several PC activities inside the house.
Then, mobile devices will be the most attractive segment in the next decade. Thanks to their
easy portability, they will become extra supports for professionals and the second PC for
home users and travelers.
On the market of notebook PCs, AMD introduced in 2005 the AMD Turion™ 64 mobile
technology. In the meanwhile, the firm also developed the first dual-core technology on the
desktop segment with AMD Athlon™ 64 X 2 dual-core processor7.
In the segment of mobile devices, AMD is actually throwing its hat into the ring as shows the
figure 3 in appendix.
As a result, it could be interesting for AMD to strengthen its position on the rather stable
server market, and to invest sharply in the mobile PC market, which represents the most
interesting prospective growth.
7
Data coming from AMD’s corporate website, available at http://www.amd.com/us/aboutamd/corporate-
th
information/Pages/timeline.aspx. Accessed on October the 7 , 2010.
8

9. 2. Differentiating to increase market shares
To tackle the mobile segment, AMD has to take up several challenges. There is no doubt that
the company has the capacity to develop processors that are as efficient as its competitors’.
Consequently, it not so much on the product itself that the difference has to be made.
Indeed, latest innovations for both Intel and AMD have proved that the companies were
able to challenge computing evolutions, with notebooks and netbooks, and that their
technological know-how was not to be questioned.
As a result, we can consider that apart from being constantly aware of the environment’s
changes and required innovations, AMD’s strategy has to focus on three main axes:
Improving the
brand
awareness
among end-
users
Improving
the brand
awareness
among
OEMs Implementing a
customer-centric
approach to
differentiate from
Intel and to insist
on AMD's specific
positioning
1. Developing the network with PC manufacturers
All along the years, AMD tried to build strong partnerships with OEMs to ensure its
microprocessors will be implemented in PCs architectures. In order to convince those
partners, AMD developed the world’s first dual-, quadric-, 8- and 12-core x86 processors.
Those platforms were offering significant advantages in data center use, delivering high
performance and power efficiency. Thanks to high research on performance-per-dollar and
performance-per-watt, AMD appears to be the best solution on a power consumption point
of view. Delivering higher performance with similar power consumption at a lower price
seems to be AMD’s core competence. The company therefore has to communicate on those
competences to increase its number of partners among PC manufacturers, research labs, to
make them use its processors.
9

10. 2. Improving brand awareness among end-users and general public.
Intel’s strength was to make its brand visible everywhere and to ensure of its brand’s
adoption among manufacturers. It has been enabling the company to acquire a leading
position on the market for several years.
This is the reason why AMD has to answer by implementing an adapted marketing
campaign. Actually, the company tried to a few years ago, with its “Power Campaign”. This
campaign, designed for IT decision-makers, promoted ecology concerns in the field of
microprocessors. According to Henri Richard, “today, people buy IT technology without
considering the amount of power it consumes”Erreur ! Signet non défini.. In a world where
concerns about power consumption and energy savings are becoming more and more
essential, IT decision-makers cannot ignore those issues anymore, and have to be “power
consumption-friendly” to comply with managers’ and legal frames’ expectations. This is the
reason why such a positioning was rather smart from AMD. Concerning companies, the
Power Campaign was totally justified because they must more and more think about their
power consumption. But are end-users as concerned about those issues? If it is obvious that
such concerns have their importance, it should not be the only specification on which AMD
should communicate, because end users by a computer for the service it will provide, and
not for its hardware.
The point here is to simplify the PC buying experience thanks to the introduction of a new
technology supposed to highlight the experience the PC will provide instead of focusing on
technical specificities of hardware components. This new technology is called VISION
technology. This innovation enables the consumer to choose a computer regarding how he
wants to use it.
Competing with Intel’s Centrino, this new technology confirms AMD’s consideration about
consumers not focusing on components specifications but on the way they will use their
equipment. This strategy makes AMD closer to consumers’ needs and expectations.
Figures 4 and 5 in appendix present this Vision technology.
AMD’s positioning with Vision is a success because it focuses on consumers’ experience and
provides a comprehensive architecture at a lower cost. As a proof for a succeeded
positioning, many PC manufacturers such as Acer, ASUS, Dell, HP, Lenovo, MSI and Toshiba
already confirmed that they would launch PCs equipped with this platform8.
Such a step confirms AMD’s new strategy consisting on resorting to a customer-centric
approach.
8
Information coming from the article AMD Vision Technology : vers des PC portables plus performants et
moins chers published in May 2010 on the website ITRnews.com available at
http://www.itrnews.com/articles/105252/amd-vision-technology-vers-pc-portables-plus-performants-moins-
th
chers.html. Accessed on October the 7 , 2010.
10

