Wednesday, January 28, 2009
These fluctuations show that forecasts based on historical metrics such as shipments or on manufacturing capacity can be wildly inaccurate for new markets or disruptive technologies. Low forecasts that fail to anticipate new-user demands or technology and business-model innovations can have a profound impact on decision-making at multinational technology companies. Intel, for example, considered creating an Atom-like processor as early as 2003, but forecasts did not support the volume benchmark for profitability. Atom processors are now a major growth driver for the low-cost segment, and a bridge into other markets (e.g., handhelds and smartphones).
There is an opportunity for technology companies that develop forward-looking forecasts for new markets or innovative technologies. Apple and AT&T had the confidence to ignore forecasts when they introduced the iPhone. NComputing’s multi-user form factor invalidates some of the key assumptions traditional forecasts are based on, and the company is remarkably healthy after only four years. These companies made strategic investments and based their own projections on non-traditional metrics, weighting unmet demand and user preferences more heavily than historical shipping trends. In hindsight, this looks like courage or luck, particularly in a mature-market environment, where forecasts by leading industry analysts may seem irrefutable. But in emerging markets, where millions of new users have different preferences and there is a different set of competitors, non-traditional metrics and the ability to forecast based on contingencies, innovations and new market scenarios is an essential part of doing business.
Thursday, January 15, 2009
While Intel’s social initiatives are certainly laudable, they do not compare to the effect of the company’s truly scaled, self-sustaining for-profit activities throughout the developing world. Intel’s distribution channels and innovative technology have had enormous economic impact on local IT industries and the broader economy in many countries. In fashioning his address, Barrett had a rich palette to draw from, including:
- Intel’s development of the Atom processor – the energy-efficient chips have enabled netbook makers to scale, making laptops more affordable to hundreds of thousands of emerging-market consumers.
- The development of the Classmate PC reference design – Intel’s answer to OLPC’s XO machine has been borrowed and tweaked by many early netbook manufacturers.
- Intel’s investment in WiMax – a cost-effective network infrastructure that could extend voice and data services far into underserved areas in Africa, Asia and Latin America.
The technology industry could use an unapologetic champion who will talk straight about the benefits of emerging-markets to the bottom line. And, of course, a healthy bottom line means more investment, which brings greater social and economic development to the target market. But there’s little reason to suggest that these social benefits are the basis for the business decisions the company makes. Shareholders, business partners and local governments will all respond positively to the corporate leader who speaks of these markets as viable business opportunities. There are a number of candidates for the role of emerging-market champion. Cisco’s John Chambers came the closest in his inspiring keynote at the end of the CES emerging economies session, calling these markets important leaders in technology evolution and market transitions. But there is still plenty of room on the stage.
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Wednesday, January 7, 2009
Notebooks have made headlines and gained market share through a rapid rate of innovation and good marketing. However, analysts of the Indian market (a pace-setter for many other developing countries) note that desktops are still the preferred form factor in many geographies and segments, including second- and third-tier cities, and the SMB, government and education verticals. Desktops have the advantages of familiarity, durability, security (from loss or theft), serviceability and lower prices for better performance.
With so much room for growth in India, there is a lamentable lack of innovation in the desktop space. Despite efforts by Dell and Zenith and others to introduce “green,” energy-efficient models in select markets, PC manufacturers have not kept pace with the innovation and marketing of notebooks. This may reflect a sense of security – that the preference for desktops will endure – but it ignores a potential opportunity. Improvements in infrastructure and service provision (e.g., reliable electricity and broadband) will make it increasingly easy for PC manufacturers to realize cost reductions by moving software applications and data storage to the cloud. More locally-relevant content, simpler interfaces, better co-ordination with local maintenance providers, and services tailored to the education, government and SMB segments could also stimulate desktop sales, claiming even more of the overall PC market for desktops in India and elsewhere.
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