PMC-Sierra: Riding the Waves of Disruption (A)

  • Reference: SGSB-SM272A

  • Number of pages: 16

  • Geographic Setting: Silicon Valley, California, USA

  • Publication Date: Jan 29, 2019

  • Revision Date: Jan 29, 2019

  • Source: Stanford Graduate School of Business (USA)

  • Type of Document: Case

  • Industry Setting: technology

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Description

This case details how semiconductor company PMC-Sierra implemented different corporate entrepreneurship strategies to take advantage of two major industry disruptions: 1) the transition from hard disk drives to solid state drives; and 2) the rise of cloud computing. The core business of PMC-Sierra’s enterprise storage business was developing products called controllers that interfaced directly with hard disk drives. The company sold these controllers to the world’s largest storage equipment manufacturers, including HP, Dell, and IBM. The case focuses on the years 2010-2012, during which the company strove to develop a new type of controller optimized for solid state drives—while maintaining the strength of its existing core hard disk drive business. With the rise of cloud computing, PMC-Sierra added a major new customer base: giant cloud service providers like Amazon, Google, and Facebook. As these cloud service providers grew in strength, they upended the industry supply chain, negatively impacting PMC-Sierra’s traditional core customers such as Dell and HP. The big challenge, and opportunity, for PMC-Sierra was to retain its current large customers while capturing new growth opportunities. The case ends in 2012 at a decision point for PMC-Sierra. Should the company continue building solid state drive products internally, given that it was emerging from two major setbacks—or look for an acquisition possibility, which would be very expensive? Either way, the company had to decide how to organize its next development effort, drawing from corporate entrepreneurship lessons it had learned in the previous few years. Additionally, the company had to decide whether to develop a newer, but riskier, technology on the horizon. Could PMC-Sierra launch and maintain development of two new technologies, or would it have to choose one or the other?

Learning Objective

The two teaching goals are for students to: 1) evaluate the strengths and weaknesses of different corporate entrepreneurship strategies; and 2) explore how companies can respond to, and try to get ahead of, industry disruptions. More broadly, students should discuss how internal new ventures create benefits for the larger organization—but may also pose threats to it. Conversely, the larger organization provides key assets to new ventures, but also brings liabilities to it.

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Keywords

Acquisitions Change management Computers Disruption Entrepreneurship Growth strategy Organizational learning Strategy Supply Chain Technology