As PC manufacturers suffer in 2011, Apple stormed ahead. Lesson: DESIGN MATTERS

2011 was the second worst year for PC sales in the US.

  • HP fell 5%
  • Dell fell 8%
  • Acer fell 14%
  • Toshiba fell 2%

Q4 figures for 2011 being particularly bad for HP as the botched sale or not of its PC division resulted in a loss of customers confidence and a corresponding fall in sales of 25%.

So, a terrible year all round?

Well … no. Not for everyone.

One company bucked the trend in the US. Increasing sales in Q4 by 18%.

You know the name of course, Apple.

Before you dismiss this, it is worthy of some examination.

In an economically challenged year when consumer confidence fell and jobless figures rose, the company that bucked the trend for sales was a manufacturer of premium products. If you want a computer, whether for work or business Apple is not the cheapest option. Of course, any comparison depends on your requirements, but it would be hard to argue that Apple are the least expensive choice for most requirements.

So at a time when you would expect price sensitive buying the opposite happened.

Or did it?

If you ask look carefully at what people wanted, perhaps this is a clearly predictable outcome.

Instead of focusing (as the PC industry typically does) on chip speeds, memory size, hard drive space, blah blah blah … you focus on long term value, a great user experience, beautiful design, and build quality then you would count out most of the PC industry. Most PCs are functional and provide good bang for the buck, but in the user experience stakes … are awful.

For many people, price will have been critical, so however much they may have wanted an iMac or Air, the price of the Apple world was simply too much, so PC sales have not completely collapsed.

An analyst would point to a number of supporting factors for this: A new operating system, value of Apple stores, strong marketing and the not least the benefits of a very positive brand. They may also talk about a competitors’ lack of vision or the growth of the Apple ecosystem and the resulting pull through effects.

But they would be missing the real driver. All of these matter, but there is a much stronger one.

Anyone who has spoken to a recent switcher from PC to Mac would tell a different story. New to Apple buyers talk about the user experience (they don’t call it this of course), the design, the beauty, the ease of use. Seriously – they do. People who don’t care about computers become attached to Apple products. It happened with the iPod, the iPhone and is pulling through to the desktop and laptop. It is also why Apple dominates the tablet market despite hundreds of much cheaper competitors.

This change is not good news for the PC industry, because most PC makers are really bad at the things that Apple is great at. I don’t just mean poor, or not very good, I mean BAD. Products keep being released with the most basic of design flaws.

Manufacturers scrimp on design throughout the whole process, they cut corners on build quality to save a few cents, install junk-ware which kills speed and offer support that is usually painful for most.

And they wonder why they are losing business?

And here is the bad news. It  is only going to get worse; as people tell their friends, as they become part of the Apple closed wall ecosystem the personal switching costs to go back to the PC increase. With disjointed and badly designed ecosystems  and no added value from competitors they are not even going to be contenders. Talking a good story doesn’t cut it. Most Mac buyers have PCs at home at the bottom of draws that testify to the failure of the PC as a long term investment. The performance slowdown, the problems with rogue code and viruses and the slow start times being ecliped by the Apple experience.

Companies should pray that Apple decides to stay a premium provider, because if Apple decides to go for growth by releasing a lower priced range, then there will be a bloodbath in the PC market.

So is this a fait accompli?

Is the end nigh?

Are there any routes to survive?

How to compete

Option A – innovate product+service

  1. STOP looking only at the product, look at the whole product+service experience from pre- to post- sales
  2. Focus on the experience. Be the company YOU would want to buy from. Fix your service problems.
  3. Find the gaps, segments and customers where you can improve and then innovate, innovate, innovate (the process and experience)
  4. Focus on designing excellent, fun and rewarding experiences (remember, it is not just about the product, but product+service)
  5. Build on these, keep innovating and develop passionate buyers
Difficulty: Hard
Reward if successful: Your business stays alive to grow and has a solid base of buyers. You may be a smaller company, but if executed well should be more profitable and stable.
Answer this question: If I was a buyer, would I buy this? Why? Then test this with real customers.

Option B – Business as usual

  1. Focus on reducing costs to win on price. Fail to develop a service mentality.
  2. Ignore Apple, continue on with business as usual. (You may talk about design, but this is likely to be copying Apple)

Difficulty: Easy
Reward if successful: Cut-throat competition and no ability to value add. Highly volatile business with high costs, ever reducing margins. What you do win will be hard fought and low profit.

Answer this question: Can I control and manage my costs better than my competition? Do I have a predictable and flexible build model?

 

So is the lesson, innovate or die?

No. You can carry on as usual, but are going to find life very challenging. Margins will continue to be under pressure, you will be worried about another competitor making a slightly better product and at a slightly cheaper price, but you can continue. Of course this a challenging life, as you have no long term value to bring. You know this and so do your customers. Should the market suddenly shift, you will be unable to compete.

If you are a PC manufacturer you should be calling Microsoft now and demanding that it pulls its finger out and starts getting products out of the labs and into the OS.

The game is not over yet, but it is not getting easier.

10 other ideas to help:

  1. Hire passionate people – find young smart people and hire them. Then LISTEN to them
  2. Build diverse teams. If you have a team of engineers you will build things may be efficient, but are ugly and will fail in the market. Hire designers, artists and people who care about people.
  3. Travel the world, watch, learn and understand. Embrace ideas.
  4. Start breathing design, understand it, live it, demand it.
  5. Cut your development and prototype timescales, build or partner to be able to quickly prototype. What is your MPT (minimum pro
  6. Release innovative ideas and prototypes – build energy, interest and passion in your company
  7. Test new ideas live, release products under other brands if you need to, make limited editions, test the market with live products
  8. Make feedback as honest as possible, setup user panels, hear the harsh truth first hand, encourage honesty
  9. Find partners … be open-minded and innovative in who these are
  10. Set metrics that encourage innovation and the changes that you want.

So no easy answers or magic bullets (there never are – which is why they are called magic!), but there are options to survive.

One final point to executives in the PC market, whether software or hardware …

Don’t complain about Apple. You could see this was happening. Everyone else did.

Now the question is whether you want to sit back and let this happen, or are going to embrace the challenges and innovate and design a way out of this? Your call.

 

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