Competition in action.


A few years ago, Nicholas Negroponte, of the MIT Media Lab fame, decided to start a project to build a $100 laptop, to be given to children in the Third World. Ultimately, he claimed he wanted to give one laptop per child to all children in the world. A laudable goal, if somewhat more complicated than it seemes at first.

The goal of building a laptop that could be affordable even in poor countries, yet modern and capable of internet connectivity and functioning in Third World conditions was very challenging. In principle, they achieved the goal. Even though the laptop costs $200, if you take into account that the dollar has lost about 1/2 its value over the last 5-6 years, and that the laptop has WI-FI of better range than laptops costing 10 times as much, that it is waterproof, and batteries can be recharged by crancking a hand generator, and most importantly - that the screen is bright enough that the laptop can be used outdoors - it truly is a marvel of engineering.

However, soon some troubling aspects of the project started to assert themselves:

First of all - what Negroponte meant by "give" one laptop per child - was that the taxpayers of various countries would pay his non-profit organization for those laptops. He targeted some of the poorest countries in the world. Villages with no running water, etc. With 5 min to think about it, we could come up with a few projects that are slightly higher priority than internet surfing - how about clean water to drink, sewage systems, maybe a decent road - their impact will be much greater than kids watching MTV at night.

This definition of "give" was also the root of his current problems. Once "giving" is defined as being worth $200, you suddenly find competition. The biggest kid on the block - Intel - figured out that if Negroponte is right, and a billion kids in the world will get a $200 laptop - well, it should be Intel's laptop. $200 billion is a huge market, worth taking a swing at.

As a result, Intel started marketing it's own ultra-cheap laptop, staring with a 300 000 laptop deal with the government of Mexico, and according to 60 Minutes and Negroponte - started undercutting one child per laptop machines in twofold fashion:
a) by taking business away from Negroponte's company
b) by making many governments rethink their strategy, and put on hold purchases from Negroponte
Direct loss of business is one thing, but having future contracts cancelled because customers are waiting to see what your competition can do is deadly - especially if the competition knows how to play this game well - and Intel is a master of the game. Basically, Negroponte lost the advantage of being the first and only supplier on inexpensive laptops. The damage is done - Intel can now, at its own pace, deliver improvements to its basic "Eduwise" system - the time is on Intel's side.

So far, this would be nothing but a tale of a big company that took business away from a little one. What makes it interesting, is that Negroponte appears to be truly upset at Intel - he seems to think that since it was his idea, nobody else should be able to do it - just him and his company. We think highly of Negroponte as an early pioneer of human-computer interface design, but when it comes to the Marketplace - nobody is promised anything. Professor Negroponte needs to study some basic economics. No use getting upset - it's competition - plain and simple. His behavior is particularly puzzling, since he has been a venture capitalist for many years - he knows the world of business very well.

Being the cynics we are, we can't help but wonder why Negroponte is upset - he continues to loudly proclaim that he has no financial stake in the one laptop per child project - that he only wants the kids to have their own machines. Well, from our point of view, if THE hardware company in the world, Intel, decides to produce ultra-cheap laptops - that's the best outcome Negroponte could hope for - after all Intel has the money to do what Negroponte dreams about. So why the sour face?

But the lesson for all of us: you can have a great product idea, you may be the first to recognize new market, you can create the right product despite engineering challenges, you can be the first to market - and you can still be knocked down by competition. Entreprenuers live an interesting life indeed.

If you want to buy the ultra-cheap laptpop - according to 60 Minutes, you have to buy 2 - one for yourself, one for a Third World child - try this link: One laptop per child.

 

 


Google


 
 
 
 
Home | Contact Us | Privacy | Copyright 2007 WealthEncyclopedia.com