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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.
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 went on a diet, swore off drinking and heavy eating. And in fourteen days, I had lost exactly two weeks. Joe E. Lewis
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.
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VCs will generally not invest in companies that don't own their own IP. I'm not saying they know everything, but, to paraphrase Vizzini "never bet against a VC when money is on the line".
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
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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
Well, my money is on the company whose ink's price by volume is seven times the cost of a good Dom Perignon.
'Don't worry' said the trees when they saw the axe coming, 'The handle is one of us.'
Jim Morgan, who used to be the CEO of Applied Materials used to say there are three phases of competition: innovation, differentiation, and commoditization. AMAT wanted to win in the first phase and make do in the second and get out of the game in the third.
A company needs to pick which phase it will focus on in and stick to that. If HP wants to be an innovation company, they need to know when to bail out of a market with no innovation left (like printers).
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
Sadly, I see Dell's quote as probably accurate. And, one of the things the patent system was supposed to help prevent. The innovators were supposed to be able to profit (for a time) from their efforts. Assuming bad business practices and/or poor financial handling, they should be able to stay in business. Even if they are not the market leaders - their technology would be, and they'd still be making revenue from the licensing.
It's the mentality of the Dell's that are hurting us. Innovation is required. Yet, to compete with the Dell's, innovation (and R&D) often suffer because R&D costs money. The companies that truly innovate, that really study and work hard with R&D, will have a harder time in our current greed-driven, shareholder value is the only goal mentality market place. Why? Because the R&D takes money from profits, making margins smaller. Therefore, the copycats (Dell) have better margins because the ride the coat tails of the innovator, without having the spend the money to innovate.
. 62,400 repetitions make one truth -- Brave New World, Aldous Huxley
Dell doesn't design its own printers! They're simply run-of-the-mill Lexmark units with a Dell logo. But here's the shady part. The Dell printers are modified so that only the special Dell cartridges fit. The Lexmark cartridges had the same pin configuration, but the Dell cartridge holders are shaped a bit differently. If the cheaper Lexmark (or generic) cart is modified a little bit, they work just fine.
I have a laser printer--but Canon seems to be the best deal in inkjets right now. Black carts for most of their printers are only like $7.
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!
Dell has sold printers for a long time. As far as I can tell, they target buyers who like to buy everything through one web site. The peripherals they sell are nothing special, and the prices aren't that good, but it's easy and convenient to buy everything with one click.
People who want the best are usually willing to shop around for it. Hopefully HP won't be run out of business if Dell is successful in undermining their market, and the next time I want a good, dependable printer I won't have to buy a re-branded Lexmark or some other similar junk.
Am I part of the core demographic for Swedish Fish?
Is NOT a true first tier company, no matter how much money they paid Gartner to say they are...
Only IBM and HP qualify as such to me in the PC based server world...
We recently had to scramble to do a firmware fix for a customer who had bought Dell servers rather than the HP ones we recommended...
The fault? A bug in Dell's RAID card firmware that would cause the card to eventually destroy the data beyond repair... A bug of the type that would NEVER get out the door in a HP or IBM product... Then there was the server that had the power supply defect that smoked and died... Dell does not do anywhere NEAR the quality control HP or IBM does.
Dell appeals to those who buy strictly on price.
You get what you pay for.... HP ProLiant is by far my favorite server line, and it's not really that much more expensive than Dell.
Corporatism != Free Market
Such slander. Xerox invented. Apple bought the rights to the invention from Xerox, improved it dramatically, and launched a revolution. Microsoft copied Apple.
Japanese automobile makers led in the development of fuel-efficient, low-polluting engines. Look at how long it took GM, Ford, and Chrysler to sell cars with engines that had 3 or the now standard 4 valves per cylinder.
Japanese automobile makers took American quality control approaches, and actually applied them. And made better cars.
My next car (my current ride has an American brand, was built in Kansas City, but was based on a european design; I've had it for 7 years, and it was 9 months old when I bought it. 150,000 not-so-trouble-free miles.) will be built in Kentucky or Ohio.
