Hardened PCs: How Dell Is Using Sun Tzu to Kick Panasonic out of the Market

    While it is a gradual process, quarter over quarter, Dell appears to be gaining share over Panasonic in the hardened PC space. What makes this interesting is that Panasonic is to hardened PCs what Apple used to be to MP3 players with the iPod. Panasonic is not only massively dominant, it historically took on all comers and tossed them aside surprisingly easily. So how is Dell now able to gain share against this dominant firm when no one could do this in the past? Part of this is Dell execution, but part of this is also textbook mistakes that Panasonic made, which put the market at risk in the first place.

    I think a lesson here suggests that if Panasonic doesn’t get its act together, it will be out of this lucrative market in around a decade.

    What Defined Panasonic? Focus

    I was taking a military strategy test the other day (I have strange ideas about what is “fun”) and one of the questions spoke to strategy against a vastly superior force. You don’t use frontal assaults; you harass and basically find ways to shoot the other guys in the butt. Or put more simply, because you have limited resources, you must use them very effectively, which means a huge emphasis on focus. You don’t have the luxury of messing around. In business, this means you know the market backwards and forwards and you focus on the related industries like a laser.

    This was Panasonic’s historical advantage. It didn’t have the distractions typically associated with a large company. The ToughBook unit was largely autonomous, focused on hardened products and the markets that used them (mostly health care, law enforcement, military and petrochemical), and owned this segment with a passion.

    Killing Focus

    What the parent company did was then take a bunch of less focused and largely underperforming units and fold them into the same firm. Now the company had businesses in fast food, general business and general government. It didn’t know which did or didn’t generally use hardened products. The unit was asked to bundle things like displays and projectors with Toughbooks, creating solutions that didn’t seem to make any real sense. The focus they once had worked against them.

    Rather than starting with a problem and then building a focused solution, they had a bunch of parts that they were trying to use to solve problems that I don’t think even existed in anyone’s head. Suddenly, the market exploded to something in Dell’s league, but they lacked the breadth of product, services and channels to compete. Or, more bluntly, rather than forcing Dell to compete as Panasonic did on the field of Panasonic’s choosing, Panasonic had flipped to what was basically a frontal attack on Dell’s markets. It hasn’t been going well.


    But Dell has changed its approach as well. Basically, learning from Panasonic, it created a company within a company to focus on hardened PCs. No longer offering simply a Dell PC wrapped in rubber, this unit has learned to embrace the markets where hardened PCs thrive, create solutions designed specifically for these markets, using components from common pools. This means they can build hardened machines that rival Panasonic’s at a lower cost, sell them bunded with Dell’s other offerings for price savings, and wrap them with global services, which are now based on EMC’s massive capability. In short, while Panasonic drifted away from Panasonic’s own model, Dell embraced it and then improved on it, very like the old Embrace, Extend, Extinguish strategy that allowed Microsoft to take the productivity market away from Lotus in the 1980s.

    Wrapping Up: Sun Tzu

    In summer, I get caught up in my reading and like to play strategy games. As a result, I’m revisiting Sun Tzu a lot at the moment. One of the things he taught was that you need to know not only your competitor but yourself. A good deal of the reason Panasonic is failing in the hardened PC space is because it has forgotten who it is and doesn’t at all realize that Dell today is very different and vastly more capable than the Dell of last decade. Dell, in contrast, understands Panasonic deeply and is coming around to fully understanding its capabilities as the new Dell Technologies.

    If Sun Tzu is right, and for thousands of years his strategic advice has proven incredibly accurate, Dell will eventually displace Panasonic unless it remembers who it is and learns what Dell has become.


    Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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