The two previous posts this morning (here and here) got me thinking a bit. And I may be off base to some degree and I may just be coming to a point others already have reached, but follow along if you care to.
The preponderance of news in the tech sector lately has been examining the impact of economic impact of losses alongside the same kinds of articles about financial turmoil in every sector of the economy. We’ve seen Steve Ballmer, (and others) blame Netbooks for some of the decline in profits. Netbooks continue to be popular with their low price point and even the most incompetent economist could tell you why.
If you ask me, Netbooks have not only shattered the price/profit equation, but also created a fundamental shift in thinking about what folks use a computer for. Now that consumers (and some businesses) don’t need heavy duty software to get their stuff done they aren’t paying attention to what the industry tells them it needs as much as what they can afford. While the almighty dollar always drives markets (if it sells its a success, if it doesn’t it’s a flop,) those who have less of those dollars to spend are having a larger impact on the decisions than they had previously.
With the economy plunging downhill faster than a kid sledding on a snowy hillside, past assumptions have gone out the window. Some companies realize it and are working to position themselves for what will be the new realities, some are trying to find a way back to the pre-meltdown realities. In some ways (and this might be a stretch) I find this analogous to the auto industry’s woes but with key differences. Of course the auto industry was in a poorer position to withstand the meltdown, largely due to their own making. That said it was operating on a paradigm where the industry set the value proposition based on what it thought consumers wanted and needed. Largely those assumptions were bolstered by how consumers responded to the value proposition in days where gas prices hadn’t jumped and paychecks disappeared. The manufacture of computers operated largely with the same mindset. To get what the industry said you need you have to pay x dollars. The equation to reach x dollars, by and large, was based around creating a device that would run Windows. The key difference here is that Netbooks tossed that equation out the window and made price the most important factor. The rise of Cloud apps also played a role in this. Intriguingly I think tough times have put consumers more in control than they ever were. Of course companies don’t want consumers to know that.
Intel, if the VentureBeat source is correct, is looking at this differently. If the Silicon Alley Insider report on the NY Times printing costs is accurate math, it shows that there are indeed paradigm shifts that could potentially reap benefits, although they would cause even more turmoil and trauma to reach a new goal. I’m not suggesting that Intel speed up its move to Android on Netbooks, or that the NYTimes send all their subscribers Kindles. They are just two possible examples that crossed my view this morning. But I find some interesting kernels in both news items that could point to newer thinking and newer paradigms. The real question is will companies have the smarts, find the flexibility, and make the tough decisions to move past old assumptions and head towards new paradigms. That more than anything will determine how we get ourselves out of the mess we are in.