IT technology companies filled business page news the last few months with press releases leading us to rethink what business these companies are really in. Cisco is moving into HP’s market space. Dell with acquisition funds in hand is soon to follow. Intel whose margins are terribly low for a company so dominant in fast chips is trying to move into low power applications like cell phones where growth prospects look brighter. And IBM whose hoped for acquisition of Sun fell through when Oracle made a surprising and winning bid for Sun must find a new way into Sun’s market space.
Business model strategy predicts moves such as these. As technologies mature and become commodity-like (which is possible no matter how sophisticated a technology is), industry boundaries between technologies collapse. Companies stuck in commodity-like competition redefine the definition of the business they are in in order to offer a unique benefit to customers. Others expand the definition of their business to play catch-up. Yesterday’s strategic partners become competitors overnight.
As offerings become more similar across IT technology companies, my bet is on IBM even though it lost its bid for Sun.
IBM’s “Smart” TV, web and print campaign clearly, concisely and inspirationally tells the viewer what IBM is doing for the world. Smarter traffic solutions. Smarter medicine. Smarter schools. Smarter bridges. Smarter energy usage. Smarter irrigation. Name the problem (and the world has an abundance of them) and IBM will use its technology and people to solve it, a compelling value promise.
The campaign is full of pictures of IBM staffers, communicating that IBM is a service business. (IBM’s most recent business model innovation was a significant expansion into services.) Technology stops being a commodity (with category names we can’t remember unless we’re IT professionals) and becomes, when bundled with services, smarter solutions, the IBM value promise. My guess is that a value promise centered on services will be much harder to copy than a value promise that seeks to differentiate IT-company’s technologies.
I have no doubt that HP’s solutions are also smart. HP bought EDS to move its business model into services. But IBM is publicly claiming smarter as its value promise. If IBM designs and aligns its processes to create smarter solutions and shows potential customers and employees the evidence that its singular focus is smarter -smarter than what we have and smarter than what competitors might do, IBM will leave HP trailing, much as HP kicked once successful Dell into an also-ran.
A winning value promise is unique, hard-to-copy, compelling to the target market and on-trend. One can’t help but read or listen to the news today to know that we need smarter solutions to the many issues facing our world. I for one am glad IBM notices the same thing and is banking its future on being smart enough to solve one or more of these issues.
For insight on business model innovation and business model differentiation, read my recently released book, Beyond Price.