October 31, 2007

Hewlett-Packard's tales of the unexpected

By DC Velocity Staff

André Kuper of Hewlett-Packard Co. is a master storyteller. In his session, "Instilling Change in How Products Are Brought to Market," he regaled his audience with tales of unexpected outcomes of new-product launches. Along with the cautionary tales, Kuper also offered up some observations and advice. What follows are a few of those observations:

  • It pays to involve legal, tax, and import experts early in the design stage to avoid costly surprises that could make new products uncompetitive. For example, the duty rate for a copier that has been built into a fax machine or a printer is significantly higher than that for a traditional printer—a fact that product planners and design engineers aren't always aware of.
  • Duty rates are based on government-determined product classifications. Unfortunately, those classifications rarely undergo major overhauls. As a result, classification systems may be 10 years or more behind the technology to which they apply. Not only can that make it difficult for importers and exporters to properly classify new technologies, but it also increases the likelihood that customs authorities will interpret classifications for new products differently—and any such discrepancy will have a big impact on taxes, duties, and profitability.
  • Many high-tech companies rely on postponement (delayed customization) to keep costs down for products with a basic framework and a great deal of SKU-level variation. But that approach is cost-effective only when the price of the semi-customized product is high. When prices fall significantly—as they have for printers, for example—postponement becomes too costly in relation to the selling price. Companies that don't review their cost/price scenarios regularly can end up losing money before they know it.
  • Changes in product quality and cost can lead to internal competition among product lines. A case in point: As the quality of ink-jet printers got better and the price of laser printers dropped, the two product lines essentially "met in the middle" and began to compete for the same buyers.