Jerry
Shen's face lights up when he speaks of more than 150 million notebooks
sold since the product's launch in 2007. And for good reason. It's a
category he created along with Asus chairman Jonney Shih. Shen, the then
president of the ASUS Open Optimal Platform (AOOP) group, started work
on the project sometime in 2006 and after four months of discussions
with Shih, they greenlit the product.
Their insight:
PC users were using just 20-30% of the total computing power available
on normal stuff like browsing, mail, working on MS Word or watching
videos. Their solution: To create an affordable product with just enough
computing power to perform these routine tasks. The Asus Eee PC
(Personal Computer) project was formally kicked off in March 2007. In
August, Shen called in a thousand Asus employees to test early versions
of the new product - Eee PC.
Satisfied with the feedback, Shen knew
it was going to be an exciting launch. Two months later, the Euro 500
product that rolled out of Asus factories was lightweight, ran on an
easily navigable version of Linuxwhich nevertheless also accorded it
some geek cred and had a solid state drive. The product's tagline said
it all: 'Easy to learn, Easy to work, Easy to play'. And rest as they is
history; notebooks took the PC worldby storm. "The results were beyond
our imagination," says Shen, CEO of Asus. And then, "I wish we had also
thought of a touch interface," he guffaws.
For a company that was
started in 1989 in a single apartment by four computer engineers - Wayne
Hsieh, Ted Hsu, MT Liao and TH Tung - to etch its name on the global
tech leaderboard is a testament of their incredible journey led by Eee
PC-like innovations. An oft repeated story in ASUSTek Computer goes back
to the founding year 1989, when the founders decided to create a new
486 motherboard design without having access to a 486 processor
that Intel wouldn't give to Taiwanese firms. And during a visit to Intel
office, the co-founders found the engineers at the chipmaker grappling
with a problem that the newbies fixed in minutes. But that was 1989.
Intel now gives Asus top partner status.
"Now the chipmakers
seem to think we are the company that will help the industry fight
Apple," says Shen who takes pride in Asus being called 'affordable
Apple'.
Game changerGlance the
company's numbers to gauge how well it has done in a cut-throat and
stagnant category, like PCs despite a modest OEM (Original Equipment
Manufacturer) background. Asus closed 2011 with revenues of $11.5
billion. And that is the revenue only for the ODM (Asus-branded
products) business.
Back in 2008, Asus split its manufacturing
and brands business. Today, the combined revenues of both businesses
would exceed $45 billion. On the mobile PC front, Asus' worldwide market
share is pegged at 11.7 per cent, up from 9.8 per cent during the same
period last year. And it is currently No. 5 in the PC pecking order. In
tablets, again, it holds the No. 5 place and sales were up 216 per cent
with 23,50,000 units shipped in Q3 2012. And, just for the record,
before the company split in 2008, one in every three PCs was using an
ASUS motherboard.
So how did Asus manage to crack the tough computing business?
Lesson No. 1: A low margin business can also be a money-spinner Asus
is amongst the new crop of Taiwanese technology companies, like HTC and
Acer, which have risen in the last 15 years or so to challenge the
dominance of established tech giants, like HP and Dell. Ask Shen the
reason for his success in a stagnant PC market when traditional giants
like HP and Dell and the Japanese companies like Sony and Toshiba are
struggling. He is quick to put it down to the way they approach the
business and agility.
"The PC market is mature and in such
markets margins are thin. For US companies, margins of 3-4 per cent are
very low. Also, the American and Japanese companies are too slow to
react. Companies like Asus moves fast and that speed to market gives us
maneuverability even in a low-margin business ," he says.
Lesson No. 2: Innovate even at tough times With
the commoditisation of PC business and slow growth, the American and
Japanese companies have focused heavily on managing cost. During that
time, Asus has attacked the market with a slew of new innovative tablets
(Transformer), ultrabooks (Zenbook) and hybrid netbooks (Taichi); all
pushing the boundaries in performance and usability. Shen says even
during the tough market situation when global PC growth has been
stagnant, Asus has grown every quarter in 2012 due to the innovation
focus.
"Two years back, I saw that the market was changing after
Apple launched iPad. I told my people we have to be original. While the
western companies were talking about cost to their OEMs, we were
talking about innovation and perfection. We talk about innovation first,
then cost," says Shen.
Lesson No. 3: Manage customer needs at right cost
Given
that being cost competitive is a hygiene factor in a hyper-competitive
industry like PCs, the challenge is to do that smartly. Asus follows W
Chan Kim and Renee Mauborgne's Blue Ocean principles of
Eliminate-Reduce-Raise and Create Grid to create differentiated
products.
"We look at the product features closely. We enhance
and raise the cost of the features that the customers want and we
eliminate the features that customers don't care about," explains Shen.
Asus
engineers works on the simple principle of add and minus management:
add features like audio, touchpad and keyboard that increase customer
satisfaction but subtract features that customers don't care about to
balance the cost. "R &D is also not only for innovation but is also
important for cost management," says Shen.
