For PC Makers, Being Different is Less Important Than Being Relevant
Rahul Sood founded Voodoo PC in 1991, when the market of PCs was very young. One thing that this man probably learnt from his experience was that customers needed to be attracted to the brand, user experience and quality, not to the low price. Perhaps, HP and Dell sell PCs every second, but the natural problem that they face is that their customers are not loyal to their brands. Owners of Apples and ThinkPads upgrade to Apples and ThinkPads, many owners of Dell or HP upgrade to the offering that is more attractive, they are not loyal to those makers.
X-bit labs: What do you think are the main challenges for a PC maker these days?
Rahul Sood: Well there are a few challenges for PC makers;
Most PC companies fall into the trap of trying to “differentiate” without really considering the consequences of their actions. By being different they think they’re putting the customer first, but they aren’t. Being different doesn’t necessarily make you better. Heck, Porsche can throw a waterbed in the back of the 911 Turbo to be different, but does that make them stupid? Probably.
Being different is less important than being relevant. You know you’re relevant when your customers have an emotional connection to your brand. Your brand is relevant when your 5 year old asks for a product from brand “X” - or when the person at the coffee shop decides they want to buy “X” brand because they have heard so many great things about it. You’re less relevant when someone wants to buy you because you’re cheap.
Most PC companies look at Apple as their biggest competitor, rightfully so, but I promise you going head to head against Apple will almost always lead to a fail. Another great quote from Sun Tzu,
“......When ten to the enemy's one, surround him;
......When five times his strength, attack him;
......If double his strength, divide him;
......If equally matched you may engage him;
......If weaker numerically, be capable of withdrawing;
......And if in all respects unequal, be capable of eluding him,
..........for a small force is but booty for one more powerful."
In my opinion it’s best to look within your organization and leverage your strengths to beat a giant. Apple did not go head to head with the PC business back when Steve Jobs returned. Instead they capitalized on their internal strengths and zigged while everyone else zagged.
The PC has become embedded in the fabric of our lives. Everyone uses personal computing of some sort, so now it’s about connecting with your customers on a deeper level. Making a visceral, emotional connection with your customers is worth more than selling them a “box” any day of the week.
Most PC companies tend to focus on device centric “innovations”. It’s less about building a family of products that look and feel like they’re coming from the same company, and more about the device itself. When you do this you tend to focus on things like TAMs, speeds & feeds, and price - and you miss the most important part, the soul.
So what’s the main challenge? Fundamentally changing the fabric of their business and the way they think – that’s hard to do. It requires strong believable top-down influence and vision.
X-bit labs: Virtually all big PC makers are complaining about thin margins (maybe with exception of Apple and ThinkPad subsidiary of Lenovo). But why very few companies try to innovate beyond what chip vendors offer them?
Rahul Sood: The fundamental problem most PC companies face is they try to lead with technology – in a market where technology is easily duplicated and commoditized. They end up fighting a raging battle to the bottom, and in the process they risk losing their identity. I am a big believer that if you focus on things that matter, like your brand identity, the soul of your company, your organizational culture, and most importantly your customers – you can be forever successful in a market full of commodities. There is a strategy that allows you to have a scale business along-side a premium business.
If you look at Ferrari, for example, they spend millions on F1 racing. They actually make money racing, which in many circles is completely unheard of. Ferrari built a brand that allows them to sell every single car they build, profitably, with a backlog. They make money selling branded accessories and products to those that may not be able to afford the car. They sell driving experiences, tickets to events, licenses, memorabilia, mugs, hats, jackets, etc. Regardless of their luxury status, Ferrari has a winning, scalable business model that other companies should study.
Acer Ferrari notebook
The reason few companies try to innovate beyond what chip vendors offer is cost. They don’t want to risk spending money when their margins are already razor thin. If only they could leverage their biggest strength and find other ways of supplementing their business, imagine the possibilities. If all Ferrari did was sell $300,000 cars all day they would have failed years ago.
X-bit labs: There are not a lot of PC companies with soul (which customers have emotional connections to the brands) these days. Moreover, there are fewer and fewer IT companies with soul. Nokia, for instance, is one of such companies, but it is about to fail... At the same time, Dell and HP continue to sell PCs every minute. Perhaps, the market of devices "with soul" is somehow limited?
Rahul Sood: Nokia may have had some challenges over the last few years, but their hardware center of excellence is unlike any other company in the world. In fact, I would argue that Nokia has the capability to one up *any* hardware company with their magnificent industrial design capabilities and technology. Vertu is just an example of their capability and vision, but their capabilities go far and beyond Vertu. In my opinion Nokia is a monster and the beast has awoken.
There are many companies in different industries with soul. You can spot them, they are easily recognizable.