Conference 7.286::digital

    	IMHO:
    
    	There it is! You're right! Now, what are you gonna do about it? 
    I, for one am ALL ears.

    maybe we should open the mill  again and start from scratch...
    
                 stig

    The writing has been on the wall that Digital is going this way for at
    least 3 years.  Events over the past year just confirm it.  

    There is a persistent rumor that Gresh Brebach has resigned and that
    Digital Consulting is dead.  This would add even more fuel to the
    commodities fire.
    

    It seems to me that a good goal for Digital marketing would be to emuate 
    approaches used by I.B.M., H.P. COMPAQ and the like with respect to
    getting the product out to the public.
    
    I should be able to walk into any computer store/or retailer that
    deal w/ computer equipment and walk out the door w/Digital gear.  
    
    We in my opinion must open these channels to do even better in the 
    personal computer realm.   

The April 25th issue of Information Week has a Q&A type article 
with Lew Platt, CEO of Hewlett Packard.

He pats HP on the back for not adding employees in the late 
1980's while IBM and Digital were bloating themselves.  While this 
certainly turned out to be a good thing for HP, it seems to me 
that this was not as much a forward looking strategy as is was 
tactics born of necessity - they were in the middle of tough times 
and weren't growing.

Anyway, more to the point of this thread...

They asked him about HP's printer business (which is certainly 
considered a commodity line of business by Digital) and he had 
this to say:

"It's a big deal.  It's close to half our revenue.  I don't think that's 
much of a secret anymore, and it's more profitable than the 
average.

"It's also a business that taught us a lot, and in many ways that's 
probably as important as the revenue and the profitablity.  It's a 
leading-edge activity, and it's pointed out where we're going."

Q: From an outsider's view, the printer business bears a close 
resemblance to a commodity business.  Doesn't that worry you?

A: "Well it's a business.  We've had to learn what it takes to be 
the cost leader.  We literally drive the cost and the price in this 
business.  We're not driven, we're the driver.  That's been a very 
important lesson for us.  It's definately a consumer business.  It's 
taught us a lot about new channels, and that's also important.

"I still don't call it a commodity business.  I think of bananas as a 
commodity.  People go to great lengths to differentiate bananas 
and talk about how they're grown and put stickers on them and 
so on, but a banana is a banana.

"Printers are a different business.  There's still room for 
innovation in printers.  We were part of that innovation in printer 
products.  I don't much like the word "commodity" applied to 
those things.  I think there's still a real important differentiation, 
and I certainly deliver that message every day somewhere inside 
HP: 'Don't give up, this is not a commodity market, this is a place 
where differentiation is still possible.' "


We seem to have convinced ourselves that everythig we have is a 
commodity and that we can't differentiate ourselves and make 
money.  From what Platt is saying, it sounds like we need to do a 
few things better: 1) implement better cost structures, 2) better 
utilize alternate channels, and 3) INNOVATE (a more positive 
connotation than "adding value").

I think Digital could become a profitable 90K employee company 
again.  Unfortunately, the only way to get there in my opinion, is 
to become a profitable 60-70K employee company and then 
rebuild.

    We are certainly in a commodities business.  There is no real
    difference between Coke and Pepsi, Ford and GM, or us and HP.  I
    believe we have better products, but not so much better that they stand
    by themselves.  
    
    I firmly believe that we must give up on the idea of "adding value" and
    go for low price, good service, high quality and low cost of production
    and sales.
    
    Anything else and we are doomed.  It does not appear possible for a
    company to invent a technogoloy so much better than the competition
    that customers will beat a path to the door.
    
    People have made a lot of money in commodities over the years.  So can
    we.
    
    Ken B
    

    re: .7
    
    > There is no real difference between Coke and Pepsi, Ford and GM, or
    us and HP.
    
    yes there is THEY ADVERTISE ALL THE TIME...

    It take an hour to tell someone how to get an la75 to change its
    margins.
    
    It takes an hour to help someone get a DEClaser 1152 to print
    landscape.
    
    It takes an hour to explain that the LA95 needs to have color data sent
    to it before it will print color.
    
    It takes about an hour to troubleshoot the "...little green light on
    the bottom of the monitor doesn't come on when ..." 
    
