Value Innovation at AMD - Essay Example

As of today, 99% of computers operate using 32-bits. As technology improves and software applications become more demanding there will be a transition to 64 bits. The K8 processor was a complete revamp of the x86 architecture for 64-bit processing, giving AMD a leadership position. Industry acceptance of the AMD64 standard has forced Intel to enter into an agreement with AMD to use the AMD64 standard on their own 64-bit based EMT64 processors. In their essay “Strategy, Value Innovation and the Knowledge Economy” Kim and Mauborgne characterize value innovators as ‘those who make their competition irrelevant by providing buyers with a quantum leap in value’.

This description fits perfectly with AMD’s strategy for the K8. Until the release of the K7, AMD was a company that focused ‘on matching or beating’ Intel. They chose a ‘distinctive cost’ position and innovation was considered exogenous with cost and product performance tradeoffs. The new economics theory, which heralds the arrival of the knowledge economy, claims that ‘innovations are no longer exogenous and can be created with the ideas and knowledge within a system’.

Again, a perfect match to AMD’s strategy of first giving the NexGen team their own building to develop the K6 and subsequently roping in a ‘world-class-enterprise-level processor design team’ for the K8. Admitted that Intel’s stumbles with their processor design and production yield have given AMD an opportunity window.