Tom Foremski interviews Olaf Swantee of Orange Mobile at Silicon Valley Watcher. Swantee is working to address sustainability concerns from the resource efficiency angle and he ranks this issue as one of Orange’s biggest challenges.
It’s a nicely produced video interview and I recommend you check it out. Here’s an excerpt:
Swantee: “There’s a lot of operators out there that believe that mobile communications is a commodity, you know, that this thing [gestures to cell phone], the prices are going down. If there’s one thing I’ve learned, also by being at HP, that in a mature market you have to innovate. If you don’t innovate, if you don’t create differentiation, you will be marginalized in a price war in the end.”
This stock Michael Porter competitive advantage stuff has withstood the test of time. Yet these days marketers and designers are learning to take take resource efficiency into consideration. I’m going to share some ideas about HP and present what I believe is THE major challenge facing consumer electronics companies.
In many ways HP sets a good example for others to follow with their various corporate social responsibility initiatives. They do so to remain competitive, to attract and retain talented employees, to attract and retain certain classes of capital; all justifiable returns when viewed from a cost-benefit perspective. Arguably they also pursue such initiatives because it’s part of the culture of doing business in silicon valley. You might even assume that HP designers and marketers believe in resource efficiency as an ethical obligation, a sort of moral cost of doing business.
Like any company working to implement some form of sustainable management, inevitably they’re creating situations where the goals of the sustainability agenda are in direct conflict with other organizational tactics. For example, you’ve probably seen HP’s outreach related to recycling ink cartridges. Would it not be “greener” to invest less in consumer oriented downcycling and address the problem upstream with a refillable cartridge design?
HP has recently published information about cutting edge life cycle analysis (LCA) as it relates to data center design. They’re reported to employ such thinking in their component designs and packaging decisions. These decisions represent tangible and growth oriented investments in the future of the organization. HP uses promotional and R&D dollars to make resource efficient design techniques an effective part of their brand narrative. This narrative is crafted to help differentiate their products in a mature and highly commodified market.
Have they avoided the commidification trap that Swantee alludes to? Not entirely, and we can speculate on what their margins would look like if they hadn’t placed a premium on smart design. But such speculation is irrelevant as we’ll never know what position HP would have been in had they not followed their recent course. Regardless, HP is wise to continue learning. The lessons their designers and marketers are learning represent a significant and expanding source competitive advantage in an economy increasingly confronted with emerging resource constraints.
At the same time, HP’s marketing department is pressured to create an unreasonable number of new product designs, each marginally different from the others, in a classic marketing tactic of planned obsolescence. HP has played a leading role in the culture of disposable electronic gadgetry.
Does anyone remember the late 90’s when Sun painted a massive billboard in Portland that read “Stop the Technology Madness”? The madness hasn’t stopped. Not yet. Technology and consumer electronics companies are under as much pressure as ever to shorten their concept to launch cycles - innovate! - regardless of complaints from the sustainability team. Consumers are aware of the shortened warranty periods and limited support. Designers are aware of the impact that disposable gadgets have on landfills.
Still product managers are driven to promote insignificant design changes as breakthrough innovations. Innovations create differentiation and differentiation improves short term market valuation… or short term net margin? Whatever else you might think about it; it’s a proven model. It worked. It still sort of does.
This type of overinflated “innovation” has played a central role in HP’s design and marketing decisions. Unfortunately such thinking is obsolete for any organization that hopes to use design and marketing to avoid commodification in a mature market. The reason being is that too many people have played that game. It’s played out. People were successful playing the game and so the game itself changed as the direct result of their success.
In the words of Michael Porter:
“Understanding what allows it to be unique will also ensure that a firm does not undermine the causes.” (Competitive Advantage, 1985)
False innovation is not a unique characteristic in the consumer electronics market and therefore should not be viewed as a source of brand differentiation. In Porter’s terms, planned obsolescence is a “driver of uniqueness” as a policy choice. Similarly, investing in resource efficient design can be a driver of uniqueness in the areas of learning and spillover. The point of interest is that planned obsolescence and resource efficiency seem to be inherently in conflict. Consumer electronics marketers need to develop methods to reconcile this conflict.
The challenge now, as I see it, is to develop transitional marketing models that support moving away from the technology madness of planned obsolescence and disposable gadgetry. Companies like HP (and Orange Mobile) are up to the challenge and they deserve respect and recognition for many of their management practices. This transition will require leadership at the policy level and at the design and product marketing level. I’m optimistic about their chances.