We all know that these companies are in competition, but is it the case nowadays? Is there an opportunity for “The Japanese Way”, where rivals cooperate?

The results of marketing research on these two companies were a surprise for me. I am new in marketing, and everything I learn is exciting. My colleague Michael, who is a marketing director at one of the well-known multinational companies, has been my guide for where to get information and how to analyze it. He said what I am doing (and actually did) is called “desk research”, when you are sitting at the desk and using the internet and papers, the opposite to the field research.

I have used only publicly available sources, located at corporate websites: Complete IBM 2006 Annual Report and HP’s 2006 annual report.

Let me describe, in short, what I found, and comment on it. Both companies are Hi-Tech companies, and have a long and successful history: HP was founded in 1939 by William Hewlett and David Packard, and IBM was renamed from Computing-Tabulating-Recording Co. in 1924 featuring charismatic leader Thomas J. Watson Jr.

The descriptions of business differ:

• HP is a leading global provider of products, technologies, software, solutions and services to individual consumers, small and medium sized businesses (“SMBs”), large enterprises, including the public and education sectors
• IBM is a globally integrated innovation company, serving the needs of enterprises and institutions worldwide

HP positions itself as a provider, IBM emphasizes serving the needs of its target customers, and seeks partnership with the clients. From my points of view, these are 2 different approaches: a good guy with all possible good stuff on hand to offer, and the good guy who wants to be your friend, but with very limited stuff on hand. In considering this analogy, both guys are good – but may serve different purposes, and may have friendship between each other and you.

What distinguishes HP and IBM in terms of market segmentation and competencies? HP has a strong consumer business; IBM spun its own to Lenovo recently. IBM has competencies in business consulting having acquired PriceWaterhouseCoopers’ consulting unit in 2004.

If we will look at financials for fiscal year 2006, we will see that HP made $73b revenue on its products, and $18b on services, but IBM made $48b revenue on services and $40b on products (hardware+software). Cumulative volume of revenue equals. It confirms the official positioning of both companies, however we may guess that HP can do more than $18b on services leveraging its intellectual and human capital. There is one very interesting paper by famous Dr. Robert S. Kaplan (Dr. Kaplan and Dr. Norton developed the balanced scorecard framework, based on research within IBM) titled The Demise of Cost and Profit Centers. It suggests that customer support and other organizations, which used to be considered as pure cost or profit centers by senior managers, can be converted to investment centers, where leaders invest and have a return on investments in terms of finances, reputation, competitive advantage, etc. This change involves modification of mindset and overall culture in the organizations, and change of critical success factors (CSF) layout within organization.

Growth priorities for fiscal year 2007 are:

Does it mean IBM wishes to get out of small-and-medium business segment too as it did for consumer? Will SMBs (“companies with less than 1000 employees”, p. 19) get required attention next year?

What HP seems to be doing is excelling its consumer model (selling directly and through channel), and targeting Internet as marketing vehicle of today’s world.

I highlighted the areas for FY07’s rivalry in blue – this is where we would expect to see battles for accounts between HP and IBM, this is where excellent processes will be the key, where best people, including front-office and back-office, should take a lead, where corporate values have the greatest impact on the success.

What we can see – is that the rivals’ officially declared priorities and strategies differ.
Is it good for customers and consumers? Yes. HP is continuing excelling on satisfying consumers with its excellent printing and personal computing products.
Is it good for enterprise and SMB customers? Yes. IBM wants to be a partner, and keen to use its business consulting competencies to improve clients’ businesses.
Is it good for HP and IBM themselves? Again yes. I do believe that IBM spun off PCs to Lenovo not for the sake of this fact, but to have ability to focus on its core business and gain more freedom in choosing consumer product and service suppliers for their clients.

Finally, from my perspective, I see that if IBM is not going to stick with a “not-invented-here” syndrome, why couldn't HP and IBM have beneficial relationships in the future? Imagine a new model of notebook computer “HP IBM Compaq Thinkpad Invent 8200” (smile).

You may just have thought about antitrust laws. I did not research that for this post. However, I believe that if this kind of alliance or cooperation benefits everyone – why not? Why are Japanese companies allowed to gain advantages at national level from rivals’ cooperation, but other countries may not? If you say – this is in their Japanese culture – and I will agree…

(great thanks to Debby for her editorship)
Post of July 25, 2007