Why Microsoft Corp should choose Silicon Graphics Inc CEO’s Rick Belluzzo, whose company couldn’t sell Windows NT workstations, to run its internet operations, remains a mystery. But industry observers say there’s no secret about why SGI bungled its NT play.
One observer, who attended SGI’s NT roll-out circus, said that while SGI fielded a capable product it attempted to sell NT workstations as a simple replacement for Unix Workstations. This violated one of the primary rules of marketing: ‘Sell the customer a product appropriate for the place of purchase.’ Put simply, this tells us that customers usually do not wish to purchase Cheeseburgers in a posh restaurant, even if they like Cheeseburgers. Similarly, they prefer not to buy fine caviar at an ordinary grocery. Place is the third of the four P’s of the marketing bible (product, price, place and promotion), and while cyberspace distorts place more than the rest of these principles, even in cyberspace, people prefer to purchase cool products from cool sites and traditional products from traditional sites.
Dell Computer Corp has had startling success selling high-end NT workstations and it is also selling them to customers that formerly bought serious Unix kit. However, the same observers say the total packaging that Dell brings is a better fit for the purchase proposition than that fielded by SGI.
There are many subtleties involved in all of this, but here are some not-so-subtle observations: The SGI brand was associated with better- than-Unix performance from Unix boxes; its NT Workstations could not make the same claim. Dell shipped NT Workstations with a better-than-PC performance and better-value-than-Unix price point. SGI’s channels feared margin erosion if the NT conversion happened too quickly. Dell had no channel with which to wrestle. SGI was worried about the nits and fine details common to a mature product; Dell, while certainly concerned about quality, focused on a fast cycle-time for its NT Workstations. It created a system where it could upgrade processors and peripherals every few months.
In other words – SGI treated every component as a strategic deliberation while Dell treated every component as replaceable. (SGI tripped over its big, macho, strategic Unix feet.) SGI Osborned itself by telling everyone it would move to NT before it even had a product. People started to agonize over purchasing existing SGI products, whereas Dell built a product and showed it off the day it shipped. This was acting more like a retailer than SGI could manage. No grocer would ever create demand for lemonade until he or she had lemonade on the shelf to sell.
Overall, our observer ventures, SGI’s total proposition suffered from a lack of understanding that when purchasers move from Unix Workstations to NT workstations, more needs to change than the chip and the operating system. The total go to market approach needs to change with it.
