Operations Strategy Implications for the “Decline of the PC” Era

With a leveling off of demand for PCs and weak quarterly earnings announcements from Dell and HP, some are calling for the “death of the PC”. That is hardly the case. Demand for desktops and laptops continues to grow although slowly compared to the growth of smartphones, tablets, convertibles (tablets with connected keyboards), computing TV’s and other new platforms. But chances are that more than 80% of you are reading this article on a laptop or desktop display.

That said, we are seeing a number of factors influencing our desire for new computing platforms. Factors such as:

• Advancement in input techniques. We are accessing devices through touch, voice, video, image recognition, spatial gestures (arm and body motion—such as Microsoft Kinect) and flexible screens (input from the twisting of flexible screens).
• Today’s almost ubiquitous access to the web and all of our personal content, apps and services on-demand.
• The proliferation of Near Field Communication (NFC) which enables mobile payment
• Ultra-fast and rich wireless communication

Use and accessibility preferences are evolving quickly with all of these new capabilities. So where is the market going? Below is a chart that shows the emergence of smart phones and tablets over PC’s (from ARS Technica).

If we are to project this forward to 2020, using the IDC forecast through 2015, the chart would look like the one below with smart phones separating and reaching volumes in the neighborhood of 2 billion devices by 2020 and tablets/convertibles exceeding sales of PCs sometime around 2016/17.

So what are the operational implications of this growth in consumer electronics? Before I go into this, let’s talk about a key trend that occurred without many people either noticing or understanding the significance. As you can see in the graph below, in 2004, a serious inflection occurred—consumer demand for electronics surpassed the demand from corporate and government buyers. Today, consumer demand for electronics is more than double that of corporate and government buyers combined!

The implication to many companies is that they need to change or transform their business models to sell to different customers through different channels. Many companies are indeed adapting their business models to incorporate these changes – some are opening retail stores (Apple, Microsoft), some are investing in hardware (Google), some are selling in retail when before they only sold direct (Dell) and some are focusing more on consumers (HP). The end result is a proliferation of products and channels that need to be managed effectively.

What are the operational implications?

As an example we will look at a company that was focused on enterprise and goverment customers and is now shifting towards consumers as this market grows.

Developing, manufacturing, selling, delivering and supporting products for consumers is a different game and requires a completely different focus than doing the same for government or corporate clients.

1. The speed of innovation must be much quicker.
2. The product lifecycles must be much shorter.
3. The buying experience and ease must improve.
   1. Subsequently, order to delivery times must shrink and
   2. delivery visibility must improve
   3. End-user consumers are emotional buyers and customers who greatly value support and service : a) Consumers want to be recognized for who they are and what they have purchased in the past from your company. We like personalized attention. b) We want guidance on what to buy and recommendations. We don’t want to be overwhelmed with insignificant options and too many choices.
4. Visibility to actual demand must improve
5. Planning cycles must be compressed and development cycles as well.
6. Support, service and warranty has to be much friendlier and your sales and marketing very targeted

So the operational implications are significant. Now, I’m not recommending that these corporate-centric companies abandon their current customers, but a number of things need to be done to allow the proper service of these unique customers.

Here are a few thoughts:

1. Supply Chain Segmentation. This means designing a supply chain from the customer back.
   1. Segmentation must take into account the preferred buying channels of your customer, how they want to receive your product and be supported and serviced after the sale.
   2. Segmentation must also identify the synergies to be leveraged across these disparate supply chains.
2. Reduce the complexity of the portfolio
   1. Once your customer value proposition is clear for each target customer and the supply chains aligned and fully leveraged, you need to ensure you have the right portfolio to meet customer demands
   2. It is also critical for everyone from sales to marketing to product management to supply chain and support to realize the absolute necessity of maintaining a “clean” portfolio. Clean means easy for sales and marketing to explain and customers to understand. It is also a portfolio where everyone understands the true profitability of each sku and platform and the impact of adding new skus or hanging onto old ones.
3. Create a central “customer intelligence” system
   1. This is a system that allows sales, marketing, support, service, warranty, etc to all share and enrich a single source of customer data. In a world where consumers dominate, this visibility and information is critical to properly targeting, selling and supporting your customers.

Now go out and enjoy this consumer dominated world! Please respond with any trends or influences that you see will impact the future of computing devices. To read more on supply chain segmentation.

Written by Todd Taylor, a partner at OPS Rules Management Consultants

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