Innovators vs Copiers: HP vs Dell 392
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.
When you're a commodity-oriented company... (Score:5, Insightful)
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.
missing something here.... (Score:4, Insightful)
Innovators? (Score:3, Insightful)
Then who will innovate? (Score:5, Insightful)
And whose technology will they copy? (Score:3, Insightful)
HP? An innovator? (Score:4, Insightful)
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
Mature products (Score:5, Insightful)
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.
Thank God I've still got my LaserJet III (Score:5, Insightful)
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).
Price (Score:1, Insightful)
IMHO, the key to it all...... (Score:4, Insightful)
Failing this there is a natrual advantage to innovators in legal regimes that allow local embryonic development without legal hassle (inventors get to eat)!
The Innovators should always win (Score:5, Insightful)
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.
"Commodoties" got "invented" first (Score:4, Insightful)
Dell and MS are leeches, and as such they work. Now, without any hosts, leeches die.
"/Dread"
(*) I use the term loosely.
Re:HP? An innovator? (Score:3, Insightful)
for creating new microchip designs, amazingly reliable and fancy sensors, and more. They lead in fields where others refused to go (medical, industrial, and nuclear control systems).
Now HP's marketting team sucked ass, but that's a bit different.
Comment removed (Score:5, Insightful)
I'll tell you where... (Score:2, Insightful)
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.
Re:When you're a commodity-oriented company... (Score:5, Insightful)
"The days of engineering-led technology companies are coming to an end," Mr. Dell declared.
It doesn't then follow that Dell will prosper. I bought my last computer at Walmart [walmart.com] for $200. That should worry him.
Short-sighted (Score:5, Insightful)
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!
Re:Software Patents (Score:0, Insightful)
Today they last 75 years. Thank you, big business, for where this will eventually lead.
Re:missing something here.... (Score:3, Insightful)
read: There will always be innovators and there will always be Microsoft.
All kidding aside, this is nothing new. Xerox invented. Apple copied Xerox, and Microsoft copied Apple. It's the same with Japanese automobile makers. The innovator usually never reaps the rewards because the true potential of their innovation is only realized by an outside pair of eyes.
Re:When you're a commodity-oriented company... (Score:5, Insightful)
Building a limited lifetime into a product is hardly innovation. A plastic shell, cheap plastic parts, built-in print heads--they all lead to a consumer purchasing a new one.
The problem you describe, however, was one of the issues faced in the 1930s. Clothes washers and dryers in particular, had been in high demand. Thus, the companies kept ramping up production. Nobody expected the market to get saturated...
I think it's a problem all durable-goods manufacturers face. Especially those whose new product concepts' markets havn't been saturated yet.
Re:VC input (Score:3, Insightful)
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?"
Re:And whose technology will they copy? (Score:2, Insightful)
It's really not a question of "if". Even Bill Gates said that all companies fail (including Microsoft.) It's just a question of when.
Re:Thank God I've still got my LaserJet III (Score:3, Insightful)
Re:Thank God I've still got my LaserJet III (Score:1, Insightful)
What meaningless blather. I've owned several Dell computers, and they've all lasted beyond my needs (e.g., still have a 1995 200MHz P2 running at home).
And incidentally, while I know it's very fashionable to bash Wal-Mart (kinda like wearing a Che Guevara t-shirt), what everyone seems to forget is that Wal-Mart has made it possible for lower-class people to live more middle-class lives.
Since when is business streamlining seen as evil? What country do you think this is, anyway?
Remember how the biz/tech press makes its money (Score:5, Insightful)
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?
HP isn't really in the printer business (Score:3, Insightful)
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.
and now you know (Score:2, Insightful)
Re:missing something here.... (Score:5, Insightful)
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
HP stopped innovating in printers... (Score:3, Insightful)
So, this contest doesn't mean what you think it means.
sPh
Re:When you're a commodity-oriented company... (Score:5, Insightful)
Two words: ink cartridges.
Innovation? (Score:4, Insightful)
My favorite quote (Score:2, Insightful)
I think that goes in the category of "Sad but true".
Re:When you're a commodity-oriented company... (Score:1, Insightful)
Re:When you're a commodity-oriented company... (Score:3, Insightful)
Innovators Rule - within a patent system (Score:5, Insightful)
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 *DOES* innovate! (Score:3, Insightful)
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.
Slashdoters need better position on Patents (Score:4, Insightful)
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
Re:Who will win? (Score:2, Insightful)
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.
Re:HP invents? (Score:3, Insightful)
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.
What happens when there is nothing left to copy? (Score:2, Insightful)
Re:HP stopped innovating in printers... (Score:3, Insightful)
Take that innovation.
The Big Problem is ... (Score:5, Insightful)
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.
Re:Thank God I've still got my LaserJet III (Score:3, Insightful)
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.
It is the Walmart, but it wasn't always. Dell used to make a fine machine back in the day, say prior to 2001 or so. They had some particularly nice workstations that we used for CAD engineering.
What meaningless blather. I've owned several Dell computers, and they've all lasted beyond my needs (e.g., still have a 1995 200MHz P2 running at home).
See above. That PC was made before Dell went all craptastic. I have a 400 Celery that functions as my fileserver and has never once blipped. The only problem with it is the TINY case.
Re:When you're a commodity-oriented company... (Score:2, Insightful)
Re:When you're a commodity-oriented company... (Score:4, Insightful)
And what's wrong with this? This is the best position for them to be in. They can sell the occassional replacement printer at or below cost, and then sell ink cartridges for $50 each (which cost $1 to make). By not manufacturing very many printers, which cause them a loss, and selling tons of cartridges, which have a huge profit margin, they'll have a huge profit and their stock will go through the roof.
