HTC has trouble making a profit. That’s because it doesn’t have any sort of advantage. And it doesn’t have any sort of advantage because it fragmented its resources, for years. It probably did that because it didn’t have an identity. It began as a company that built phones for others’ brands and evolved into an intermediary between component vendors, OS makers, and operators. It never seriously sought to control the fundamental technology, deliver product directly to consumers, or build exceptional manufacturing.
That drive to do something different — critical to identity – never existed at HTC, at least not in its leaders. HTC existed, like many companies, to make money. Ironically, that makes it harder to make money. Because without a drive for technology control, customer interaction, or manufacturing excellence, it’s very hard to undertake something unique – to deliver differentiated products, to serve some customers especially well, or to deliver the same product but at a superior cost. I’d never blame the employees. I’m sure they were eager to fulfill a good mission and follow a good strategy.
Allow me to illustrate HTC’s situation. The slides below show how companies can compete and how critical it is to build a sustainable advantage. I’ve found this view, based on Michael Porter’s work, very valuable. Precise positioning of companies on this view is tricky, so think of it this way: if you’re not at an extreme (left, right, bottom), you can’t make money. Even the companies that aren’t fully “stuck in the middle” have trouble, but I’ll leave that discussion for another day.
Back to the issue of resource focus: It took HTC until 2012 — that’s five years after Apple had announced the iPhone — to focus its R&D on a flagship device, the HTC “One”. But it was a false focus. “One” products were, ironically, many. And HTC kept fragmenting its R&D by continuing to launch mid-tier and low-tier smartphones.
HTC didn’t want to focus on (commit to) differentiated products. And it didn’t want to commit to building a low cost advantage. (It’s not alone in this: count BlackBerry, Nokia, Motorola, Microsoft and others in this camp. In a nutshell, if you don’t control key hardware, software, or manufacturing (at-scale), you find it hard to commit to any direction – they’re all hard.)
The visible slide down (in HTC’s financial performance) started in 2011 when the iPhone reached Sprint, a key HTC customer. By 2013, the end was a foregone conclusion (its financial resources and installed base were critically low), and now we’re seeing its last gasps. The end is likely near. I wish all of its employees the best of luck. I hope they can find a place and a role where they can thrive.
