Vizio’s Vision

In his latest column for Bloomberg Businessweek online, Drucker Institute Executive Director Rick Wartzman takes a look at how flat-screen TV maker Vizio’s “extraordinary business model” embodies a number of principles articulated by Peter Drucker.

Wartzman notes that “the company, which last year brought in nearly $3 billion in revenue, has only about 300 people on its own payroll. (Yes, you read that right: That’s roughly $10 million in sales per employee.) But another 50,000 workers are employed by other (mostly Taiwanese) companies who manufacture Vizio’s TVs, which retailers then sell at bargain prices.”

By outsourcing everything but product design and customer support, Wartzman writes, Vizio is “a great example of one of ‘management’s new paradigms,’ which Drucker believed were starting to emerge at the end of the 20th century.”

“Increasingly,” Drucker wrote, “the economic chain brings together genuine partners, that is, institutions in which there is equality of power. . . . What is needed, therefore, is a redefinition of the scope of management. Management has to encompass the entire process.”

“This is precisely the challenge Vizio faces,” Wartzman explains, as its executives “work side by side with the company’s subcontractors to find new efficiencies and control inventory. In other words, Vizio doesn’t squeeze its suppliers; rather, it assists them in squeezing excess costs out of their own systems.”

Wartzman’s piece is tied to Vizio’s entry into a new market: tablet computers. “Whatever happens” there, Wartzman says, “Vizio has already done wonders by redrawing a variety of management concepts on a blank slate.”