Do Business Well

If your company developed a new operating system and software platform that became the world’s de facto standard in the field, gaining you a market share three times larger than that of your nearest rival, you would probably be pleased. If your new product earned cult status, won award after award, sold 7 million units in the four years following its release, causing industry analysts to predict a 40 percent earning growth rate for the next several years, you would probably be elated. That is, unless you’re Palm, Inc., the world’s leading provider of personal handheld computing devices (also referred to as personal digital assistants or PDAs).

Palm’s sleek electronic organizers took off faster than color TVs, cell phones, and CD players, and now account for approximately 70 percent of the worldwide market, but nipping at the company’s heels is its key rival, Microsoft, whose PocketPC operating system (a modified version of Windows CE) was chosen by Hewlett-Packard to drive its Jornado, by Compaq for its iPAQ, and by Casio and Siemens for devices that will compete with Palm’s.

To add to your headaches, there’s a new company called Handspring, run by two of Palm’s well-respected cofounders, which came up with an eye-catching new product they claim is even better than yours. Furthermore, the powerhouses that license your operating system—Sony, Nokia, and QUALCOMM—are speedily designing new products based on your technology that could render your version obsolete.

It’s not surprising that Palm, which ranked 36 on my list of the top 100 market leaders, feels under tremendous pressure. In this brutally competitive and time-starved world, no one can do everything alone. More people and organizations are asking: What can I off-load onto someone else? Put another way, the question is, what can I delegate? You want someone to assume the elaborate, difficult, tedious, or resource-consuming jobs— those you would prefer not to think about and can trust others to perform, so you can pursue more pressing matters.

For Palm, which designed its breakthrough product, the Palm Pilot, around the idea that simplicity is a virtue, the answer has been to delegate everything except the business’s core functions. In June of 2000, Palm employed just 951 people, who, among them, produced $1.06 billion in revenues. That’s more than $1.1 million generated per employee. To put this number in perspective, compare it with Microsoft’s $730,000, GE’s $345,000, and Sony’s $317,000 of sales per employee.

Palm’s vital functions are product design and engineering, which employs 364 people, or 38 percent of the company, and marketing and sales, with 342 employees, or 36 percent of the total. Among the remaining employees, 154 are in general and administrative jobs, and 91 take care of supply, service, and support activities. The majority of the latter activities are delegated, thus keeping Palm’s operations highly focused.

Palm does not have an operations center where all of its PDAs are made and serviced. Instead, Flextronics International and Manufacturers Services, Ltd., take care of prototyping, manufacturing, procuring, testing, and handling the logistics for its product. Regionally based third parties look after Palm’s customer service, tech support, and product repair, while its network operations are outsourced to Houston-based Network Inc. And to top it off, Palm encourages some seventy-seven thousand third- party volunteers to enhance the functioning of its products by developing new and improved software and applications.

Of course, not all customers, corporate or consumer, delegate their tasks to the same degree that Palm does. There are aspects to our lives as customers that we enjoy taking care of ourselves, whether as lone search-and-browsers or in collaboration with others, and we streamline some of our buying to make it as automatic as possible. Yet for most of us, delegating whole jobs to trusted surrogates is increasing. As consumers, we are trying to free up time and make our lives more convenient, in addition to shedding those tasks that we aren’t comfortable handling ourselves. We want to reduce our risk, worry, and anxiety. When we hire delegators, we are buying relief.

Companies that cater to delegators understand that frame of mind. They circumvent the scarcity of customers, and make themselves indispensable by creating new demands for their services, and they do so for both consumer and business customers. Managers know that delegators crave solutions like one-stop shopping because these customers want to devote as little thought as possible to the job they are off-loading; they actually welcome having narrow choices. Once the clients trust the quality and reliability of the service they buy, they will return repeatedly to that supplier, rather than switch to a new one. Above all else, delegators want peace of mind, and will prefer “reliable” to “exciting” any day. Their mantra might be “Just don’t make me have to think about it.” Or as they say at Palm, simplicity is avirtue.

Possibly related posts: (automatically generated)
Free Up the Delegators

• Enthrall your Customers with what you do best
• Choose for the Customer (continue...)
• Run the Whole Show
• Team Up with the Collaborators (continue...)
• From Self-Reliance to the Catered Life
• Why start a business?
• The contract is still to be signed continue…
• Mobile commerce & Internal communications
• Why start a business? part 3
• Networking Ecommerce: Listening to and Hearing from your Customers

3 Comments »