The Next One Billion Users: Assessing Future Opportunities in the PC Market
Declining prices will unleash significant personal computing growth in emerging markets. But how fast will penetration increase? What tradeoffs are new users willing to make? Is it economically sound to invest in new product development in this space? How should product roadmaps be shaped as a result?
For years, the computer industry has seen average system prices continuously decline around the globe, improving affordability and helping drive market growth. Nonetheless, computer penetration in emerging markets is still relatively small, and many in the industry believe that explosive growth may be unleashed once computer prices get low enough to enable the next one billion users to join the market.
In that context, Bridge Strategy has helped a major computer components manufacturer to assess the low-cost PC market opportunity, and to realign its product roadmap to focus on where the highest business value could be captured..
cHARTING THE TERRITORY
Emerging markets have been a fertile ground for innovative ideas that aim at taking computing to the masses in places like India, Brazil, China, and throughout the African continent, from inventive hardware solutions and new form factors to new business models (e.g. pre-paid and pay-as-you-go computing).
With so much activity and early-stage experimentation, mapping out the low-cost PC space were critical first steps towards defining the boundaries of the opportunity.
Where Should We Place Our bets?
Emerging markets have been a fertile ground for innovative ideas that aim at taking computing to the masses in places like India, Brazil, China, and throughout the African continent, from inventive hardware solutions and new form factors to new business models (e.g. pre-paid and pay-as-you-go computing). The race is on!
With so much activity and early-stage experimentation, where should our client focus his investments and resources? Understanding needs and requirements in this evolving segment of the market, as well as mapping out and assessing the different areas of opportunity, were critical steps towards defining higher-value priority areas.
How Big, How Soon, How Profitable?
Once we had created a common understanding of the low-cost PC market, it was time to model how the identified target segments would evolve over the years.
Bridge Strategy developed a custom forecasting model combining a variety of techniques to indicate: a) at what point in time would new lower price bands be enabled (e.g. when we would expect to see a PC retail for $100 or under); b) how penetration would evolve at these new lower price points; c) what devices would be replaced as a result (and at what price points); and d) how much margin components developed to target these low-cost PC segments would deliver. The model allowed us to simulate what the computing market and our client’s business performance would look like in a ten-year horizon across different scenarios.
Aligning the Product Roadmap
The implications for the product roadmap were profound, as the development of new parts to target the low-cost PC market proved economically unsound.
As a result, Bridge devised an alternative product roadmap strategy deeply rooted in an integrated product lifecycle management approach. This strategy aimed at the most attractive "profit pools”, and then would allow for component prices to drop significantly as R&D investments were amortized and as fabrication assets depreciated. This approach would secure a faster and more predictable return on investment, while allow our client to keep pace with direct competitors in the low-cost PC space..
Positioned to Win
Our analyses, insights and advice provided our client with a much more structured platform to further their understanding of the lower-end of the PC market, dispelling previous misconceptions about the nature, the size and the value of the opportunity. Our work also unveiled huge strategic implications for the organization, which went beyond addressing the specific needs of the low-end PC segment, and included strategic imperatives such as: a) realigning the existing product roadmap; b) rethinking the R&D investment decision process; c) considering adjustments to cost accounting methodologies; and d) reassessing the existing manufacturing strategy.