Much has been speculated about what will work and what will fail expectations in this deal, and much has been trying to find the silver lining on behalf of analysts on either side of the fence, those who lean towards big blue or those who feel it sinking. One perspective interests me and makes the deal in retrospect not at all interesting and very predictable indeed. Looking back at why Creative did not succeed at the digital music player business and why apple owns it today one can learn the lessons Lenovo learnt in it. Creative had the cheaper comparable product with similar quality. What it did not have is the marketing and brand name that apple had. To summarize what it lacked was management skills and not technical skills. Lenovo has a reasonable market share in the Chinese PC market share. It is only natural that it will lose some as the entry of foreign players becomes more and more viable to them economically. The PC market is one which tends to move toward a low entropy situation, where all players are similar and there isn't one big player as there is simply nothing one manufacturer can give that another can't. And since all end up giving the same thing switching and compatibility issues aren't there. The operating system make for instance is so strange that. Apart from Linux, which thrives on compatibility, every other system wants to trap users in it for eternity. if it hadn't been for the selfishness of predecessors of Steve Jobs and Sam Palmisiano things might have been different.
So coming back to Lenovo. No one doubts the Asian management on low cost and fairly reliable manufacturing and assembling. But their record at managing international companies is suspect with the exceptions of Toyota and Sony. Even Nissan, a phoenix of the auto sector, needed French eyes to see the obvious. Lenovo goes on to buy IBM's proven and newly resurgent managerial prowess in this deal and already has wasted no time in shifting its headquarters to new York. To find such foresight in a public sector undertaking of China should scare our Uncle Sam. The Chinese seem to be beating them at their own game. First you had American contractors hire Chinese labor to make the products cheap and sell them below par to get the market in America. So they ended up paying 30% of the cost to china. Now china buys the American manager's brain for a mere percentage of the cost and makes it cheap in china with no government problems of outsourcing to stop it and takes all the money back home. The only things stopping more of this is that not many companies have the kind of money Lenovo has. But isn't this a self catalytic process!
Wednesday, December 29, 2004
Tuesday, December 28, 2004
Kodak's new image by emphasizing ease of use
Ten years ago, Kodak manufactured the first digital camera aimed for sale to retail consumers, the $749 QuickTake 100, sold by Apple Computer. But by 2000, Sony had muscled in as the leading digital camera maker and Kodak was hovering near 5 percent of the market, a dire position, while the film business which it had dominated for a decade was starting to collapse.
Kodak called in anthropologists and other social scientists, who observed camera users in an effort to learn how taking and printing pictures fit into their daily lives. They also followed prospective camera buyers into stores to understand how they chose certain models from the crowded shelves.
The research was part of Kodak's effort to reorganize its digital camera product line by transforming product design, manufacturing and marketing. The company's big decision was to focus on low- priced, easy-to-use cameras that would appeal to women, who take the majority of snapshots, rather than Sony's forte of shiny toys for gadget-loving men.
That strategy paid off as digital cameras moved into the mass market. This year, Kodak's EasyShare brand has almost 19 percent of digital camera sales in the United States, a very close second to Sony and ahead of Canon, according to International Data Corp., a technology research firm.
"Kodak is up because they are really committed to ease of use and they communicate that very well," said Michelle Slaughter, the director of digital photography trends at InfoTrends/CAP Ventures, a market research firm. "Kodak tends to excel at the touchy-feely side of the market that tends to appeal to first-time buyers and mainstream consumers, especially women," she said.
Kodak certainly needed a success. Since selling its pharmaceutical and chemical divisions a decade ago, the company has shed a third of its jobs and has seen its revenue fall to $13 billion last year from $15 billion in 1995. Now it says it expects to eliminate as many as a quarter of its remaining 64,000 jobs over the next three years.
Sales of film and other traditional products were down 20 percent in the third quarter of 2004, even more than expected. But digital products consumer and professional cameras as well as printing systems sold to drugstores and the like were up 39 percent.
The company recently stopped selling reloadable film cameras in the United States.
Profitability in digital products has been harder to achieve than sales. Kodak has said that 2004 would be the first full year in which its digital camera division would be profitable. And it will say only that the line is profitable when its high-margin accessory sales are included.
