welcome to this exploration of the prime directive and its …... · 2020. 9. 28. · page 4 of 26...

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Welcome to this exploration of the Prime Directive and its relationship with the Microchip Client

Engagement Process, or MCEP.

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Let's take a look at what we're going to cover in this video. In this video, we will cover the

following:

• what the Prime Directive is,

• aligning our goals with the client's goals,

• how the Prime Directive defines or helps define the role of client engagement,

• the Prime Directive as the foundation and safety net of MCEP,

• using the Prime Directive to help qualify opportunities, and

• using the Prime Directive to help you decide what to do in unclear and uncertain situations.

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What is the Prime Directive?

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The Prime Directive says that “We help clients achieve their desired business outcomes by delivering

the freedom to innovate. We co-create the most value we can with them, without compromising our

own business model.”

In effect, we are aligning our goals with those of the client, so long as we don't break the law or

harm our own business.

Let's look at that statement piece by piece.

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"We help clients achieve their desired business outcomes."

These are business issues and outcomes the client organization is trying to deliver or contribute to

with their project.

Microchip needs to uncover what these desired business outcomes are overall, and how and

where this project will support them.

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This often means juggling a diverse, sometimes competing set of needs and requirements

amongst the various critical client contacts and other key players, working to create a balance

acceptable to all.

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"…the freedom to innovate."

What qualifies as innovation is determined by the client. Microchip helps clients remove perceived

risks to client innovation by providing insights, tools, code, and other resources that have partly or

fully mitigated these risks for the client. They can now innovate with far less risk.

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"…co-create the most value we can with them."

Value is always determined by the client. Microchip's proportion of the co-created value stays

relatively constant. The words "co-create" and "with" are specifically used to indicate that

maximum value cannot be provided or brought to the client or to Microchip. It has to be created

together.

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Clients tend not to walk away from good solutions they've invested time, energy, resources, and

perhaps political capital into helping create.

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And to do all this without compromising our own business model. This is the balancing of the

client's needs and Microchip's needs.

Loss of margin percentage, extended payment terms, price discounts, and so on, are key things

that could directly compromise Microchip's business model. Things valued by the client that

compromise our business model should be indicators for potentially qualifying out of the project.

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Well, what are the key elements of our business model? Let's take a quick look.

One is consistent growth and profitability. So, we have margin targets or minimums. We don't

really want to be taking business that falls below these targets or minimums for margin. And also,

net new revenue. We're looking to have more of our business being generated from projects that

are new, that have happened in the last 12 months or so. And we're also looking for the total

number of clients that we have to grow.

And we're not distracted by "killer apps". We have hundreds of applications and application areas

that we actively support. And this means that we're not going to be badly impacted by the sudden

end of demand for a killer app.

And then, third, we have thousands of customers. Actually, we have over 125,000 that we support

indirectly through our channel partners and Microchip Direct, and about 6000 that are supported

directly by the Field. And having this reduces our vulnerability to problems in any one market or

economy.

And that brings me on to the fourth, which is that no customer brings in more than 3% of our total

revenue. The sudden loss of a large customer in this way, cannot jeopardize Microchip's overall

business. Others in our market are heavily exposed with just one or two clients making up too

much of their total revenue. If they lose one of those big clients, their business is significantly

impacted. It might even send them into unprofitability.

And then, fifth, we are diverse geographically. We have presence and operations in many countries

all over the world. And so, if there's a problem in one particular part of the world because of

extreme weather events or political unrest, the impact there will have much less impact on our

business overall than it might, if we weren't so diverse in our geographical presence.

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And related to that also, diverse end markets. A problem in one part of the economy is going to

have less impact on our business overall.

And then, our final element of our business model that we're looking at here, is that we have a

high internal barrier to custom product business. Custom products come with levels of commercial

risk and cost that are a poor fit for our business model. So, we tend to stay away from custom

products unless the opportunity is a good fit for us. It's not that we don't do custom products, it's

that we are very careful about the risks and costs that we expose ourselves to.

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Now, why should a client or prospect care about our business model? The answer is in a simple

concept and word that is: 'resilience'.

Resilience has several meanings. In this context, it means the ability to recover from or adjust

easily to misfortune or change. Our clients need reliable, dependable, and capable partners to help

them tackle the challenges before them.

Doubly so in a large scale crisis such as was recently experienced around the world. And it seems

to happen every few years.

