ThinkPad Sets Pace In Laptop Race

In the final quarter of 2000 IBM overtook Toshiba to become the sales leader in laptops. How did it happen?

With the ThinkPad, IBM Corp. has achieved the unthinkable. A distant also-ran in the portable PC business just a few years ago, IBM has taken the lead in the laptop market, besting longtime leader Toshiba Corp. By responding to what customers want and by daring to break its traditional product mold, IBM has propelled the nine-year-old ThinkPad line of notebook PCs to the top of the laptop heap. IBM moved ahead of Toshiba and Compaq Computer Corp. in notebook computers shipped for the fourth quarter of 2000, according to figures provided by International Data Corp. (IDC), a leading IT research firm. A year ago IBM ranked third. "This is the first time on a global basis IBM surpassed Toshiba in portable PCs," says Alan Promisel, notebook-computer analyst at IDC in Framingham, Mass. And he expects IBM to maintain its lead over Toshiba. "IBM has deep pockets and a powerful brand," he says. During 2000's final quarter, IBM's global shipments of laptops totaled 932,000 units, compared with 889,000 units for Toshiba, giving Big Blue the lead in market share at 13.3% versus Toshiba's 12.7%. Other laptop contenders include Dell Computer Inc. at 12.1%, Compaq with 11.6%, and Sony Corp. at 7%. Executives at Toshiba, the leader in units shipped for all of 2000, declined to comment on IBM's rise to the top. IBM's ascendance is all the more remarkable given the company's missteps in the early days of laptop computing. "Prior to 1993 IBM was the laughingstock of the personal-computer industry," observes J. Gerry Purdy, coauthor with Deborah A. Dell of the book ThinkPad: A Different Shade of Blue (1999, Sams Publishing). "They were like Rodney Dangerfield -- they could not get any respect. The reason they could not get any respect is [that] they kept doing copycat technologies." No more. Over the last six years IBM embarked on a two-pronged strategy to ensure that its ThinkPad entry would be both innovative and easy to use. The strategy, which Frances O'Sullivan, general manager for mobile computing at IBM in Raleigh, calls "two secret weapons," begins with seeking out and implementing customer input. "We make changes. When you see a ThinkPad rollout, we have tested it with our customers," O'Sullivan says. The other secret weapon, she says, is the IBM product-design team in Japan. IBM gets many of its best ideas from "frustration research" and face-to-face meetings with industry analysts. "Our key strategy is to improve the mobile experience," O'Sullivan adds. For example, IBM added keyboard lights after air travelers had difficulty seeing the keys on all-night international flights to Europe and Japan. College students wanted keyboards they could use in dimly lit auditoriums. The mute button on the notebook was added after research showed users did not like interrupting meetings every time they turned on their noisy notebooks. "People were embarrassed," says O'Sullivan. "Our engineers installed a mute button to silence the noise. It was very easy for us to add, and customers loved it." Another key to the ThinkPad's success was Big Blue's recognition that the mobile-computing initiative could not be run like its PC business. Symbolically, the act of making the TrackPoint device red was important. It stunned IBM diehards, who thought blue was more appropriate. Even the ThinkPad name was a tradition-buster of sorts. The original ThinkPad development team in Boca Raton, Fla., named the device after a writing tablet IBM employees kept in their shirt pockets to write down ideas. The word "Think" was engraved on the leather cover of the writing pad. If it had been up to IBM's traditional corporate-branding group, the ThinkPad name probably wouldn't have made it out of the shirt pocket. Within IBM at least, it was widely viewed as a radical departure for a product name. After all, these are the same people who came up with the name AS/400 for the popular midrange computer. No wonder, then, that Big Blue's corporate name committee rejected the ThinkPad name more than once before finally giving it the green light. Things were not much different for the design team when the color black was chosen for the notebook. IBM thought black would be out of character with the computer industry, according to author Purdy. But the ThinkPad design team wanted black because it was distinctive. All this was part of the marketing and branding strategy to give the ThinkPad a new look that set it apart from IBM's past image and from the competition. IBM keeps up with demand by manufacturing notebooks at eight locations around the world. It takes workers 13 minutes to build a notebook from start to finish. The ThinkPad enjoys the highest margin among laptop makers, according to one IBM executive. That's all the more remarkable given that the laptop trade essentially is a commodity business. ThinkPads can be pricey, with typical low-end machines in the $1,500 range, and top-end models going for $4,000. Obviously, customers must think they're worth it. Arms For Road Warriors Rodney D. Jarboe, president of Futura Coatings Inc., Hazelwood, Mo., has been using an IBM notebook for the last five years to help manage his industrial seal-coating business. This is his second laptop, and like a lot of ThinkPad users he likes the feel of the keyboard. On a recent weekday he was tapping away at his ThinkPad notebook while waiting for US Airways Flight 3178 to depart Philadelphia International Airport for St. Louis. "My secretary went out of town," he said, "and I need to get this letter out. This is the only way I can get it done." When the leader in a market has only a 13% share, there's plenty of room for jockeying, and the other major laptop manufacturers aren't likely to surrender the field to IBM without a fight. Plenty of America's road warriors carry models other than IBM on the job. During a recent visit to Laptop Lane at the Philadelphia Airport, where notebook users pay to plug in their units, one business traveler in Cybercube No. 10 hammered away on his Toshiba. Nearby at an America West gate, a peripatetic engineer crunched numbers on a new Sony machine. And elsewhere along the Delta concourse, business executives awaiting their flights cozied up to Compaq and Dell notebooks on full-battery power as they pounded out reports and checked their e-mail. Clearly, IBM will have to continue to do the unthinkable for the Think-Pad to stay on top of this market.

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