Past Present
Upside down
I saw this happen before, in the early
1990s, when I was selling computer solutions
to auto dealerships. PCs were sold to auto
dealers for $4000-$6000, each with mandatory $15-20 per month service agreements.
We “licensed” (but did not sell) laser printers
for about $250/month and then charged a
few cents for each page printed. This was very
profitable business for us.
I watched as technological convergence,
connectivity and industry standards crashed
into our business practices. Technological
convergence changed our businesses
overnight. We were selling our solutions all
bundled up. Because of our pricing, we made
most of our initial gross profit from the sale
and servicing of hardware. We had unwittingly positioned ourselves as hardware vendors. We provided consulting, design, systems integration and training services more or
less for free. Our value proposition was
upside down in a rapidly changing market.
We had to compete with the big box stores
and discount hardware vendors. We adjusted
our pricing, unbundled our offerings and
placed value where it belonged—on specialized services such as consulting, needs analysis, system design, software integration and
employee training that we previously provided to our car dealer clients for free. We
now charged for it.
The genie is out of the lamp. Every factor
in the table at right has dramatically changed
except distribution, and that is starting to
change, too. Technological convergence will
drive down the cost of marine electronics
hardware and software. New hardware manufacturers will enter the market. Hardware
manufacturers and software developers will
seek greater volume as margins are eroded by
falling retail prices. Because of the new manufacturer and distribution channels, prices
will not be affected significantly by who sells
the hardware.
Marine electronics hardware and software will become a commodity. Consider
what happened with PCs and how in the
1980s you went to a specialist PC store for
advice about computers and to purchase
one. Today you can buy PCs anywhere. The
specialist PC retailer has disappeared or has
become a service provider. As PC makers
and software developers fought for volume
to drive down costs, PC stores couldn’t generate enough volume to remain a viable distribution channel.
Specialized hardware
& software
low volume & high cost
HARDWARE
Converged technologies
enable multipurpose
hardware & software
Proprietary
architecture
ARCHITECTURE
N2K open architecture
Dedicated, device-
specific hard-wired
configuration
WIRING / CABLING
Common network
architecture & or
wireless configuration
Proprietary data
formats
DATA
N2K standard data
formats
Unable to export data to
non marine external
devices
DATA / SHARING
EXPORT
Able to export data to
PCs, mobile devices,
cell phones
Limited on or off vessel
connectivity
CONNECTIVITY
Total connectivity: N2K
cabling, USB, Ethernet,
WiFi, Bluetooth, cellular
OEMs to boat builders
Specialist dealers to
commercial &
recreational users
DISTRIBUTION
CHANNELS
OEMs to boat builders
Specialist dealers to
commercial &
recreational users
Big box & Internet
Bundled pricing: one
size & one price fits all,
sometimes offering
unlimited levels of
service with no
appreciable change
in pricing
PRICING
Unbundled pricing:
custom solution
configuration & custom
solution pricing based on
client needs
(ex.: Dell Computer, US
Airlines, South West Airlines)
Technically
unsophisticated owners
did not understand the
black boxes that made
up their marine
electronics systems
CLIENTS
Technically
sophisticated owners
better understand their
marine electronics
systems & how they
communicate & work
A new approach
Marine electronic dealers should carefully
assess the needs of their client base. They
should evaluate whether their business is
more or less threatened by technological convergence in each of their markets. Just because
a marine electronics dealership has a client
(Continued on page 49)
mix that is largely made up of commercial customers does not mean that they are safe. Just
look at personal computer makers Dell and
Lenovo, which sell PCs, printers, other equipment and even services through direct Internet
sales portals they developed.
