From Jim Collins to Michael Porter, the latest generation of management gurus argued companies must focus on core competencies and shed all other activities.
Just what makes a “core competency,” however, is always in flux. And as electronics companies see sales plunging like cliff divers, they are quickly redefining the terms.
With today’s launch of Nokia Booklet 3G,Nokia, long synonymous with mobile phones, has now officially entered the netbook market.
But Nokia is just the latest in a string of high-profile OEMs that are seemingly trying to jump-start their revenues by going after what are increasingly commodity markets.
Dell, in conjunction with China Mobile, is said to be looking at jumping in the mobile phone wars. In doing so, the world’s No. 2 computer maker would join Hewlett-Packard, Acer and Asustek as PC OEMs that either have launched or are planning to debut smartphones.
Meanwhile, China Mobile, AT&T and Far EasTone Telecommunications are among the mobile providers now pitching netbooks.
In today’s Wall Street Journal, Roger Yuen, Acer’s vice president of Asia-Pacific smart handheld business group, is quoted as saying “it is relatively easy for PC makers to make smartphones because the two devices share similar components and software.”
Which makes sense to analysts, I suppose, but is something of an insider’s joke in electronics manufacturing. After all, what doesn’t have Intel Inside?
The moves are highly questionable. As this article today in the Wall Street Journal notes, “Analysts say PC makers are unlikely to reap significant benefits in the near term as they need to develop better relationships with mobile operators to sell their products. It will also take time to develop differentiated products and market their own brands in a segment where consumers already have many choices.”
The WSJ hedges, adding, “[M]any agree that longer-term, PC makers have a chance to gain share which would generate a new source of revenue growth and improve overall profitability.”
I don’t see it. These are extraordinarily competitive markets, flush with big-name brands with deep pockets. IBM. Nokia. Samsung. Dell. H-P. The list goes on. None is going to give in without a (very expensive) fight.
Meanwhile, the broader markets are showing some signs of leveling: Worldwide mobile phone sales fell 6.1% year-over-year to 286.1 million units during the second quarter. And the battle for the niche markets – like smartphones – may already be over. Nokia holds a 47% share of that market, and RIM has been entrenched in second place.
New players have found the going bumpy. Take for example, Apple’s much-ballyhooed entry, the iPhone. Measured in terms of style and pizzazz, it has performed exceedingly well. In terms of units sold, it’s another story. Apple shipped 5.4 million units in the second quarter, Gartner says, good for 2.4% market share. Very likely, Apple makes the equipment as a medium to sell its highly profitable catalog of digital music.
Given that, and given that few companies boast Apple’s marketing and design savvy, it’s hard to fathom why a company would risk dominance in one market to attempt to conquer such foreboding – and possibly worthless – terrain.
It brings to mind one more business truism: That the grass – and the profits – is always greener on the other side of the fence.
Your August 24th blog is right on the money. I am a proponent of Jim Collin’s observation that the best companies stick to their core competencies. In today’s difficult economic market it is increasingly tempting to diversify our product lines. Over the past several years, we have successfully resisted the temptation to offer our customers a product based solely on the idea that we can build it.
Our company only sells products that are in full alignment with our vision and core competencies. This has allowed us to grow profitably for seventeen consecutive years. We have also seen other companies expand their product portfolio to include, among many other things, products that compete with ours. In nearly every case, these companies could not maintain a sustaining presence in our specific industry. They lacked persistence and ingenuity that a sole focus can provide.
Mike, I generally find your comments informative and insightful.
Since this blog is under Circuits Assembly…. ( a wide array of markets using electronics assembly technology)
I take exception to: “After all, what doesn’t have Intel inside?”
While this may apply to PC manufacturers.. It is a poor example of the shared technology in most other consumer products…. even less with other industries.
However, if the statement is referencing consumer, high density, electronics products being pervasive….
Sure, technology no longer much of a differentiation between companies.
In fact …If the company is producing consumer electronics,
most of the real design and production are happening with only a few , large ODMs and CMs.. (a few exceptions are still out there).
So what is the focus for the “name brand” consumer electronics company?
Marketing is the primary differentiation….
And…. how well they can coordinate the remaining functions (concept development, finance, support, etc…)
Their “technology” is rarely unique to them.
Their manufacturing options… same as everyone else.
Same for most every of aspect of their companies.
20 years ago… consumer electronics companies were vertical … many ways to differentiate themselves.
They had to be good at many areas of expertise.
Now they have only two areas to “focus” … 1)Marketing and 2) who can exploit the next , cheapest labor pool available.
So the “focus” is taking successful marketing teams into new markets.
This is what we are witnessing when………
Noika becomes a Netbook provider.
Dell gets into phones…
Apple gets into selling songs…
We have gotten too lazy .. and given the technology to others so we can focus on marketing.
When will those with the technology realize they have the “keys to the kingdom”?
All they have to do… is develop a marketing plan.
When this happens.. all the players will change.
Witness IBM getting out of the laptop market (Lenevo)
I equate this to IBM putting there focus on other than “consumer” markets.
It doesn’t matter if they make a great product..
After awhile.. it only matters if they can market better …
This creates cycle of diminishing margins…
Unacceptable for their stock holders…
Thus, the crazy situation these companies have created for themselves…. trying to define their “focus”.
This is one of the reasons why I don’t want to be involved in any consumer electronics… As someone developing technology, I don’t have much real value.. except as a “hired gun”… ( a commodity) in their business plan.
Other markets.. still have some long term reasoning in their plans.
I prefer to see technology driving marketing.. instead of marketing driving technology.