Lesson No. 4: Restructure to enhance competitiveness Asus
was originally a hardware vendor manufacturing motherboards, laptops
and graphic cards for other leading PC manufacturers but later the
company also started selling PCs under its own 'Asus' brand. In 2008, as
the company grew, the business was split into brands and manufacturing
with Asus keeping the brands and the newly-formed offshoots Pegatron and
Unihan, focusing on manufacturing. The leaders restructured the
businesses for better competitiveness and also to minimise potential
conflicts of interest (Pegatron works with competitors , like Apple and
HP).
"For an OEM, scale and efficiency is important, and for a
brand, innovation and perfection. So we split the company to achieve
more single-mindedness in our operations ," explains Shen.
While
splitting the business worked for Asus, the leaders at another tech
competitor, HP, think otherwise. The new CEO Meg Whitman refuses to part
with the PC and printing businesses. "It is the heritage of HP. We are
market leaders in the business and we are good at it. We have fantastic
supply chain that helps us in our server, storage and networking
businesses," she explains.
Lesson No. 5: Every product should push boundaries After
Apple launched its game-changing iPad, tablets have been one category
that every PC company has targeted and struggled with. HP even pulled
back after spending millions on its Touchpad and even players like Dell
and Sony are struggling. Last year, Asus launched its EeePad
Transformer, a tablet with an add-on keypad and EeePad Slider, a hybrid
of a tablet and portable PC that tried go beyond the tablet format.
Recently, the company launched Taichi, a dual screen, multi-touch fusion
of netbook and tablet, another first. The strategy going forward is to
target aggressively the 2-in-1 (notebook-tablet ) but also 3-in-1
(notebook /tablet/smartphone ) category.
"This year, we have sold
more than 7 million tablets. The top players in the tablet market ,
apart from Apple, are one PC player (Asus), one smartphone player
( Samsung) and one content player ( Amazon). We believe the PC
background gives us a unique advantage to play across categories and
across multiple platforms," says Shen.
Lesson No. 6: Design thinking is a competitive advantage With
a new avatar in 2008, Asus' top management started pushing a design
thinking culture throughout the organisation. Shen says it took two
years of constant efforts on the part of the top management for design
thinking to percolate down to each person of the organisation.
"Now
we are trying to grow our brand through 'experience branding' . We want
people to be moved and touched by the beauty and usefulness of our
products," says Shen. Handling the Padphone 2 (smartphone/tablet combo),
Shen demonstrates how the sleek smartphone slides into the tablet to
become one working unit. "It weighs just 649 grams and it's thinner and
sleeker than its earlier version. It can be turned into a notebook too,"
says Shen.
At the Taipei headquarters, the company has more
than 100 designers working on different facets of design: material,
industrial design and usability.
Lesson No. 7: Reimagining old products A
lot of Asus' growth can be attributed to its ability to re-imagine
already existing products. Shen recalls how they are ready to think out
of the square in PCs and that has helped the industry grow too, like
with the Eee PC. In an incident that's reminiscent of the past, a few
months back Shen and Shih flew to San Jose to meet Intel's Paul
Otellini and his team with their new Zen Book, an extremely stylish
ultra thin, ultra light notebook. "The Intel guys changed the name of
the segment to Ultrabook. That means we also try and help the industry
by evolving new segments," says Shen. The Intel marketing team had
earlier coined the Eee PC category as Netbook.
Lesson No. 8: Be always prepared for disruption or big shifts in market The
PC makers have to be war-ready all the time with the post-PC era
looming over their head. The popularity of newer devices, like tablets
and smartphones, is changing the rules of the game. And the rules of
change are brutal: adapt or die. Michel Dell explained his rationale to
transform his hardware company into an IT solutions provider to CD in an
interview few months back. "I think all business are seeing some
greater change accelerated and that to some extent is driven by IT
itself. So every business has to evolve and understand how it is going
to stay relevant, affordable , valuable and create things which are
going to be important to their current and future customers," he said.
How
is Asus preparing for that era? Shen feels the PC industry is
converging. Companies will need to have expertise in tablets, notebooks
and smartphones to succeed in the future marketplace. And if the company
has expertise only in one category, it will spell trouble in the near
future. Asus already had a very strong engineering background due to its
OEM background but today employs more than 4,000 engineers (more than
20 IITians included) in its R&D centers in Taipei and China who are
constantly working on new innovations and new designs to keep one step
ahead of the market.
But entering newer adjacencies is a
dangerous exercise. PC makers who have tried to enter into tablet space
(HP) and smartphones (Dell, HP) have failed. Will Asus succeed? Shen
gives Asus a chance. "If we sell only smartphones, we will fail. But
with the 3-in-1 innovation (tablet-smartphone-notebook ), it will work.
We have spent two years to make the 3-in-1 platform perfect . After
spending two years, we think we can go to the mainstream market. We are
betting on the platform," says Shen.
The coming two years will
be tumultous for PC makers as intense competition, newer devices , a
fast rate of obsolescence and newer operating systems change industry
dynamics. Shen feels they are on strong ground. "After the launch
of Windows 8, big changes will happen from now to the end of 2014 in the
PC industry. There will be consolidation and it will be clear who the
winners or losers in the PC race are. Hopefully, we will be one of the
winners,"
