biting the hand that feeds you

We don't talk about it much in our industry, but one of the real issues on occasion is cannibalism.

Some folk talk about the Osborne Effect, wherein Adam Osborne produced the first viable 'luggable' (an early version of a portable computer) which sold very well for a year or so.  Integrated circuits were moving so rapidly that a "B" model was soon on the drawing board, and it greatly surpassed the power of the Osborne 1.

Meanwhile, competitors were starting to appear, and Osborne's sales lead was being challenged.  He elected to describe his new whiz bang at a conference, with plenty of press there, and the news spread like wildfire that the imminent Osborne 2 would be stupendous.

The result?  No more Osborne 1's were sold.  The inventory was unsellable, the expected cash flow evaporated, and Osborne Computer couldn't pay its bills.  It couldn't finish the design, or build any of the new machines.  Bankruptcy followed almost immediately.

This was pre-VCs, so maybe today it would have been a different ending -- who knows?  But the message is real.  You can invent something that crumbles yesterday's sales -- what we at HP always called "eating your own children".

It works best when your new thing kills a competitor's products, but when you're the king of the hill, odds are good that something relatively impactful for customers in a positive way -- smaller, faster, cheaper, lighter -- might just cost you sales of the older larger, slower, more expensive, heavier box.

Think about this with Donatelli's "Big Three" that he touted in the April 2013 interview.  Moonshot, essentially a tailored Blade server approach, is said to reduce costs 77%, while improving performance up to 80% for specific applications. Then Store Once, the radically powerful idea for storing "once" instead of multiple copies with HP Labs' great new software saves companies all sorts of disc space, server time, and human intervention.   Donatelli and HP call this "Data De-Duplication."

Sounds great unless ... it slows demand for HP servers and discs.  What if this is what is going on?

Actually, HP computers with these great little photo labs, Snapshot et al, are doing exactly the same thing to images.  Why print a whole set of copies for everyone who came to the party?  Just put 'em in Shutterfly or a DropBox, and they can be viewed by all without making any ink copies.  Whew, don't tell Boise divisions.

What do you do in such a situation?  Well, you surely don't want a small start-up to replace your stuff, so you have to do it.  But it could well create a situation where leading-edge contributions in one part of your business wreak havoc on other parts.  Might this be some of the story at HP?

The worse manifestation of this perhaps is the telephone rreplacing the telegraph.  Voice just was better than Morse Code.  Also digital photography is better, and 1000x more cost-effective per image, than Kodak emulsion film.  So the question isn't why didn't Kodak 'win' in the digital camera and film business since they invented 60% of all the replacement technology -- they couldn't win, because no one could win, in a game where previously expensive stuff is obsoleted.  Note that there isn't a Kodak slayer -- except Kodak.  No one will ever make the money on film images like Kodak did.  Period.  They didnt't do anything wrong except live too long.