    The phone system has a cost, the building has a cost, the computer
    equipment to keep the on-line info has a cost and, of course, the
    people have a cost. Even if this service was outsourced there would be
    a cost.  If you answer one question on any of these devices (or any 
    other commodity product) you've lost more money on that one box than
    that one box earned.  Sales alone is not the answer.  One form,
    improperly filled out, costs the entire profit for the lifetime of yet
    another box.
    
    Yet, terminals business probably has fewer questions per unit shipped
    than any other product we sell.  Reliability and ease of use of our
    products will become imperative in a commodity market.  Ease of use of
    our internal systems will become imperative.  You can sell all you want
    but if you're frittering away the profits in house or out the back door
    by answering unnecessary questions on hard-to-use products, or by
    patching bug ridden code, you're not going to remain a force in the
    market place.
    
    How much does it cost to answer these questions?  I can probably answer
    that in about an hour.
    
    Being in the commodity business is not a bed of roses.  It's a very
    easy place to lose your shirt while improving your market share.  I
    would hope that all aspects of the business are being carefully
    considered while sales are being generated.

    re: .4 
    
      I have heard this as well i.e. Gresh is going, gone... 
    
     Anyone else?

    .10
    You have a point,you got to smarten yourself up to march in the parade.
    Eyes right.

    Could it be that the one area that we can add value and achieve
    reasonable margins is in Middleware?  Do products like objectworks,
    Linkworks, Forte, provide us with a competitive edge that we should
    take greater advantage of?

    re: .13 "Is the answer Middleware?"
    
    This is *one* of the answers, but there is no *single* answer. Being
    profitable in middleware will not keep 90,000 people employed. 
    
    Geoff

Commodity does not mean no differentiation and no margin.

Low end video terminals made $92 million in profit last year with 30% PBT
selling almost half a million units.

Commodity means the basic product concept is well understood and
available from many suppliers.  Price, service, quality, ease of use,
warranty, and other consumer attributes become the most important
success factors.

A car is a commodity, but that doesn't mean people don't care about
what kind of car they drive, or aren't willing to pay more for the
quality of a Toyota Camry versus a Ford Escort.  Despite being
a "commodity", automotive technology is advancing faster than ever.

A computer is a tool for organizing information so it is easier
to use and communicate effectively.

As processing power has shifted from very expensive to very inexpensive,
computing design has shifted from optimizing the expensive machine
(epitomized by batch) to optimizing the user's experience and
productivity (epitomized by Macintosh User Centered Design).

"Client/server" is first and foremost about combining User Centered Design
(responsive direct manipulation) with back end (often modular distributed)
compute power to handle large business critical applications.  This isn't
another take on time sharing, but a different and significantly more
efficient model of computing.  The opportunity is enormous.

Being in a commodity business is fun, challenging, and rewarding
if you can focus on the right success factors to help "drive the industry".

- Peter

    
    There are guys living in mansions and driving big yachts
    because they figured out how to do commodities (or, to
    eliminate the semantics games, low-cost, volume products
    that are efficiently made and shipped).
    
    I am under the impression (I'm sure someone will disabuse
    me of this notion if it's incorrect), that the biggest
    profit centers within Digital are:
    
      VMS
      Hardware Services on the installed base
      Storage products
      PCs
      Components and Peripherals
     
    The first two in the list are eroding quickly.  Unless I miss
    my guess, that leaves products in the "commodities" spaces
    as the only realistic option for survival.
    
    Spin them off into separate businesses. Keep some money
    and advertise the s*it out of Alpha in the hopes of rebuilding
    a major systems business out of it. And for God's sake, get on 
    with it.
    
    Glenn 

    >There are guys living in mansions and driving big yachts
    >because they figured out how to do commodities (or, to
    
    Reminds of the movie "Down and Out in Beverly Hills" where Richard 
    Dreyfus is a millionaire "coat hanger baron" - OK so it's Hollywood, 
    but I'm sure there are real life examples.  Often times there's big $ in 
    the mundane/mass market appeal products.  Take a look at Walmart for 
    example.
    
    Of course, the engineering might not be as interesting, but sales and
    marketing probably still have a good time selling commodities products.
    
    The HP example of innovating to drive the printer market is an interesting
    notion though.

	... in the Atlanta paper this weekend for Digital's color dot-matrix 
printer at CompUSA. Had a picture, and the logo, even said something to the 
effect of "... now we have Digital, too...".