Of course, if consumers were smart enough to refuse to buy into this business model, maybe we'd have better printers and cheaper ink, but I'm sure a P.T. Barnum quote would explain this phenomenon nicely.
Re:When you're a commodity-oriented company... (Score:5, Insightful)
Maybe I should make a statement about what the US would be like if we instituted Sharia (strict Islam) law, like many Americans want. Just because you hear one freak say something doesn't mean it's representative of the group.
Re:Innovators Rule - within a patent system (Score:5, Insightful)
The process of selling something by clicking a mouse button should never, ever have received a patent.
But by all means software should be able to be copyrighted and where you can make it work, it should be able to be a trade secret also.
Re:When you're a commodity-oriented company... (Score:2, Insightful)
Re:When you're a commodity-oriented company... (Score:5, Insightful)
I think you hit the nail on the head.
Dell's real observation is that computers (at least PCs) aren't a high-tech industry anymore.
Howerver, surely Dell's "The days of engineering-led technology companies are coming to an end" guideline is not at all the case for companies that are still in a high tech sector [dfj.com]. One of the carbon-nanotube companies [eetimes.com] may very well replace Intel in post-silicon computing. One of the robotics [packbot.com] companies may replace much of the military. Surely these are "engineering led".
But in their market, I must agree with Dell that I don't see a "engineering-lead" Wintel-box company in the near future.
Unfortunately Michael "El Puto Grande" Dell (Score:2, Insightful)
Re:Innovators Rule - within a patent system (Score:4, Insightful)
Re:When you're a commodity-oriented company... (Score:5, Insightful)
At work we recently bought some printers for $600 each, with an option to buy a $200 service contract.
We saved money by just buying an extra printer. If anything bad happens we'll just toss one and immediately substitute the spare. It is cheaper that way.
Same goes for super-fancy hardware. Which is better, a 99.999999% reliable server for $100,000, or 10 99% reliable servers for $5000 each? If it breaks, just throw it out (granted, servers aren't an ideal comparison since the data on them might be priceless, but it works just fine for most hardware).
If having a plotter goes down will cost you tens of thousands of dollars, then you should have more than one of them.
This is just like the difference between just-in-time and just-in-case. If not having an item will hinder your ability to get one item out to market, then make it just-in-time. If not having one item will shut down every assembly line in your plant and take a month to replace, then keep a few spares just-in-case.
Re:When you're a commodity-oriented company... (Score:4, Insightful)
The innovator will have the first shot at the market. This means that they can charge premium if they want.
The copier comes later, and must compete on price. Dell is doing that okay for now, but how are they going to do once big boys like Walmart have their game down?
The innovator at least can hit the market hard, and get a little profit until everybody else jumps in. They can also profit from licensing patents to others, so even if they lose the marketing war later on, they can profit from the copiers' volume. However for the copiers, they must outmarket or underprice every other copier in the market.
Dell's been doing a good job of marketing sofar. We'll see how they deal with Walmart's muscle considering their many distribution points. I think Dell is in big trouble.
They should also be very afraid if the thin client makes inroads in the home user market. Then people will end up buying their next computer at the supermarket, throwing it into their shopping cart alongside the box of cereals and toothpaste. Not that far fetched.. in a year or two, the cost of the hardware to build a thin client good enough for the average (non-game-playing) end user would be less than the cost of an imported wheel of cheese.
Re:When you're a commodity-oriented company... (Score:5, Insightful)
And when the second problem develops? What about the third? Note that having a replacement handy is not neccessarily a replacement for a warranty, thats just bad math.
Which is better, a 99.999999% reliable server for $100,000, or 10 99% reliable servers for $5000 each?
Thing will depend on your usage. Is this an application you need uptime for? Can you effectively cluster the multiple boxes Will the performance scale effectively? These are very important questions that could easily make that $100k server a bargain and those $5,000 servers a money pit.
If having a plotter goes down will cost you tens of thousands of dollars, then you should have more than one of them.
I think you missed the posters point. Buying a $6,000 plotter that has to be replaced every 1.5 years is more expensive and troublesome than buying a $10,000 plotter that runs reliably for 4 years. Wasting Space (which costs money) on a spare in the closet is not a genius plan. Buying a workgroup class printer which can be shared, costs less per page, and is more reliable/maintainable/etc. is probably a far wiser plan, although certainly there are circumstances when this is not the case.
Dell: the Wal-Mart of computers (Score:3, Insightful)
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.
Limits of Innovation (Score:3, Insightful)
You may be on to something here...
Re:When you're a commodity-oriented company... (Score:4, Insightful)
I vehemently disagree.
The Silicon Valley venture capital community has the financial (Kleiner, Redpoint, Brentwood, Benchmark, Draper, etc), and intellectual (Stanford, Berkeley, both next door) to hold it's own against any of those far east conglomerates or wealthy corporations. Furthermore, they have as one of their primary goals to take on this kind of high-risk/high-reward R&D.
Consider just one of these VC firms [kpcb.com]. These guys are the force behind AOL, Amazon, Genzyme, Cell Genesis, Electronic Arts, Cryogen, Genentech, Google, Macromedia, Nanogen, Netscape, Pharming, Rambus, Sun, Sybase, Zetacore, etc. They certainly have the resources to accomplish "real innovation and significant research", and they have the track-record as an existance proof.
Even when the big corporations do high-tech research these days, it's often through a venture arm [intelportfolio.com] investing in small organizations or a venture-funded spinoff (Affymetrix from Affymax, etc).
Contingency planning (Score:3, Insightful)
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.