The news that HP is splitting itself in two (ironically a few years after a previous CEO lost his job for proposing the same idea) made me think about the size and structure of tech companies. Some companies invest in growing rapidly and aim to be biggest in their field, others focus on niches, while a third group aim to be a jack of multiple trades, spanning diverse sectors.
HP was previously in the jack of all trades camp, with its fingers in lots of different pies, from enterprise software and services, through servers and networking equipment, to consumer PCs and printers. It will now become two companies, one focused on the enterprise and the other on PCs and printers. Sadly, it has missed the chance to name one H and the other P, going instead for the more prosaic Hewlett Packard Enterprise and HP Inc.
While the two companies will be smaller, they will still each have over $50bn in revenues, and are likely to be hard to disentangle. At the same time eBay has announced it will divest its PayPal subsidiary, following pressure from shareholders and the entrance of Apple into the payments market. I must admit to being cynical about efforts by many tech titans to refocus themselves – it can look suspiciously like a random throw of the dice that keeps investors happy but has no real long term strategy behind it. After all, the world’s most valuable tech company, Apple provides software, hardware (mobile and desktop) and music and video content, alongside payments, maps and health data. And no-one has yet pressured it to split.
However there are definitely optimum size and types of company, depending on the maturity of the market they are in. Emerging sectors, such as the Internet of Things, change fast, so a company needs to be flexible and focused, with the ability to pivot quickly and respond to market conditions. It stands to reason that smaller players will be able to do this faster than legacy behemoths.
Mature markets run less on innovation, with much tighter margins. You are selling a replacement piece of software/hardware and any new features are likely to be incremental not transformative. Consequently the bigger you are the greater the economies of scale when dealing with suppliers and customers. The car industry is a perfect example outside the tech industry, where you need to be big to have a chance of profitability.
The tech industry is going through a rapid wave of change, driven by the move to the cloud and the rise of mobile devices. Previous shifts (such as from the mainframe to the minicomputer and then the server) have led to market leaders falling by the wayside – does anyone remember the likes of Data General for example? In fact HP has done well to survive so long, with a heritage that dates back to 1939. What will be interesting to see is if can make it to its 80th birthday in 2019, or whether it will be carved into even smaller chunks before then………..
The High Street at Christmas is a loud and particularly garish place. With fewer and fewer physical shoppers retailers have to shout at the tops of their voices to attract attention. Which is probably why I’ve not really noticed the rather catastrophic rebrand of EE (previously Everything Everywhere), the owner of Orange and T-Mobile.
Everything Everywhere was quite obviously an appalling name – although it did give rise to the wonderful FT headline Everything Everywhere disappoints analystswhich pretty much summed up the performance of the telecoms conglomerate. But as a holding company it was fine – you had two strongish brands, Orange and T-Mobile with defined markets so why confuse matters with a third umbrella brand? In a similar way when BA and Iberia merged the new holding company was called International Airlines Group (IAG) – not fancy, not competing with its existing well-established brands, but just providing a name, a website and a name for the stock market.
But EE has decided in its infinite wisdom to essentially bin the Orange and T-Mobile brands. I switch on my phone and it says EE, even though my contract is with Orange and the previously recognisable high street storefronts are now a drab blue grey that looks like it has come from the Farrow and Ball catalogue (my money is on Hague Blue). Given that Orange became successful by being a new, interesting and involving brand that people wanted to be part of and that T-Mobile screamed value to countless students it seems ludicrous to write off that amount of goodwill in a stroke. As Nils Pratley points out in The Guardian it looks more like a dull but worthy European quango than a leading edge telco.
But does it matter? Many people in the technology industry don’t really bother about branding, focusing on building advanced products and services and giving them involved names made up of lots of numbers and Zs and Xs. However while that may work for deeply technical audiences if you want to get mass market appeal you need an appealing and non-threatening brand that is clear and easy to understand. Apple is the obvious example, but looking around the tech industry you can see plenty of others. Even in the telecoms world there has been a lot of effort put into building global brands – from the clever (O2) to the limited (3) and the mundane (Vodafone).
Ironically at a time when it has the UK’s only 4G network, rather than talking about technology advancement, EE seems to be embracing the safe and boring. It may claim that rebranding has ‘re-energised the organisation’, but in a crowded market it looks more like a retreat than a step forward. Apple, Raspberry Pi, Banana Republic – EE should have stuck to fruit………….
Like most companies, Apple has created some duff products in its time. And many of them have been down to winning out over substance. The perfect example is the round mouse shipped with the iMac and Power Macs. Design wise it looked gorgeous and fitted in completely with the style of the product. However it was virtually impossible to use, leading to a storm of complaints and forcing customers to buy replacements.
But at the time it didn’t really Windows over the issue.. Macs were a and users (mostly designers) weren’t going to defect to
Roll forward to the iPhone 4 and again a gorgeous design compromises the ability to actually use the product. But rather than just affecting a relatively small number of Apple fanatics, we’re talking about millions of mass market consumers. Big difference, hence Apple’s eventual issue of protective cases and heartfelt apologies.
But it took a while for Steve Jobs to stand up and admit the mistake (sort of). As it moves more and more into the mainstream Apple will need to learn to react faster if its brand is going to retain its lustre and appeal. Oh, and checking that the antenna works before shipping would also be a good idea…………