25th June 2011

Strategy in today’s smart phone & tablet market

On a recent flight to Penang (a biz trip and not a vacation!), I was thumbing through a special edition of HBR – Essential reads for Global leaders” and came across this interesting and old HBR article “What is Strategy?” by Michel Porter. While this was published in HBR Nov-Dec 1996 issue, it reflected so much of today’s biz world, especially the hot competition amongst the smart phone and now the tablet vendors that I wanted to share it here.

First the article outlines the difference between Operational Excellence (OE) and Strategy – something that is so often confused in today’s biz arena. OE means performing similar activities better than rivals. Strategy is the creation of a unique and a valuable position, involving a different set of activities. It is creating a fit among its activities. The essence of strategy is not just of what and how to do but very much of what NOT to do.

Some statements from the article, which resonate so well in today’s market of smart phones and tablets –

“Gradually managers have let operational effectiveness supplant strategy resulting into zero-sum competition, static or declining prices ad cost pressures”

Take the example of Mediatek. By providing a cheap reference design and a complete system, it became a game changer for the shanzhai market in China. However, this was more of an OE coupled with targeting the right market. With Spreadtrum making inroads in the same space at even more competitive prices, Mediatek is now losing ground to such rivals and is tweaking its strategy.

“Competitive convergence is one reason why OE is insufficient. As rivals imitate one another’s improvements in quality, cycle times, or supplier partnerships, strategies converge and competition becomes a series of races down identical paths that no one can win”

“Strategic fit among activities is fundamental. It is harder for a rival to match an array of interlocked activities than it is merely to match a process technology or replicate a set of product features” – Now is this not exactly what Apple is doing (user experience pervades all activities within the company. Everything Apple does just re-enforces this and it has a close end-to-end system to ensure this)? The others are following it with a “me-too” approach, which can provide an explosive growth for an interim but not last long.

On approaches to preserve growth and re-enforce strategy – “One approach is to look for extensions of the strategy that leverage the existing activity system”

I look at RIM and its foray into tablets with Playbook here. RIM’s strength with its Blackberry phones has been enterprise. Analysts attribute RIM’s decreasing influence to the growing trend of CIO’s decisions on smart devices to be used by the enterprise employees as being increasingly based on what the employee uses as a consumer – thus skewing it away from the enterprise world which had always been RIM’s strength and essential to its strategy.

But then look at it from another perspective. Tablets are not just being used as a general consumer product – for the consumer to be connected. It has a tremendous potential (and is already being used thus) for enterprise productivity. RIM needs to see how to connect or rather leverage on this fit and communicate the strategy better to the customers who value this enterprise productivity.

posted in Business, Management & Strategy | 0 Comments

7th June 2011

Tablets and other MIDs: Commoditization of hardware??

A Tablet market report from Goldman Sachs states “The OS platform wars could drive greater hardware commoditization over time. We believe that over time the more open platform vendors may have to impose standard hardware and user interface specs on handset and tablet OEMs to ensure that software developers have a uniform installed base. This move to standardization would narrow the ability for hardware manufacturers to differentiate their technology over time and could result in hardware commoditization like that found in the traditional PC market.”

With the gaining importance of software in the Mobile Internet Devices (MIDs), hardware’s role as a differentiating factor is indeed diminishing. And with that, so do the profit margins for the chip industry incumbents. So, how are the chipset players reacting to survive, if not thrive, in this evolving market?

Qualcomm shows a recent example - “Qualcomm will give web apps a boost”.
As a part of the company’s effort to enable a shift away from today’s fragmented set of native mobile environments, it is set to release shortly a set of applications programming interfaces geared to give Web-based applications deeper links into hardware. The company already supports Android, Blackberry, Windows Phone and WebOS mobile OSes among others. A move to Web-based applications would help it reduce the variety of platforms for which it needs to write software supporting its chips.

Web vs. native apps - as the mobile usage increases, both will grow with it and become valuable factors of product road maps. The question the product strategists need to ponder upon, however, is “what does my target audience need?” While the debate of web vs. native apps is not new, it does throw some interesting options in this backdrop of looming hardware commoditization.

One option is - The chipset vendors start conforming to the standard specs set by the open platform vendors. The hardware is strongly connected to the OS platform and with a proliferation of various mobile OS in the market, it is not an easy task supporting them all or even hedging on a few. Not enticing.

But what if a chipset vendor were to make inroads into web apps and get a deep link between web apps and its native hardware through some popular browsers? it can potentially get some interesting revenues by tapping the right web apps based on their target market – and remember that web apps is an open platform – no waiting, no approval. Its success is hinged on its adoption by the user community.

Having said that, the speed comparison (of compiled vs. interpreted code/web vs. native) will be there as well as cases, especially till the near future, where native wins over web but companies are working on those too (Qualcomm has been working for two years to optimize software so that browsers run as fast as possible on its chips). What has happened to desktop apps, can also happen to native mobile apps. Hmmm…. This may be one escape route from the commoditization problem.

posted in Semiconductor, Technology, MIDs, Hardware | 0 Comments

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