Why I Bought a No-Name Computer From a Components Firm

I was told by the computer doctor that my wife's desktop computer had all but died at the hands of a virus and, in addition, it had been obsolete for years. A new replacement was needed. My mind immediately went to a two-brand consideration class — Dell (most of my computers had been Dell) and HP (I have HP printers and have always like the "HP Way"). But minutes later, I decided to buy an ASUS computer even though I had never heard of it. Why? Three factors were convincing.

1. The recommendation. The computer doctor said that he had just bought and installed for another client an ASUS computer and liked the price, specs, and firm and the fact that it was available at a local electronics store that stood behind its product with service and assistance.

2. The story. He told me that ASUS has been the motherboard supplier for most of the leading computer brands. This was critical because performance and reliability is much more important to me than price.

3. The confirmation. Suspicious that an "off-brand" computer would be reliable I called my son-in-law, our in-house computer expert, who confirmed that ASUS was the motherboard firm of choice, that the motherboard is the heart of the computer, and that it would be a good choice.

Only after the purchase did I learn more about ASUS. A Google search revealed that ASUS was a Taiwan firm started in 1989 that now owns nearly 40% of the motherboard market and is a supplier to both Dell and HP. According to Interbrand, the ASUS brand is the third most valuable Taiwan brand in 2011 valued at 1.6 billion dollars. And it was a successful, major player in notebooks and tablet computers.

Several observations.

First, the power of influencers was crucial. It is reminiscent of the ideas so long ago of Regis McKenna, who helped Apple get off the ground with the concept that PR to influentials should lead the way.

Second, a story is a powerful device to deliver the brand message.

Third, having distribution, being in the right place and the right time was critical. The computer doctor might not have tried the brand if it had not been featured in an aisle display in the local store.

Fourth, there was no funnel experience, I passed by awareness, comprehension, and preference and skipped directly to purchase. Makes me wonder about the logic of many marketing programs as well as accompanying analytical efforts to measure results.

Why don't more components firms create branded final products and, like ASUS, leverage their experience and reputation? A components company has several advantages. It is going to be ahead in innovation within its area. Samsung became a leader in cell phones because of its advances in semiconductors, the key component. A components firm can control quality and production, indispensable parts of the brand experience. And it has a story that provides credibility, which is half of the relevance challenge (the other being visibility). Further, it has protection if the component business drifts toward a commodity status.

There are problems. A components manufacturer will be competing with customers, which is awkward. So, as when you launch an insurrection against a king or dictator, you better win. Further, to serve as an ongoing component supplier, you really have to have be an indispensable innovation machine with ongoing "must have" advances. You also need to deliver unquestioned quality and reliability; the market will not be forgiving if you are a competitor. Finally, you need to develop the skills and assets, especially the brand assets, to compete in the downstream business area, not a trivial challenge.

There are good reasons why components manufacturers stick to their knitting. However, the ASUS case and others show that there is potential to look beyond components to the land of great margins and more control. Andy Grove once sat in my office and suggested that Intel would have been better off if it had gone into computers. Maybe or maybe not but it might have been worth raising as a strategic option.

This post originally appeared on Harvard Business Review's blog. For more of my HBR blog posts, click here

Posted January 5, 2012 / Permalink / Subscribe (e-mail) / Subscribe (RSS)

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