Observing Dell and HP

Yes, in response to a comment in an earlier post, it is indeed tempting to point to design as the answer. Causality after the fact is always a sticky area but… after my posts on Dell and HP etc recently, how could I resist an observation on the current buzz? In short, Dell’s stock plunged and HP’s shares rose. And in an attempt to inject some objectivity into this post, I’ll just select some snippets instead.

From E-commerce News,

Still, of all the results HP
posted, the PC numbers were the most intriguing on a competitive level
given the changes afoot in the desktop and notebook computer space. HP
said notebook sales were up 27 percent and that profit in the division
was up nearly 70 percent year-over-year to 3.6 percent of revenue.

Not only has Dell hit a tough patch after years of making gains on
HP and other rivals, but new competition from overseas players such as
China’s Lenovo is seen creating new pressure to produce PCs at lower
costs at a time when some analysts say Dell has made the process as
lean as it can be.

From MoneyControl India,

HP’s new marketing strategy is betting that all users of PCs really want to know one thing – beyond all the configuration and tech specs – they all just want to know: what can this machine do for me? And HP’s answer is: virtually anything that’s useful and fun.

And an interesting snippet via Dominic Basulto’s Business Innovation Insider blog,

The new Tianyi models are providing users a fresh experience with
the up-to-date technologies. The new models also won the prestigious
"Red Dot" award for its innovative designs. From "made in China" to
"created by China", the company says "innovation is Lenovo’s future".

Xia Li, Vice President of Lenovo Group said: "Innovation will
be the key force to push Lenovo forward, and the foundation for future
success."

So why these three disparate posts? For one thing, the pattern that I see here has less to do with the concept of the physical design of the boxes themselves, atrakasya, but more to do with the application of design thinking – call it what you like – the fundamental fact of which is 1. understanding your customer 2. attempting to fill that need. By that measure, whether it’s design awards won by Lenovo and Acer (both Asian btw) or whether’s it’s HP’s attempt to connect ‘personally’ to their customers’ needs, Dell’s competition has more similarities in common with each other than with Dell. That is, not one is imitating Dell’s cost leadership strategy alone. Sure they are streamlining their processes to make them leaner, but they are not standing on that point alone. They’re adding that ‘missing something’, connecting on a visceral level with their customers rather than just the bottomline level.

On the other hand, that point alone – cutting costs, going leaner, discounting retail prices – forms the whole of Dell’s strategy.

It could be argued that this strategy works for large corporations who are buying PC’s in bulk, Dell’s major customers. But then why aren’t the results demonstrating the validity of this argument?

Smart Money is feeling confident that the day of the PC is not over, but I am tempted to say that the day of the "box" is over, and to quote HP, "The computer just got personal again".

[interesting update] Found this little partial article dated Nov 2005 with a Michael Dell quote,

"We believe that the quality and nature of the
customer relationship and experience is going to be the next
competitive battleground."

—Michael Dell, CEO
Dell Computer

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One Response to Observing Dell and HP

  1. Niti,
    What you say is definitely important – Understanding the consumer is inherently a part of any business or profession. From this, comes what the consumer wants and what the consumer is willing to pay for it.
    At the end of it, every market leader attempts first to compete on the basis of their core strength.
    Lenovo or HP do try to get their products to low costs, but stick to their core expertise first.
    Dell will naturally try to stick to its core strength and then also try to get its products to be better designed.
    A low cost product would have to be strong on its after sales service (necessary – primarily to dissociate from the stigma of lower quality being associated with lower costs)- if Dell has screwed up on that, then it is losing its core strength as well – this is undebatable.
    Lower cost with loss in reliability is not going to sustain in any market. The lower cost must only be achieved on the basis of high quality supply-chain management and superior marketing leading to high volumes.
    I shall imagine that Dell will stay afloat – it is only a matter of how and by doing what. As you said and as I said – they will no doubt have to get into design as well. How they do it remains to be see.
    What we know is “doobta, kya na karta”.
    Also, what remains to be seen is whether HP’s connecting with the customer is done by their design department or by another department that the design department is answerable to?
    And, as a derivative question – to what extent should good marketing strategy (ex: connecting to the consumer) be seen as a triumph of design?
    At the end of it, the ideal product fuses thinking from multiple departments – like marketing, engineering, research, technology, indutrial design, branding, etc. into a seamless offering which then may be a success.
    Then, is it valid to call this kind of thinking as design strategy, or is it something that is more of a superset?
    I personally believe that while your personal approach to strategy may have begun from design, it no longer is bound to only design.
    You think on all the other levels, too.
    If I attempted to classify your strategising as purely design strategy, that would be non sequitur – you know that.
    Just as the success of a product transcends design or marketing or supply chain management – it is a combination of all this, in the right proportions to meet a specific market demand.
    Consider the beginning and succes of Dell – it saw beyond industrial design. Perhaps, if Michael Dell had attempted to dabble in ID, it would have been a disaster – the success strategy did what was necessary.
    Today, as you say, the strategy may need to be changed, and it is perfectly valid to consider if any new parameters that have to be introduced into the solution that once scorned the same parameter (industrial design).
    If design needs to be deployed, so be it.
    Yet, the introduction of strategic thinking (which goes beyond cost-cutting) into an organization that scorned it hitherto will have to be done carefully, as I pointed out before. It cannot be allowed to disrupt the core-strength hitherto – it must assimilate into it, not knock it out and replace it.
    A Q for you – Would you call it a success of design thinking, if dell innovated better than anyone else, and goes up a couple notches in its service, remained marginally cheaper than its copetitors, connected better to the consumer, and YET scorned styling as before? Would you still refer to that as Dell embracing design?
    I need to know – to what extent do you classify great looks as being essential to design?
    Is shelf appeal integral to great product sucess? To what extent will we insist that a product cannot be great unless it also looks great? I know of cases where it has not shown any connection.
    Dell had become successful in spite of blatant disregard for styling (I am not making any comment on the quality of its products here, either way) – is that not a fact? Did they do it without understanding the consumer? Were their products not great then?
    Wasn’t Dell’s ability to see beyond styling a recognition of consumer needs at that time?
    (A brilliant case of lack of design by design, maybe?)
    Niti, perhaps I am touching something that is very sensitive to industrial designers, whose insistence on form is so vehement that they have begun equating a great design with a great looking product.
    You, as a product strategist, must see beyond this insistence on form and the utter craze for shelf appeal.
    I do see that you speak of design beyond the “physical design of the boxes”.
    If so, why hasn’t there been any talk of what precisely is the innovation that is missing in dell? All I have seen till now are all suggestions that only seem to say “hey, design your boxes better, like HP is doing”. There is zero discussion on what innovation we are talking about.
    Your quote from MoneyControl India says – “HP’s new marketing strategy is betting that all users of PCs really want to know one thing – beyond all the configuration and tech specs – they all just want to know: what can this machine do for me? And HP’s answer is: virtually anything that’s useful and fun.”
    Is this innovation in design?
    No – this is marketing strategy. Maybe an innovation in marketing strategy, but not in design.
    This is the consumerist game that corporates play – “Adding value” has come to mean that you project information in a way that appeals to the consumer.
    Fair enough. But I’m not about to look at that as innovation.

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