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They are now being explicit about valuing partners and suppliers who are, and have, resilience. For

us and many others part of being resilient is also about having the capability to be resilient. And

that's almost impossible to do and have when you're financially weak.

Partners and suppliers that aren't very profitable will really struggle to be resilient enough. Doing

what we can to protect our business whilst also meeting the needs of clients is about balance. Get

it wrong and both parties can lose out.

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Our aim is to balance the needs of the client and the needs of Microchip, and for both parties to

see increase in value over time, from working together. Whether it's to solve business challenges

through technical solutions, logistical solutions, or a combination of both.

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Aligning our goals with client goals is a mindset for client engagement that informs our every

thought and the actions that come from these thoughts. Actions that result in our prospects and

clients seeing more value and less risk in partnering with us over the long term.

Over time, clients will see the benefits and increased value they receive through Microchip's goal

alignment efforts, which will highlight the difference between partnering with Microchip versus

other sellers.

The Prime Directive helps us work toward goal alignment and differentiation, without putting

Microchip at commercial risk.

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So, how does the Prime Directive help define the role of client engagement?

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The Prime Directive is the job description as defined by Microchip, for Field Sales and Application

members such as ESEs or FAEs, CEMs and RSMs, and, GSS and ISR. Fully supporting the Prime

Directive means you are doing the job you are hired to do.

When situations arise that require challenging or difficult decisions, use the Prime Directive as your

guide to achieve the best possible outcome for all parties concerned.

This ensures that even if the outcome is less than ideal, the rationale behind the decision is solid.

Wrong decisions in the situation but for the right reasons, will become less frequent over time

with coaching, experience, and practice, using the MCEP and the Prime Directive.

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How is the Prime Directive a foundation and safety net for the MCEP?

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The Prime Directive is the foundation of the MCEP. Like a traditional brick and mortar building, the

foundation it is built on supports the entire structure from the bottom-up. Solid foundations allow

the structure above to have more flexibility to adjust to the surrounding environment, and to

weather any storms or major changes.

The Prime Directive is the solid structurally- sound foundation for the MCEP. And provides clear,

easily understood intent and direction for client engagements. So, the MCEP itself can have more

flexibility in how to adjust to the changing client environment.

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How can the Prime Directive help us qualify opportunities?

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The Prime Directive is also a tool to help Microchip qualify into or out of a project. Given what

Microchip values, projects or clients that reduce the value received in those areas, should be

reviewed for continued resource investment. Asking, "can Microchip help with this project?

And, if so, should we help?" may seem to be unnecessary, but can be very helpful in identifying

clients that do not value the relationship with Microchip enough to co-create maximum value for

all - only enough to try to increase the value they receive, often at Microchip's expense.

Sometimes, "yes, Microchip can help..." is often followed by "No! We really shouldn't help with the

current levels of resources. This project should be handled by a distribution partner or charged for

custom design work with an NRE."

By using the Prime Directive as a tool to help qualify into or out of a project, some of the value the

client receives is in the form of useful information and time to search out alternatives as early as

possible, while Microchip's business model is protected.

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How can the Prime Directive help us deal with unclear and uncertain situations?

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The Prime Directive is also the safety net that protects Microchip when situations and

environments become turbulent or uncertain.

Part of having a structurally sound foundation is to provide safety during challenges or crises such

as earthquakes, tsunamis, tornadoes, and so on.

Buildings built on foundations where both the building and the foundation have been designed,

planned and constructed, anticipating uncertainty and turbulence, are far safer. These buildings

are the ones still standing after major events. The Prime Directive supports the MCEP in the same

fashion.

Client engagements designed, planned and constructed using the MCEP, have the Prime Directive

as the safety net to help ensure both Microchip and the client are still standing after major crisis

events. In the absence of specific and clear information regarding what to do next, when situations

are uncertain and unclear and fast moving, or when situations are complex, the Prime Directive

helps keep us grounded, and prevents us from making the wrong decisions or taking the wrong

path.

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So, in summary, we help clients achieve their desired outcomes by delivering the freedom to

innovate. And we co-create the most value we can with them, without compromising our own

business model. This is the essence of client engagement for Microchip, and it is the foundation of

the MCEP. It defines our role. It helps us be true to our mission and our Guiding Values, and it

helps us deal with unclear and uncertain situations. It helps us balance what clients need and what

Microchip needs. And it helps us be resilient.

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You have now reached the end of the Prime Directive, an introduction.

welcome to this exploration of the prime directive and its …... · 2020. 9. 28. · page 4 of 26...

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