ANALYSIS: Consumer Division says Farewell to Business as Usual

By Sam Albert

IBMers are often heard saying they're "thinking outside the box." Does that thought extend to IBM's Consumer Division?

In May, IBM CEO Lou Gerstner reassured Wall Street analysts that the company's PC business was healthier than it appeared, and braced for a turn-around. Now, just two months later, IBM is once again taking a public, and aggressive, stand to prove that its Consumer Division has a bright future ahead.

Just as IBM faces a challenge to keep its PC sales on a par with the biggest players, the company also concedes that its not leading the pack when it comes to hardware and software sales for the home consumer. But here is some good news--to drive sales up a notch, IBM is working to become the lowest cost producer of consumer products, while providing convenience and ease of use.

Here's a few "good news" statistics, according to industry analyst firm MarketMaps: 14 percent of all households in the U.S. are planning to buy a PC this year. That percentage is even higher where there are children in the households. Those families with youngsters are also more likely to spend as much for peripherals, software and accessories as for the PC itself. That's got to be cheery news for IBM, which is showing its renewed commitment to the consumer technology market.

The Consumer Division's general manager, Mike Braun, a newly returned talent, (Braun left IBM five years ago, and recently rejoined the company), has been charged with turning the challenged PC business unit around. Braun is putting the latest emphasis on ease of use, and conformance to a hectic consumer lifestyle. He says, "Technology needs to make it easier for people to live in a busy world, and it must be relevant for them."

Braun also refers to today's consumers as "tomorrow's business buyers." Is IBM undergoing a paradigm shift, coming around to the critical role of individuals and small and home business owners? It appears so. From what I see so far, IBM is listening closely to its home consumers, and knows the answers to their questions lie in providing a total solutions focus--a break from Big Blue's traditional "reads, feeds and speeds" approach.

The Consumer Division just unveiled a new fall line-up of products and services--including enhanced Aptiva E Series and ThinkPad i Series models, new software product bundles (including 22 new enhanced-learning software titles for the family and back-to-school crowd), Web-based training programs and new online offerings. Big Blue timed its announcement to coincide with back-to-school for the kids, and the small business owner's return to the office.

There are other new focus areas for the consumer division, including: continued price declines, a shift of the distribution model toward direct sales, migration towards a subscription model, and greater emphasis on Web-enabled software. That last one is as important as the others, because we now realize the tremendous role of the Internet in consumer buying decisions.

In fact, industry studies show that many PC consumers are more concerned with the speed of their Internet connection than with the speed of their processor; and that new PC buyers want to surf the Web in increasing numbers, to send e-mails and to play computer games.

Related to home recreation via the computer, the latest three ThinkPad i Series models for the "work, home and school market" have evolved into traveling entertainment centers, complete with video players and stereo speakers. Again, think lifestyle, relevance and ease of use for the consumer.

All of these new initiatives represent aggressive moves for IBM. But as the saying goes, "the proof of the pudding is in the eating." While the IBM Consumer Division's strategy certainly appears to fit the bill, execution is the name of the game.

So if IBM can "build the building to spec," the structure will be a model for all to see. The jury's out on this but the next millennium could see a "consumer oriented" IBM!

Sam Albert is president of Sam Albert Associates (Scarsdale, N.Y.), a consulting firm that specializes in developing strategic corporate relationships.

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