11. 3. Implementing a customer-centric approach to differentiate
For Hector Ruiz, COE of AMD in 2007, a customer-centric strategy consists in “solving a
customer problem or address a specific need”9. It is about listening carefully to what
customers say about the product, how they would improve it.
Actually, what must be understood by “customer-centric approach” is the fact that
customers are not just at the end of the value chain of a company. Customers are rather
“the vital core element without which the business would not exist”, as explained in the
report “Customer-Centric approach”, a project published by Anirudh Singhania, CEO of
Softnet Solutions (available at http://www.softnetsolutions.com/cca.pdf).
Obviously, the core focus of a company is to generate profits. But if we think about how
profits are generated, we surely notice that customers are the ones who are willing (or not)
to pay for the products the company offers. In this way, they are the one that generate
profits of a business. And, if all profits come from customers, it appears to be logical to focus
on this source of profits. Integrating customers’ concerns all along the
production/development process therefore enables to ensure the product or service suits
customers’ expectations and will gather all elements to experience a success.
As we can see in figure 6 in appendix, a customer-centric organization is totally set up
around the customer.
In the facts, such an approach can consist in opening architectures, such as AMD’s Torrenza
project that opens Opteron’s architecture. AMD’s customer-centric approach helped the
company to make customers loyal, to improve its brand awareness and to developed
products that are more adapted to the market’s latest evolutions. To sum up, we can
consider that “AMD has the resolve to fulfill customers’ needs and expectations”10. In a
company where satisfying consumers is not enough anymore, and where delighting
customers is a daily challenge, we can be sure that AMD has all the tools to fight against Intel
in a more and more challenging environment.
9
From “AMD; A customer-centric approach to innovation” by Elie Ofek and Lauren Barley, published on
January 31, 2007. Page 13
10
Dennis Fisher and Jeffrey Burt, “AMD Processor Chief : Commercial Space, here we come” eweek.com,
January 2006, available at http://www.eweek.com/article2/0,1895,1907684,00.asp, accessed on October the
th
7 , 2010.
11

12. Conclusions and recommendations
If AMD first used to be considered as Intel’s follower on the microprocessors market, it is
now obvious that the company has developed all necessary tools to challenge the long-time
leader. AMD’s ability to constantly innovate was the key element for the company’s
development all along the years. Being the first one to develop dual-, quadric-, 8- and 12-
core x86 processors enabled AMD to position itself as an interesting alternative to Intel’s
products. The market indeed used to be monopolized by Intel, and OEMs could therefore
not take advantage of a competing market. To be more and more efficient and to offer the
best alternative to users, OEMs indeed have to take advantage of a lower bargaining power
of suppliers. As a consequence, increasing the number of suppliers on the market can only
be positive to them. And AMD soon understood the game. Its platforms were offering
significant advantages, delivering high performance and power efficiency. Delivering higher
performance with similar power consumption at a lower price therefore seems to be AMD’s
core competence.
Taking advantage of its success on the servers’ market with Opteron, AMD leveraged this
success to the two other segments: corporate desktops and notebooks. AMD was also strong
in understanding that end-users’s buying behavior: they are not focusing on performance
and hardware specifications, but more on the experience the machine will enable them to
live. Thanks to its efficient customer-centric approach, that could be defined as a way of
doing business while focusing on creating a positive customer experience. AMD’s VISION
Technology therefore provides improved performance and battery life, consequently
offering higher quality and higher quantity.
It therefore seems that AMD chose to focus on servers (with a low growth rate) and on
Personal Computers with its VISION Technology, experiencing an interesting growth.
But several challenges are actually growing: Tablets like Ipad do not feature
microprocessors, and AMD’s market shares in mobile devices remains very low.
In order to deal with those challenges, several opportunities are to be thought about. A
partnership with the company Oracle, developing hardware and software, seems to be
possible and would enable AMD to benefit from a higher cash flow and Oracle to compete
on the servers’ segment thanks to Opteron11.
In order to face those new challenges, AMD also has to tackle new markets. With its low
prices strategy, the company indeed has an interesting competitive advantage for emerging
markets such as China and South America. In such markets, the equipment rate is still rather
low and consumers are very price-focused. AMD therefore has chances to experience a
sharp and rapid growth.
11
From the article AMD parle de l’hypothèse d’un rachat, available at http://www.presence-
rd
pc.com/actualite/Opteron-40921/ and accessed on October the 23 , 2010.
12

