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Innovators vs Copiers: HP vs Dell
eaglemoon writes ""The days of engineering-led technology companies are coming to an end," Mr. Dell declared. The NY Times outlines a modern version of a classic innovation theory. Who gets to win in the marketplace - the innovators who invest in R&D like crazy or those that just take cost out of standard products? The current fight between Dell and HP over the printer business is a great natural experiment in verifying this theory." The article does a good job of stating what the real contest is - it's the different theories of corporate structure that's being tested.
Sure, there's something to be said for running a solid business around commodity products, even if they do cost a lot (compared to say, paper plates). It really is a good business to be in. The printer business, which the article focuses on, fits Dell's ideas pretty well.
But when I look for a new computer to buy, I look to Apple and I look at Dell. There's a big difference there.
I'm sorry, but am I missing something here? There will always be Innovators and there will always be copiers. It really doesn't matter, since the two are in a mutal parasitic relationship. The innovators make some money when they come out with something new in a market that's flooded with clones, and the copiers make money by driving down the bottom line for their clones...
stuff
Ex-innovators. Under Carly HP is a shadow of its former self.
sulli
RTFJ.
Will the pace of improvements decrease as fewer companies are willing to invest in research and development? It seems to be the case for the last 4 years.
The real question is, whose technology will Dell copy if Apple and HP fall apart?
Click here or a puppy gets stomped!
Boy do things change... well at least labels.
HP was always known for not jumping on latest technologies and only entering market once it is well established, improving on existing technologies. I mean these are the people who passed on original Apple designs and were still proud of it when Apple became successful. They were by far not the first ones to enter laser printer market. It was part of their philosophy.
Now they are the innovators. Curious times. But then again, if Microsoft can claim to be innovators, HP is way ahead of them there.
-Em
RelevantElephants: A Somatic WebComic...
Who gets to win in the marketplace? The Innovators who invest in R&D like crazy or those that just take cost out of standard products.
The innovation was in creating products that filled a formerly unidentified need. Those lovely early HP calculators are an example. The first reliable laser printers are an example. The personal computer is an example.
When each of these was being developed, the technology industry - heck the whole personal computer industry - was in its infancy, and just about anything with a semi-conductor as "innovative".
Those are now mature products, which is where companies like Dell appear. Their role is not to address needs that other companies haven't seen, but to build a business that exploits mature technology with identified market.
Innovation will come from left field, and will involved products or processes that few of us will see coming.
Three Squirrels
All I can say is "Thank God I've still got my LaserJet III." I'm sure that it will long outlive every POS printer that's being sold today, and I'm sure I'll always be able to find toner cartridges for it.
I hate to see HP forced into competition with a company like Dell. Dell is the Walmart of computer hardware, it's cheap, it probably works okay for a while, but but eventually it's gonna crap the bed and you'll have to buy a new one. HP stuff USED to last forever, but now they're starting to sell wally-peripherals as well. It all goes back to our disposeable culture. But some of us (like me) would much rather pay a little more for something that will last a lot longer, or even pay a little less for something that's already old but that will STILL last a lot longer (like my LJ III).
-73, de n1ywb
www.n1ywb.com
Competing on price alone seems pretty risky to me. The minute someone else provides the same commodity for a lower price, you're out of business.
Failing this there is a natrual advantage to innovators in legal regimes that allow local embryonic development without legal hassle (inventors get to eat)!
And if you thought that was boring you obviously havn't read my Journal ;-)
The Innovators (HP) could always just raise the licensing prices to the copying companies (Dell).
Without companies like HP that can afford to dump large sums of money into innovation, the industry would be pretty stagnant.
That's exactly why patents exist...to promote innovation....and to protect the innovators from someone who could just take the technology the innovators worked so hard to develop, then mass-produce it for less (and without the R&D cost), effectivly putting the innovators out of business.
How could I say to men: "Speak louder, shout! For I am deaf!"? -Ludwig van Beethoven
No commodoties would *exist* as such, without some *invention*(*) first
Dell and MS are leeches, and as such they work. Now, without any hosts, leeches die.
"/Dread"
(*) I use the term loosely.
"but where would HP be right now without patents?"
Same place as they are today.
Patent the printer, copyright the printer driver.
But patent the printer driver? Only someone not versed in the art of software development would say something so ridiculous. And I think I'm putting that very kindly.
Thinking like this stagnates the industry. Copying existing technology is easy money, but don't forget that some aspects of PC design are nearly 25 years old. The market is ripe for something new...and the company that comes up with something other than a variation on a theme will make lots of money in the long run.
