Channeling HP
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I like to pick on HP more than most people, so it is odd I now must praise
them.
Back when I was on the other side of the B2B technology exchange, I was
primarily an HP customer. I ran shops with multiple minis of varying HP
operating system flavors (RTE, MPE, HPUX) and thus had a deep love/hate
relationship with the company. To this day I keep a number of HP
executives in my virtual Rolodex and hound them when necessary or advantageous.
For a long time it appeared that HP’s PC business was going to go the way of
IBM’s, namely "out the door." Sales were weak, and the fatter margins
promised by the Compaq merger were not evident. HP went toe-to-toe with
Dell, attempting to clone their success without ever coming close. Mass
customization was not something HP was going to be good at, and like all things
Carley inspired, was heading for the technology sewer.
Two things happened at about the same time that changed HP’s PC fortunes.
First the market changed. Dell was the PC king when mass customization was
demanded by the market. Keep in mind that Dell grew during the period when
PCs were fragile, components were expensive, and building system to order
allowed consumers to get what they wanted without overspending. Michael
Dell saw the weakness in the market (incompatible system, limited store
selection, and high prices) and made a business out of eliminating those
problems for the consumer.
But the market changed, to which HP responded and Dell did not. First,
components became more standardized and the price of components fell through the
floor. My bookkeeping system reports that I gave Dell $3,500 back in 1998
for well loaded desktop. Today a server grade desktop with a quad
processor costs around $2,000 at CompUSA. This is due primarily to
standardization, which kicked a key differentiator out from under Dell.
Take away the need for mass customization, and you remove mass sales.
About the time this market shift occurred, HP installed Todd Bradley at the helm of their Personal Systems Group, that
included oversight of PCs. Todd came from Palm, an outfit that had both
good direct sales and retail sales of consumer products. Todd understood
that PCs were now over configured for the average user, meaning that most users
didn’t require customization or many feature tradeoffs. Consumers needed
competitive prices and instant gratification, which can only be had at a retail
outlet. Soon thereafter the shelves of every office supply and computer
store were filled with HP hardware. The prices were low, the features
competitively rich, and you could take it home today.
IBM never saw this opportunity because IBM is IBM, and makes it’s money
selling expensive gear to enterprises. Today HP is happily schizophrenic,
selling both enterprise and consumer technology goods. It took time, and
it took getting consumer marketers like Bradley into the mix. Recent news
shows Dell playing catch-up and elbowing their way onto retail shelves, sadly by
fishing on the bottom of the lake by peddling through Wal*Mart ("Hey, honey,
fetch me a 12-pack of BVDs, some shotgun shells, and a Dell Core Duo" ).
Though not abandoning their direct sales model, they have a bit to learn about
resurrecting a brand that suits retail sales, as well as manufacturing to meet
the perpetual feature/price crush of the PC market. I would bet they do
well, but HP now has the commanding lead and Dell has an uphill battle ahead.
The marketing take-away is this: markets change, and complacency kills.
Recognizing a shift in your market, and acting on that shift is essential to
staying alive. No market is static, and neither are your competitors.