13. Bibliography
Books and reports
Working Globally, 2nd Edition. AMD; A customer-centric approach to
By David C. Thomas and Kerr Inkson. innovation
Published by Berrett-Koehler Publishers By Elie Ofek and Lauren Barley
2009 2007
Chapter 1 page 5
Customer-Centric approach
Published by Anirudh Singhania, CEO of Softnet
Solutions, available at
http://www.softnetsolutions.com/cca.pdf
Websites and articles
Definitions of a processor, to better understand the market, was found on two websites:
Cuk.ch is a Swiss Weblog featuring news and tests concerning computing items
Available at http://www.cuk.ch/articles/3008
Wikipedia, for the article on Personal Computer
Available at http://en.wikipedia.org/wiki/File:Personal_computer,_exploded_5.svg
Computer Industry Almanac Inc. is a company that publishes market research reports for the PC and
Internet industry. Website available at http://www.c-i-a.com/worldwideuseexec.htm.
The Great Idea Finder, available at
http://www.ideafinder.com/history/inventions/compersonal.htm
Business PME available at
http://www.businesspme.com/articles/informatique/30/amd.html
AMD’s corporate website available at
http://www.amd.com/us/aboutamd/corporate-information/Pages/timeline.aspx
AMD Vision Technology : vers des PC portables plus performants et moins chers
Published in May 2010 on the website ITRnews.com available at
http://www.itrnews.com/articles/105252/amd-vision-technology-vers-pc-portables-plus-
performants-moins-chers.html
AMD Processor Chief: Commercial Space, here we come
By Dennis Fisher and Jeffrey Burt, in January 2006. Available at
http://www.eweek.com/article2/0,1895,1907684,00.asp
AMD parle de l’hypothèse d’un rachat
By David Cidera, in October 2010. Available at
http://www.presence-pc.com/actualite/Opteron-40921/
13

14. AMD renforce ses parts de marché CPU mobiles
Published on August, 2010 on the website Tom’s Hardware, available at
http://www.presence-pc.com/actualite/CPU-marche-40399/
AMD VISION: quatre logos pour concurrencer le Centrino d’Intel
Published on September 2009, on the website Laptop Spirit available at
http://www.laptopspirit.fr/51526/amd-vision-4-logos-pour-pc-portables-afin-de-concurrencer-le-
centrino-d%E2%80%99intel.html
Resources on ProQuest
AMD, Intel post solid Q3 results; now for the hard part
http://proquest.umi.com/pqdweb?did=1972135541&sid=11&Fmt=3&clientId=63894&RQT=309&VN
ame=PQD
14

15. Appendixes
Appendi
12
Figure 1 - Hardware of a modern Personal Computer
A computer features: a monitor (1), a motherboard (2), a CPU or processor (3), the Random Access Memory, or
RAM (4), some expansion cards (5), the power supply (6), an optical disc drive (7), a hard disc drive (8), a
keyboard (9) and a mouse (10).
12
Source: picture from Wikipedia. Available at
:
th
http://en.wikipedia.org/wiki/File:Personal_computer,_exploded_5.svg.
http://en.wikipedia.org/wiki/File:Personal_computer,_exploded_5.svg. Accessed on October the 5 , 2010.
15

16. 300
250
200
Worlwide PC Server sales
150
Worldwide Desktop PC sales
100 Wordwide Mobile PC sales
50
0
1990 1995 2000 2005 2008 2010 2014
13
Figure 2 - Worldwide PC sales from 1990 to 2014 (forecast)
100
AMD
- 0.7%
80
AMD
- 3.3%
60
Intel
40
AMD
AMD
+1.6%
20
0
Desktop Mobile PC Servers
PC
Figure 3 – Intel and AMD market shares in the first quarter
14
of 2010 (in %) and AMD’s evolution since first quarter
13
Computer Industry Almanac Inc. is a company that publishes market research reports for the PC and Internet
industry. Data here were published in the yearly adapted report “Worldwide PC market”, available at
th
http://www.c-i-a.com/worldwideuseexec.htm. Accessed on October the 7 , 2010
14
Data from the article AMD renforce ses parts de marché CPU mobiles published on August, 2010 on the
website Tom’s Hardware available at http://www.presence-pc.com/actualite/CPU-marche-40399/. Accessed
th
on October the 7 , 2010.
16

17. 15
Figure 4 - AMD's VISION Technology
15
Figure 5 - AMD's VISION Technology explanation
15
Form the article “AMD Vision: quatre logos pour concurrencer le Centrino d’Intel” published on September
2009, on the website Laptop Spirit available at http://www.laptopspirit.fr/51526/amd-vision-4-logos-pour-pc-
th
portables-afin-de-concurrencer-le-centrino-d%E2%80%99intel.html. Accessed on October the 7 , 2010.
17

18. 16
Figure 6 - Organization of a Customer-Centric company
16
From the report “Customer-Centric approach”, a project published by Anirudh Singhania, CEO of Softnet
Solutions (available at http://www.softnetsolutions.com/cca.pdf).
18