This is the same kind of thinking that has CIOs everywhere shipping jobs off to outsourcers; they figure one sysadmin is much like the other. Technically they are, but if you train your staff well, they learn much more about your core business than any outsourcer would.
Especially in tough times, it's tempting to cut R&D budgets. However, comapnies that abandon basic research do so at their own peril!
It has more to do with the duration. Once upon a time, your patent for whatever would only last 15 years. Plenty of time to make money, not so long that it choked off innovation.
Today they last 75 years. Thank you, big business, for where this will eventually lead.
Unless the economy happens to be in an investment frenzy, which is cyclical. Just ask the dot-com losers...
"...once I built a dot-com, made it run, brother can you spare a dime?"
"I'm just here to regulate funkiness."
May 27, 2004: "Michael Dell announces that sleeping with underage gerbils is the only path to transformative strategic insights."
May 28, 2004: "Carly Fiorina declares death of gerbil-inspired strategy and outlines new meerkat-based inspiration management system."
Who needs the Enquirer?
Read the EFF's Fair Use FAQ
They made the decision to make the printer as cheap as possible and instead make their money selling ink. It's a very similar strategy to Gillette's famous (almost) give away the razor and sell the blades strategy. However this really means HP is in the ink business moreso than the printer business. And ink is a commodity far more than cheap printers. And the printers aren't really highly differentiated either. HP printers are good but most of the time there are competing products that are technologically just as good. It might be the case that HP chased profits and marketshare but opened themselves to competition from Dell in the process.
If I were HP, I would be very concerned about my cost structure right now. Dell is a reseller of commodity products. Yes they do some R&D but realistically they mostly just manufacture and resell products developed elsewhere. In a battle of selling commodity products, Dell's cost structure is just better. Dell actually gets paid days before they have to pay for products and they have only a few days of inventory on hand at any time. HP does pretty well with commodity products but they are much more similar to IBM than to Dell with multiple divisions, heavy R&D, high end servers and support organizations. This isn't a bad thing necessarily but it does mean that they may eventually have to exit the low end printer business if it becomes any more commoditized much like IBM has had to move upmarket in PC and focus on business customers.
Fortunately for HP, they do have a great brand, strong R&D and a pretty substantial computer business of their own. HP is hardly defenseless. But if this becomes a pure cost battle, HP probably will lose. I think the most interesting part of this battle will be to see how much brand matters here.
One Can Never Own Enough Musical Instruments...
HP stopped innovating in printers about 5 years ago (say 1998 or so) and since then has just been releasing variations that require new, propriatary toner cartridges every 18 months. Basically a razors/blades scam.
So, this contest doesn't mean what you think it means.
sPh
Not sure of the value of that... I really prefer my HP Laserjet IIIP and my old Laserjet II to just about ANY printer on the market today (for a B&W Laser Printer). Work horses over 10 years old and still going. And while I like the little 1210PSC I just bought. My Deskjet 540 is still also plugging away. Newer printers from Epson and Lexmark are in the trash heap as uneconomical to repair, and were too flimsy to hold up long. So there's a trade off there... I'd like to see HP reintroduce a "Classic Line" of products. Instead of innovating all the quality out of their line...
I think that goes in the category of "Sad but true".
Innovators Rule - Provided they can outlast the drain on their development dollars and recoup the investment. I think Iridium was a good test for that. The people that bought them out for 10 cents on the dollar are making a killing now.
I know this ain't the politically correct thing to say on /., but:
Without those legal protections, the intellectual property of innovators is essentially worthless.Dell pioneered just-in-time manufacturing -- they didn't ask for parts for your computer until they had your order in had. No inventory to store means no warehouse to pay for!
Wal-Mart innovates, too. There's a reason their IT department is one of the biggest in the world. They want to know what each store has on each shelf. Again, they're trying to minimize total cost.
The Slashdot crowd cares more for performance, but remember that there are many more customers who care about COST innovation.
Yeah - we don't like it when obvious stuff is patented premptively - but obviously having a Dell simply copy whatever it sees in the market will stifle little guys who say - why invent if the end result is merely to inspire the monsters to clobber you in the market place.
A position of equity which suggests that all people are entitled to equal degrees of intellectual freedoms and rights without regard to the ability to pay for legal protections should be the foundation of thought in IP.
Allowing money to dictate the outcome of IP conflicts is dangerous to the last bastion of American productivity - ideas.
AIK
This is NYT's idea of making money by being an innovator.
What they've innovated is 40 percent market share, which gives them monopoly power to differentiate the market into a thousand different proprietary cartridge lines, each of which runs out about once a month and so produces a revenue stream of $30 a month.
