100 Laptop paper
$100 Laptop Case Analysis
Why did Negroponte do what he did? Why was this necessary?
The idea of One Laptop Per Child (OLPC) was born in 1999, as Professor Nicholas Negroponte was visiting a Cambodian rural village school previously established by him and his wife. By letting children play with some Panasonic “Toughbook” laptops,
Negroponte experienced the power of change that could be brought about by laptops. He was impressed by how “it changed their lives in several ways, improving
self-esteem and empowerment and fulfilling the passion for learning". (from book p225)
In 2002 Negroponte created a stir in the PC industry when he announced his innovative project. In January 2005, the non-profit association One Laptop Per Child was created. That same year Negroponte introduced a working prototype at the United Nation World Summit on the Information Society.
Negroponte has a vision to launch an educational movement that would help alleviate poverty by connecting children in developing countries to the rest of the world. “As
the pace of change in the world increases dramatically, the urgency to prepare all children to be full citizens of the emerging world also increases dramatically. No one can predict the world our children will inherit. The best preparation for children is to develop the passion for learning and the ability to learn how to learn.” (http://one.laptop.org/about/education)
One Laptop Per child aims “to provide each child with a rugged, low-cost, low-power,
connected laptop.” To this end, “were designed hardware, content and software for collaborative, joyful, and self-empowered learning. With access to this type of tool, children are engaged in their own education, and learn, share, and create together. They become connected to each other, to the world and to a brighter future.” (http://one.laptop.org/about/mission)
To support this vision and mission, Negroponte’s goal was to build hardware and software that would be both affordable and adapted to the specific needs and environment of children in developing countries. To take advantage of economy of scales and reduce the cost of the laptop, Negroponte also decided to start production only when OLPC receives purchase orders for six million laptops. OLPC targeted education ministries in developing countries.
What were the main marketing challenges and non-marketing challenges confronting OLPC?
OLPC created an innovative technology, $100 laptop, developed with close attention to the necessities of students in unindustrialized countries. However, they failed to foresee the social and institutional difficulties that could arise in trying to sell the product. OLPC aimed to achieve its vision through extraordinary innovation in hardware and software, but the benefits of the $100 laptop could not be immediately. The marketing team had to take into consideration the long-term benefits are hard to measure, and would take time to
observe. Inaddition to the marketing challenges, OLPC had to faced more difficulties with consumers, design and cost, and competitors.
OLPC has to face many difficulties marketing the $100 Laptop to Governments. Even though the end costumers will be the students and their families, Governments are the first step in order to implement and deploy the educational project.
OLPC had to sell them its vision and many government officials were enthusiastic and even committed to purchase OLPC’s laptops. However by 2006, although OLPC had received purchase orders for six million laptops, no deposits were made. Negroponte explained, “it’s a big check to write” as nations are asked to invest in laptops one million at a time. Although governments saw value in the project, many were reluctant to make such a large investment a priority when their country lacks basic necessities (food, water, electricity, drugs, etc), basic infrastructures (classrooms, sanitary condition, textbooks, school supplies, etc). Many countries lack and cannot even pay teachers.
Design and cost Challenges
Designing an inexpensive, lightweight and modern laptop was a contradiction in the early 2000s. Negroponte wanted the $100 Laptop to be innovative in technology and cost efficiencies; however, lightweight modern laptops were typically more expensive to produce. In order for his project to be viable, OLPC needed to overcome some critical design and cost obstacles. They needed to select or design affordable components that
would allow the laptop to be low-priced enough to appeal to governments ($100 Laptop).
The laptop needed to be adapted to children and developing countries’ environment. Therefore the Laptop needed to be strong enough to sustain drastic temperature changes, shocks, water damages, and have an extended operating time on its battery. Power
generation and internet connectivity were crucial as the majority of children using the $100 Laptop would not have access to electricity and internet infrastructures. A lowpower consumption screen also had to be created to save on limited electricity. Despite many ground-breaking innovations, Negroponte was still unable to keep the Laptop’s price under $100. In mid 2007, the actual price tag was closer to $200. Only when the project would be able to access scale economy would the price drop at $100 per unit (projected for 2009) and $50 per unit in the next decade.