To the great relief of camera manufacturers, buyers have not yet pressed for lower prices, as they have in some markets, like DVD players. The average price has remained just under $300, but consumers expect that the makers will continuously provide more features especially megapixels of resolution and zoom capacities at those prices. Any maker with a model that does not match up to its rivals is forced to liquidate at a loss.
"The lifetime of digital cameras is measured in months, while the life of a film camera is years," said Elliot Peck, a vice president for sales at Canon. "Someone always has overstocks, and that disrupts the market."
Peck said that Canon's camera business, which has concentrated on more technically sophisticated buyers by offering digital single- lens reflex cameras and the unusually small and sleek Elph line, is also profitable. Sony, which charges a premium for its unusual designs, also makes money in digital cameras, although the company does not break out figures for the business.
Four years ago, it was not so clear that Kodak would have any credibility in the digital world, despite its place as a photography pioneer and its 1,000 digital photography patents. So Kodak's engineers developed a system meant to streamline the process of moving pictures off the camera, onto a computer and then to either a printer, Kodak's Ofoto online printing service or e-mail. This involved new cameras, new software and an optional dock that cradled the camera, allowing it to recharge its batteries and transfer pictures to the computer at the same time.
The working name for the system was "Dock and Go," but Pierre Schaeffer, who had just taken over as marketing director for digital cameras, did not like the phrase. "We had been trying to play catch- up with Sony while we were trying to see what Canon was going to do," he said. "We needed something crisper that we could own and push forward with confidence."
After several brainstorming sessions, he came up with the EasyShare brand, which captures what Kodak hopes differentiates its line from competitors.
One innovation was a "share" button, which allows users to select pictures as they take them that will later be printed or e-mailed as soon as the camera is returned to the dock. "There is an emotional moment at the time of capture," said Gregory Westbrook, Kodak's vice president and general manager of its digital and film imaging systems unit. One of the company's first insights from its research was that its target market was annoyed and sometimes intimidated by the need to use a personal computer in order to print pictures. Many women, the anthropologists found, wanted the center of their picture taking and viewing to be the kitchen rather than the home office.
So in 2003, Kodak introduced what would become the signature technology of its camera line: a printer dock that housed the camera directly no computer needed to print 4-by-6-inch, or 10-by-15- centimeter, glossy photos using a dye sublimation printing process.
Kodak sold a million printer docks in the first year. Printers have the potential to be far more profitable than cameras because customers are locked into years of buying ink and paper. Even more important, Kodak convinced many retailers to put its printers right in the aisle that sold cameras, not in the printer section.
"The dock just resonated with consumers," said Slaughter of InfoTrends/CAP Ventures.
Of course, innovations do not remain exclusive for very long in the electronics world. Canon, for example, added the equivalent of the share button to its Elph line. And Sony, which is promoting its own 4-by-6-inch printer, has been fighting back with a refreshed product line. Sony's T-1 model is even thinner than the Canon Elph and features a 2.5-inch display, larger than those of its rivals.
Still, Sony is losing market share. In the first nine months of the year, Sony had 20.8 percent of the digital camera market in the United States, according to IDC, down from 21.7 for all of 2003. Kodak is up to 18.8 percent of the market from 17.9 percent. Canon is now the No.3 digital camera player, with 15.2 percent.
Kodak called in anthropologists and other social scientists, who observed camera users in an effort to learn how taking and printing pictures fit into their daily lives. They also followed prospective camera buyers into stores to understand how they chose certain models from the crowded shelves.
The research was part of Kodak's effort to reorganize its digital camera product line by transforming product design, manufacturing and marketing. The company's big decision was to focus on low- priced, easy-to-use cameras that would appeal to women, who take the majority of snapshots, rather than Sony's forte of shiny toys for gadget-loving men.
That strategy paid off as digital cameras moved into the mass market. This year, Kodak's EasyShare brand has almost 19 percent of digital camera sales in the United States, a very close second to Sony and ahead of Canon, according to International Data Corp., a technology research firm.
