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Also posted on: IT Infrastructure
Nearly 20 years ago I was doing some competitive analysis of PCs. In a market that was already heavily commoditised one company stood out as having a really focused approach to engineering value in and cost out of its products. Dell spent a lot of time researching what elements of buying, owning and running a PC were most important to its customers. Much has been made of Dell’s build to customer order process, which was actually a bit of a misnomer. No, what really caught my attention was the way in which Dell bought and built components to match the performance criteria of their customers. If, say, I/O performance was really important they would ensure the best performing I/O components were built into the PC. Conversely they spent much less money on graphics cards because their customers didn’t place graphics performance high on their priority list.
The result was that Dell was able to charge a slight premium because their PCs did exactly what customers wanted, and make a bigger margin because they engineered cost down or out on components customers didn’t place as much value on.
So what has this got to do with the data centre market? Recently a data centre supplier moaned that they didn’t do business with AWS because AWS just wanted to drive costs down and the supplier couldn’t compete. I’m sure AWS negotiates price fiercely, but it is not true to say that they are just interested in low cost. In fact AWS will spend money on specialised, customised designs where that will deliver competitive improvements in their market offerings as they did in sourcing customised Intel processors for M4 instances in their Elastic Compute environment.
The reality is that many hardware and software vendors keep adding new features (and cost) to their products in an attempt to differentiate in increasingly commoditised markets. Yet much of the time the end customer doesn’t want, or use, a lot of these added functions and features and, increasingly, won’t pay for them.
In a mature market with lots of strong competitors with seemingly similar products, focus on what the customer needs that you can provide, and focus all your energy on making it better/faster/more cost effective than anything your competitors can do. Don’t allow product management to keep adding new features for the hell of it. When the Great Britain and Northern Ireland rowing team was asked for the secret of their success at the London Olympics the team coach responded that they agreed as a group they wouldn’t do anything that didn’t help make the boat go faster. Eyebrows were raised when they didn’t parade with the rest of the Olympic team at the opening ceremony, but they all agreed that doing that wouldn’t help make the boats go faster…so they didn’t go. We all know how successful they were at those games!
Have you worked out what will make your boat go faster? Have you stopped doing things that don’t help make it go faster? If not I sure hope you are working on how to make boats obsolete.
This post first appeared on the old Cassini Reviews website.