It came as no surprise to many analysts that Microsoft has had a disappointing few months, with very slow holiday sales of its Surface tablet and continuing tepid-at-best reviews of Windows 8. PCs and Windows software are in trouble – so much so that Microsoft is investing billions to prop up one of its channels to the market – Dell, and some predict a Kodak-like demise of Microsoft. It also comes as no surprise to anyone who, like me, turns on a Lenovo Think Pad (or any other PC) and resumes Microsoft Windows. Depending on how I exited my computer, I may have to wait as long as 5 minutes before it is usable. A similar delay occurs throughout the day when my computer falls asleep. Consider that my employer (IBM) has 400,000+ workers across the globe experiencing these delays every day, every…
Alignment builds a winning brand and business model for XIAMETER®
Brand trust is harder to earn in today’s economy? The pressure to cut costs makes delivering day after day on promised benefits more challenging. Social media creates messages that listeners deem more reliable than your own. And retaining meaningful and hard-to-copy differentiation has become more challenging in our copycat global economy. Silicon leader Dow Corning is one company that has managed to build authentic brand trust by clearly communicating its value promise, aligning people, adapting its business models, and letting its culture evolve to support its two brands, Dow Corning® and XIAMETER®. Dow Corning created the XIAMETER brand in 2002 to preserve market share as specialty silicon products commoditized, a savvy example of business model innovation that I wrote about in late 2011. The fully automated (from ordering to fulfillment) business model enables the brand to maintain profitability at the lower price points…
DELL and The Emperor’s Clothing
I’d never have bet that the US Security and Exchange Commission, the team fooled needlessly by Ponzi-scheme artist Madoff and others, would become the brave kid in the crowd to scream, “The Emperor is naked!” In accusing Dell and its CEO of negligence-based fraud, the reality of Dell’s broken business model becomes clear to all. Apparently Dell’s profits were significantly enhanced by rebates from Intel, so much so that Dell would have otherwise reported a loss in at least one year. Investors should have been told about the role of rebates in Dell’s financial performance. The information reveals much about the financial risks Dell faced. The information also casts a spot light on a poorly-conceived business model that left Dell’s products competing as commodities. I’ve criticized Dell before. Owner/leader Michael Dell failed to evolve a once-unique business model in ways that retained a…
Why Business Model Innovation Matters
In November of 2008, Business Week magazine reported that Apple’s cash on hand exceeded Dell’s total market valuation. These two statistics explain how it happened – Apple net profit margin = Dell’s net profit margin plus 10 percentage points Apple operating margin = Dell’s operating margin plus 13 percentage points There is a vital lesson in the Dell-Apple financial comparison and it goes way beyond new product innovation. Apple has an incredible company-wide design competency upon which it built a differentiated business model. As a result, it introduces breakthrough new offerings while spending a much lower percent of revenue on R&D than other Top 25 innovative companies. The comparison in R&D spend tells you everything you need to know about the power of advantage and a differentiated business model built upon it. In Quarter 4 of 2008 – Apple R&D spend of 3.1%…