Earlier this decade we saw an explosion in the profitability associated with the manufacture and distribution of personal computer. Companies like Dell, HP, and Apple have made fantastic returns from producing their hardware systems to consumers. However, over the years, competition has generally commoditized the PC market, and driven the entire sector to begin diversifying.
Through the course of this article, I’m going to describe some of the ways in which PC manufacturers have diversified out of the PC business itself, and into niche specializations to defend their returns.
One major trend of the shift away from PC systems was for companies to begin focusing on services. By developing in-house solutions for corporate clients that were already buying their hardware from the producer, the manufacturers were able to increase the value realized by each unit sold through continuing contracts. This also complemented the increasing sophistication required by these companies, as servers, routers, and remote-distribution became more relevant to companies, it is no wonder how the service industry managed to revive the old manufactures into consulting giants.
Another strategy that several of these manufactures pursued was specialization. This was particularly facilitated by a trend towards consolidated computing power. Companies were able to focus in on boutique laptops, high powered computers, and mobile technology. From there, they could establish stronger brands, and better volume in a less competitive market.
Companies like HTC were able to grow their product line parts into full blown finished goods, and Apple was able to take its O/S and hardware expertise and apply it to the creation of a line of miscellaneous electronics products that would go on to be some of the most successful products in the world.
The final shift that I want to discuss here relates to the pursuit of breadth. As companies began to see their marginal value per unit decrease, some decided to begin pursuing additional sales volume through applying their solutions elsewhere. Companies like Microsoft began applying software expertise to Ford vehicles. Household appliances suddenly became worthy of intellectual property investments, and televisions began taking on a great deal similarity to computers.
As engineers found more and more applications for the PC products that they had been building for years, they were able to expand the top-line growth of the company, and diversify the company into growing into an even larger production power-house.
While each of these changes has its merits as a business model, it’s somewhat trivial to look back at them when we have such an exciting future ahead of us to.