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
I disagree with the first part, but agree with the reason. Take PK-ZIP, Ethernet, RS-232, and Eclipse for example. Their creators released the specifications to the world. Suddenly, their product is compatible with a lot more machines out there, so people will buy products centered around it.
In fact, that's one of those business models that was mentioned in the OSS compatibility handbook [
The point is, innovation can survive in a copycat-filled world. You ju
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So I threw out my last POS inkjet printer years ago, and got a real laserprinter (HP LaserJet 4000TN) instead. The pinnacle of b&w printing. Fast. Stunning quality. Toner cartridges so large that one will last me around 10 years at my current rate of consumption.
And colour? If I want that, I put it on a floppy and get it printed at the photoshop down the street. 60c canadian (about 40c US) for a 4x6 printed on real kodak photo paper, by a real dye sublimation printer that costs as much as a fancy car.
You could view it that way. Or you could look at some of the products HP has rolled out in the printer category the last couple years.
For instance, the HP Laserjet 3330mfp. It's a multifunction device just like everyone else's. Only... you can throw an IP print server on it, and make ALL of its functions available to everyone on your network. Oh, and ALL of its functions work simultaneously. So one of your users can be faxing through the unit while another is scanning from the glass and a third is printing.
In a world full of USB-only multifunction devices where you're lucky if you can share the printer function peer-to-peer due to proprietary "status monitor/sender" panels and such (Canon L6000 for instance CANNOT be redirected), this product is astonishingly innovative.
I should state that I am an HP-authorized warranty repair tech. I don't work for HP, but I do service their gear.
"Oh no... he found the
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...
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.Disclaimer: I've got an MBA ('m also a programemr).
Dell's quote is this: "The days of engineering-led technology companies are coming to an end."
It looks like the basic opinion on this here at /. has broken down into two camps:
Fact is, both of those are right. It is shortsighted; but within the short-run time frame -- and the business sphere HP and Dell are operating in right now -- he's exactly right. Hell, HP knows it, too -- that's why they're in trouble and know it.
As the article points out, there are two types of companies: innovators and copycats. In the short run, the copycats will always eat the innovator's lunch. Naturally. They've got lower start-up costs, lower R & D costs, lower overhead all around. Thus, they undercut the innovator's price and outsell them.
This trend is accelerated when quality becomes fairly consistent accross the board. That is, when the copycats are still ramping up, their quality is poor. Thus, in the old days you would hear, "Spend the money for the HP -- brand X is cheap but sucks." You don't usually hear that, anymore, regarding printers. Sucks for HP.
But here's the kicker: when the Next Big Thing comes around, who will it come from? Dell or HP? Yep, HP. Innovators will survive not by getting pulled in to a lowest-price mud-fight -- no, they'll survive by innovating their way out of trouble. In fifteen years, do you think HP or Dell still be here? My money's on HP. Dell's a great commodity company: pretty good boxes, cheap. So was Tandy, and where are they?
It's the same thing with IBM. IBM has been a leader in nearly every single office productivity market they've competed in for, what, like 50 years? Typewriters, word processors, servers, PC's, etc. Big Blue has out-lived nearly every competitor who was at one time undercutting their market. Why? Because they innovated into the next Era -- and the copycats got caught in a mass extinction.
It's evolution on a corporate scale, baby. Those that adapt to the changing market, survive. Those that don't, don't. HP and IBM change the marketplace. Dell just hangs on and hopes they don't change it too much.
So Mr. Dell's right, for now, and doomed, eventually.
I don't think it's so much that Dell innovates on cost instead of performance...it's that Dell innovates on supply chain management rather than on product design and manufacturing. Keep in mind - Dell's supply chain innovations not only made custom-built hardware cheap, it made it realistic. What good is cheap custom-built hardware if it takes three months for the custom order to arrive at the consumer's door?
I think Dell is just as concerned about performance as cost, it's just that Dell is a management company and HP is (was?) an R&D/engineering company.
Most interesting thing of all to me is that the two compete in the same market while coming from such totally different business plans.
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.