Posts Tagged ‘kodak’

HP has lashed out. When it paid $11billion for a UK software company that produced a search engine that no one really seemed to understand, some said they didn’t understand what HP was up to.

Back then the PC company was under the leadership of Leo Apotheker. A former boss at SAP, Mr Apotheker was a software man. His big idea for HP was to move it into software. Hence the purchase of British software company Autonomy.

If you want to know what Autonomy does, the best description may be search engine with knobs on. Is its product any good? Well HP thought so, so it must have been.

Except that a few months later Autonomy, under the HP banner, looked like a pale shadow of what it once was, and the company’s management team, including founder Mike Lynch, had been given their marching orders

Then HP decided it didn’t want to be in software; it was a PC company. Err no it wasn’t a PC company, it was a printer company. Err no it wanted to be a tablet company. Err no it was a consultancy like IBM. Errrr.

So Leo went, and in came Meg Whitman, who shined a light of certainty on the company. Now HP is absolutely certain it doesn’t know what it is.

But one thing it does seem to be certain about is that buying Autonomy was a mistake. Now it is alleging that the British company cooked the books, put certain costs down as marketing costs when they were unit costs, and booked sales to distributers as sales to end users. Mike Lynch denies it of course. He may be right, or HP may be right.

But what is for sure is that HP panicked, and still seems to be panicking.

Okay it still sells a lot of PCs, but its margin on each sale is tiny – around $22, according to IDC. Contrast that with the profits enjoyed by Apple, which is making money out of the fact that its brand name justifies a premium. Compare that with the profits enjoyed by Google, which rakes in the dollars from adverting when Androids are sold. Or contrast it with Amazon, which counts the dollars as it sells books and other goods from its stores on the back of the Amazon Fire.

The truth is that the PC market may not be dead like a dodo, but it is like the Siberian tiger – on the endangered list.

Chastened IBM saw the signs and got out, became a consultancy, and now Big Blue is back, and for a while this year enjoyed a higher market cap than Microsoft.

But for PC companies like HP and Dell, change is required but what change?

This is classic innovators’ dilemma, or what Clayton M Christensen called the “technology mudslide hypothesis.” In his model, established companies in a position of market dominance reinforce their position of strength through their specialisation, but when a new so-called disruptive technology emerges, they miss it. They get relegated to backwaters or go out of business.

Christensen himself took the disc drive industry as an example, and looked at every major change – for example from 14 inch disk drives used for mainframes to 8 inch disks for mini computers, 5.25 inches with the emergence of PCs and then 3.5 inch disks as laptops were developed. He showed that with the emergence of a new disc drive standard, there was a change in market leadership; previously dominant players started doing dodo impersonations.

What is especially interesting about the Christensen study is that the companies themselves were often aware of the danger, researched the new burgeoning technology, but their existing client base showed no interest, and urged them to stick to what they already knew.

Kodak fell victim to innovators’ dilemma. It even flirted with new technology before the rest of the field; it was, after all, a pioneer in digital photography. It still failed to change, however.

HP saw the changes coming too, which is why it bought PALM.  It didn’t know what do next, however, and actually cancelled its PALM based products about the same time as the Autonomy purchase.

Err, that was not a good move. Still, when all else fails, it can always blame the accountants.

©2012 Investment and Business News.

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So Amazon’s marketing in on fire, It is literally on fire, for much rests on the success of the Kindle Fire, its answer to the Apple’s iPad. And now a UK launch is imminent.

In the US the product is selling big time, the message is spreading like… well like wild fire.

The thing about the product is its price. The products are cheap, and they are cheap for a very good reason. Amazon sees the products as a means to promote its online shopping experience.

So, in other words sell the hardware as cheap as you can and make money when your consumers start using your hardware, going online and buying from your store.  There is another way of putting it of course, give away the razors, make money on the razor blades.

It is just that Amazon’s boss Jeff Bezos doesn’t like to put it that way. He told Tricia Duryee at Allthings D “We do not like the razor and razor blade model, where you lose money up front and then somehow make it up on the backend. We also do not like the other model, where you make a lot of money on the device, because it doesn’t follow our approach “ see Making Money While Keeping Prices Low: Amazon CEO Jeff Bezos Explains It All (Mostly)

But the real point here is that Amazon’s model is different from Apples’s. Apple is a hardware company and it makes money from hardware, income for the iTunes store is good to have, but it is not core.

But these days we are seeing different business models converge.  So Google makes money from advertising, and promotes its model via the Android. That’s why it can give the operating system away for free.

The Amazon Fire is an Android with the Google disabled, and replaced with an Amazon bit. Incidentally, in the US Amazon is now offering a version of the Fire with the Amazon interface taken out, but you have to pay more for the hardware.

But is there really a difference between online advertising and the online shopping promoted by Amazon?  Well, maybe there is a literal difference, but really what Google does is make money from promoting goods, available from third parties, that you can buy on the Internet. Amazon makes money by selling products on the Internet that are available from third parties.

So Amazon, Google and its family of hardware partners, the Nokia/Microsoft alliance and Amazon are all chasing a similar source for revenue.

But they are not just competing with each other, they are competing with Wal Mart and Tesco too.

But this begs the question, if Apple and Google are using hardware to promote sales of ‘stuff’ why aren’t the big traditional retailers doing the same?

Over the last year or so Tesco has made three acquisitions in this sphere. It has bought digital radio company, WE7 and digital-movie streaming service Blinkbox. Last week it also announced the purchase of online book store, Mobcast  – which was started by ex SAS man not to mention author Andy McNab.

The Tesco deals are interesting, but they are small fry.

In a  few years time, its big rivals will be Amazon and Google, and perhaps Apple. Hardware products, especially smart phones and tablets, will form part of the battle ground.

Tesco has to dig trenches, and lay down fortification in this battlefield.

That’s not easy. Innovators dilemma explains part of the problem here. Market leaders find it very hard to adjust when an industry sees radical change. Such a dilemma explains Kodak’s descent from market leader to Chapter 11, it explains why RIM, the company behind Blackberry is having such a torrid time, and it explains the challenges facing Nokia. It may yet prove to be a problem for the likes of Tesco and Wal Mart.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here