"Kodak is up because they are really committed to ease of use and they communicate that very well," said Michelle Slaughter, the director of digital photography trends at InfoTrends/CAP Ventures, a market research firm. "Kodak tends to excel at the touchy-feely side of the market that tends to appeal to first-time buyers and mainstream consumers, especially women," she said.
Kodak certainly needed a success. Since selling its pharmaceutical and chemical divisions a decade ago, the company has shed a third of its jobs and has seen its revenue fall to $13 billion last year from $15 billion in 1995. Now it says it expects to eliminate as many as a quarter of its remaining 64,000 jobs over the next three years.
Sales of film and other traditional products were down 20 percent in the third quarter of 2004, even more than expected. But digital products consumer and professional cameras as well as printing systems sold to drugstores and the like were up 39 percent.
The company recently stopped selling reloadable film cameras in the United States.
Profitability in digital products has been harder to achieve than sales. Kodak has said that 2004 would be the first full year in which its digital camera division would be profitable. And it will say only that the line is profitable when its high-margin accessory sales are included.
To the great relief of camera manufacturers, buyers have not yet pressed for lower prices, as they have in some markets, like DVD players. The average price has remained just under $300, but consumers expect that the makers will continuously provide more features especially megapixels of resolution and zoom capacities at those prices. Any maker with a model that does not match up to its rivals is forced to liquidate at a loss.
"The lifetime of digital cameras is measured in months, while the life of a film camera is years," said Elliot Peck, a vice president for sales at Canon. "Someone always has overstocks, and that disrupts the market."
Peck said that Canon's camera business, which has concentrated on more technically sophisticated buyers by offering digital single- lens reflex cameras and the unusually small and sleek Elph line, is also profitable. Sony, which charges a premium for its unusual designs, also makes money in digital cameras, although the company does not break out figures for the business.
Four years ago, it was not so clear that Kodak would have any credibility in the digital world, despite its place as a photography pioneer and its 1,000 digital photography patents. So Kodak's engineers developed a system meant to streamline the process of moving pictures off the camera, onto a computer and then to either a printer, Kodak's Ofoto online printing service or e-mail. This involved new cameras, new software and an optional dock that cradled the camera, allowing it to recharge its batteries and transfer pictures to the computer at the same time.
The working name for the system was "Dock and Go," but Pierre Schaeffer, who had just taken over as marketing director for digital cameras, did not like the phrase. "We had been trying to play catch- up with Sony while we were trying to see what Canon was going to do," he said. "We needed something crisper that we could own and push forward with confidence."
After several brainstorming sessions, he came up with the EasyShare brand, which captures what Kodak hopes differentiates its line from competitors.
One innovation was a "share" button, which allows users to select pictures as they take them that will later be printed or e-mailed as soon as the camera is returned to the dock. "There is an emotional moment at the time of capture," said Gregory Westbrook, Kodak's vice president and general manager of its digital and film imaging systems unit. One of the company's first insights from its research was that its target market was annoyed and sometimes intimidated by the need to use a personal computer in order to print pictures. Many women, the anthropologists found, wanted the center of their picture taking and viewing to be the kitchen rather than the home office.
So in 2003, Kodak introduced what would become the signature technology of its camera line: a printer dock that housed the camera directly no computer needed to print 4-by-6-inch, or 10-by-15- centimeter, glossy photos using a dye sublimation printing process.
Kodak sold a million printer docks in the first year. Printers have the potential to be far more profitable than cameras because customers are locked into years of buying ink and paper. Even more important, Kodak convinced many retailers to put its printers right in the aisle that sold cameras, not in the printer section.
"The dock just resonated with consumers," said Slaughter of InfoTrends/CAP Ventures.
Of course, innovations do not remain exclusive for very long in the electronics world. Canon, for example, added the equivalent of the share button to its Elph line. And Sony, which is promoting its own 4-by-6-inch printer, has been fighting back with a refreshed product line. Sony's T-1 model is even thinner than the Canon Elph and features a 2.5-inch display, larger than those of its rivals.
Still, Sony is losing market share. In the first nine months of the year, Sony had 20.8 percent of the digital camera market in the United States, according to IDC, down from 21.7 for all of 2003. Kodak is up to 18.8 percent of the market from 17.9 percent. Canon is now the No.3 digital camera player, with 15.2 percent.
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