That monopoly power means inefficiency, which is where Dell has an opportunity to produce the same thing at a lower cost--if they can do it through different technology.
The key word is they are "compatible", not "identical". We purchase a set of computers, but out of those, a handful could go to a previous site where a single image exist. When we deliver updated images, we certainly don't want to put the burden on the end user to figure out which image to use. As you've stated, you have 3 ghost images and while not impossible to work with, it is not desirable. At least deployment group in my company has switched from Dell's to HP because HP was able to guarantee identical systems over multiple orders. We are in the early stages here so we'll see if that holds true.
Personally, I'd rather see the software sit in a network server to be mounted locally for use, there by relying on OS compatibility rather than a specific configuration (at least if carefully done). Unfortunately, our customers are moving further away from a UNIX environment and we are dealing more with MS Win32.
This is the second article I've read espousing this model that companies that do their own basic research fail and that any research should be purely market driven. They always point to "failures" like Bell Labs and Xerox. What I want to know is where we would be without these (formerly) far-sighted creative companies? The inventions of these companies where "seed" innovations that created whole industries. It doesn't take much heavy lifting to research the idea of e-commerce or to make a cheap printer, but invent the transistor, the laser, oop, etc. takes some serious resources and long term prospects. We are still reaping the rewards of a golden age in fundamental research driven by very large companies, regulated monopolies (Bell Labs) and cold war research. I can't imagine that Microsoft, the only company that seems to being doing any real basic research has the foresight to give away ideas that will spawn new industries.
HP's quality has dropped by orders of magnitude since Carly took over. HP used to be highly proprietary, high priced, but lasted forever. Now HP shoves out marginal product with high failure rates, HP still beats the hell out of Lexmark but simply can't compare with the quality of Epson. In essence it's the Ford Pinto versus the GM Corvair when Epson is pumping out Honda Civics. I bought a cheap HP when my Epson 400 gave out, The quality of the printing was marginal, the registration was horrific, and the paper feed mechanism jammed every few pages. When printing CD labels I had a 25% wastage rate. As soon as I had amortized the cost I ran out and got an Epson C84, runs like a tank and generates spectacular print quality, I haven't had a jam in 6 months!
HP seems to be following the path of Polaroid and Xerox, once great innovators who have been mismanaged to oblivion.
Dell is worse with Lexmark (Ugh!) printers, but that does not exonerate HP from destroying a once great brand.
Might be right, The Amiga was technologicaly way more inovative than any of the PC's of the time but it languished in sales because of Commadores "If your not smart enough to buy our computer then go buy a X86" ad campaign. There are A LOT of people out there that will buy just about anything as long as it is marketed well.
Dell is a distribution channel, plain and simple. Its costs are minimized, there's no R&D, etc. Unlike Wal-Mart, Dell rebrands many of the items that it sells. Wal-Mart does too, under private labels, but for some reason Dell has been able to create "Dell" as a brand, unlike most white-box builders.
Dell now sells a ridiculously large amount of computer equipment: $11 Billion last quarter, $44 Billion on an annualized basis. They sold as much stuff as Microsoft last quarter, and they made 50% less. They've cut the monopoly premium to 50%, with margins of about 23%.
Plus, there's no reason to think they're going to stop anytime soon. They are the low-cost provider, period.
New technology? Probably not. But they sure are a cheap place to get boxes.
You may be on to something here...
Da Blog
It comes down to a cost/benefit equation. What can you least afford: to have money invested in backup equipment/parts or to miss the deadline and possibly the business due to equipment failure.
If it's going to cost you tens of thousands of dollars then you would have two plotters running in the first place, and be able to switch queues should one device go offline. Both devices would be on a on-site-warranty contract, and you would place a call as soon as the first device went down. You would have scheduled maintenance and a replacement strategy to ensure the devices didn't run themselves into the ground.
If it's merely going to be mildly inconvenient, or cost you maybe several tens or hundreds of dollars. Then you would run with a single unit and possibly have the number of a hire service on file for when your primary device fails (for while you are waiting for it to be repaired).
Like any other form of risk management, you need to weigh up the likelyhood of the risk event occuring, the cost of it occuring and the cost for mitigating it. If the probability of failure is low and the cost of effect is low, then the investment to mitigate should also be low. If the probaility of failure is high and the cost of failure effect is high, then you should be prepared to invest in mitigating the risk.
Ultimately, that's what make the difference between a well run organisation and a lucky one.
Sara
Designer, Gamer, Macgrrl in an XP World