Case study: Becoming a consumer company

The story

Taiwan’s Asustek Computer is the world’s biggest producer of PC motherboards and the fifth-biggest laptop manufacturer by shipment volume. It had revenues of $12bn in 2011.

Set up by four engineers in 1989, the company was always strong in technological development and manufacturing efficiency. But the standardisation of personal computers threatened to make Asustek’s core business increasingly commoditised and less profitable.

The challenge
Jonney Shih, Asustek chairman, wanted to generate new growth by translating Asustek’s strong design skills into hot consumer products – laptops with a fashion appeal in particular.

However, the industrial design team played a peripheral role in new product development, despite having won many international awards. The existing working norms of the company were such that the team was able to provide only “supportive consultation” to Asustek’s laptop division, while its suggestions regarding the look and feel of a product were rarely taken seriously.

In October 2006 Mr Shih initiated a project to build a simple, ultra-mobile and low-cost laptop (the Eee PC, later known as a netbook) that was targeted at groups, such as children or the elderly, who would not normally buy computers because they were too expensive or intimidating.

Asustek needed to change from an engineering-driven company to a consumer-focused one.

The strategy
Mr Shih intervened directly in the netbook project from the start. He took the role of project manager via direct, micro-level interventions.

First, he avoided the traditional market research used by Asustek’s existing laptop division and focused on “design thinking”, which integrates customer needs with what the technology can do. Mr Shih spent three months working directly with a small group of engineers on the basic concept, and explained how the “design thinking” approach would help differentiate Asustek.

When he became frustrated by incessant internal debate, he took the cross-functional Eee PC project team away to a hotel for a three-day workshop. When resolving technical issues, Mr Shih made sure the critical product features coming from the industrial designers were maintained. This elevated their role in the process of product development.

Later, when the team could not find a suitable partner for the new product’s operating system, Mr Shih told them to ignore company policies and look overseas. Asustek chose a Vancouver software house, the first time it had used a non-Asian developer.

Last, Mr Shih approved a suggestion by the team leader for a “Thousand User Testing Initiative” in which employees’ friends and relatives tried the netbook and gave feedback.

The result
When the netbook reached Taiwan stores in October 2007, priced at just $340, the initial supply sold out in 30 minutes. In the US, the Asus netbook was voted “most wanted Christmas gift” by Amazon and CNET. Encouraged by the strong demand, Asustek for the first time distributed its products throughout the entire network of US retailer Best-Buy instead of just selected stores.

The cross-functional taskforce became a new business unit that expanded and continued to make consumer electronics products other than laptops. At this point, Mr Shih felt he no longer needed to supervise its day-to-day operations and named two executives to oversee further business development.

The lessons
When a shift in product development or strategy requires a company’s functions or divisions to operate in a new way, simply allocating resources to the project may not be enough. Top management should consider taking a hands-on role to push the initiative and change entrenched behaviour patterns.

However, senior managers should know when to free themselves from constant micromanagement. In Asustek’s case, Mr Shih’s strategy was to set up the new business unit, which organised and rewarded people differently. 

- Financial Times, 11 June 2012