Dell vs HP

NYTimes writes about the marketplace battle between the distributor (Dell) and the innovator (HP):

The confrontation between Hewlett-Packard and Dell is more than a particularly lively bout of competition in the $106 billion-a-year printing industry. It is a clash – and an intriguing test case – of two different models of innovation and corporate strategy.

With its engineering roots and its corporate tagline “HP Invent,” Hewlett-Packard is committed to spending heavily on research and then funneling that home-grown technology into new products. Those products, in turn, must be able to command profits high enough to keep financing the corporate invention machine. Hewlett-Packard’s printing business is a showcase of success for internal innovation. Dell, by contrast, is pursuing a “virtual” research-and-development model. It does some engineering development work itself, but that typically amounts to tweaking an existing product. Dell’s main role is to scour the world for technology, fine-tune the products of corporate partners, wring costs from the supply chain and sell products directly to customers.

There is plenty of technology being developed by companies around the globe, Dell executives insist, but the technology often lacks an efficient path to the marketplace. And as it gets bigger and bigger, Dell is becoming the Wal-Mart of high technology, a marketer so powerful it can set product standards for its suppliers.

“This competition between Hewlett-Packard and Dell is a collision of two rival models of innovation,” said Henry Chesbrough, executive director of the Center for Technology Strategy and Management at the Haas School of Business at the University of California, Berkeley.

The Dell strategy is obvious: build a printer business, attack Hewlett-Packard’s crown jewel and, thus, hobble its principal rival. And Hewlett-Packard is trying to return the favor by cutting prices aggressively on PC’s with the goal of grabbing sales in the corporate PC market, which is Dell’s stronghold.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.