Finally competition is a major issue for OLPC. Big companies in the PC industry have been launching cheaper laptops; to illustrate, Intel’s Classmate PC, India based
Encore Software, and the low cost laptop by AMD. The PC industry is extremely competitive and the first movers are easy to copy. OLPC was also at a disadvantage when it came to supply chain and manufacturing operations; they have 800 different parts that are supplied are around the words, so they are unable to cut cost at this stage. Also, they have low volume of productions; therefore, they have limited bargaining power with suppliers, and process are more likely to fluctuate with the market. Different form the biggest competitors, Intel and Encore, OLPC manages only one product and lacks a wellestablished brand name and associations with credibility and high quality.
How well have they done in overcoming these challenges?
OLPC’s technologist culture encouraged innovation; they are focus on showing a good understanding of what was needed in each country. The OLPC new plan is to trust on governments, provide distribution and support, train teachers to use the laptop, and even developed local-language software. The OLPC was much stronger in developing unique technology; therefore, their new goal focus on understanding the needs and interests of the people who will ultimately buy and use their product.
The consumer and government challenges are related with the new perspective of the OLPC. They hay managed to understand the country and child’s needs. OLPC pilots is a new strategy implemented in half-dozen countries to try the impact of the laptop. Recent reports showed positive changes; for example, increased enrollment in schools, decreased absence, more discipline and participation in classrooms. Country such as Ethiopia and Uruguay expressed the positives effect of learning through the computer. As of June 2009 the biggest pilot project was in Peru, which distributed 140,000 XOs, even in the Andes, rural area, where electricity is frequently limited and Internet is not available.
Design and cost Challenges
OPLC took advantage of their technology team to implement new changes on their
design at a lower cost, and it was working better and faster than anything. Major design contributions came from different part of the world. They analyzed their main markets and competitors and made the following improvements:
Electricity: Cranking the handle shook the machine and put stress on the hardware.
Internet: Build-in Wi-Fi connectivity allowed the $100 Laptops to create their own mininetwork. A couple of wireless antennas rising up from the screen's siders.(215) Each laptop became part of a "wireless mesh" which relayed the broadband signal from laptop to laptop and enabled out-of-range machines to connect to the Internet.
For kids: The computer fit in a tiny white plastic briefcase that could resist a rainstorm. It's keyboard had a waterproof rubber coating and the case was sealed to keep dust out. Folded down, the laptop's Wi-Fi antennas locked the case and sealed off its ports.
Cheap: A key to building the PC cheaply was its innovative, low-power LCD screen with a built-in camera. Jepsen found a way to cut each screen's manufacturing cost to $40 while reducing its power consumption by more than 80%, two advances that allowed OLPC to win over many initial skeptics.
Save power: The laptop's liquid-crystal display could be flipped from backlit color to self-reflecting monochrome to save electricity but also make the screen more visible in direct sunlight. The choice of the computer's processor was also driven by the need to economize on power consumption. It ran at 433 megahertz, compared with the 2-3 gigahertz of conventional laptops. Furthermore, using less power meant generating less
heat, obviating the need for a power-consuming cool fan. Finally, the laptop had a 1gigabyte flash drive and USB 2.0 port to which additional storage could be attached, and it had built-in speakers.
Breaking the Wintel Paradigm
"Playing with and building things is one of the best ways to learn. Particularly to learn about thinking and algorithms and problems solving and so forth."
The $100 Laptop would come equipped with a completely new OS. Students could then review their journals to see their work and retrieve files created or altered during
each session. Red Hat (The world's largest Linux distributor) had provided an extremely compact version of its Fedora operation system, called Sugar, that used only 130 megabytes of the XO's flash memory (Windows XP required 1.65 gigabytes). OLPC wanted to build its own supply chins and manufacturing operations around the world.
OLPC did not do enough to battle its competitors; they should have acted offensively from the beginner. They had a big challenge because all existing computer companies were potential players to enter the educational laptop market; the market potential is enormous. Many companies evaluated the $100 laptop in order to figure out how to duplicate it. OLPC was trying to meet a social need, and be socially responsible to the less fortunate; this explains why the company is less aggressive in capturing market. Also, Negroponte
expressed satisfaction at the competitors for developing laptops that would provide more options and educational tools.
What were the difficulties associated with marketing the OLPC to governments?
Negroponte had an innovative idea but saw his vision weighed down by the political and social reality when diffusing new technology in developing countries. When the $100 Laptop project was announced in 2002, many governments showed a genuine interest. However having governments purchase the OLPC machines was more difficult than Negroponte anticipated. It was difficult for governments in poor countries to justify investing large portions of education budget in laptops. In addition, most governments would be left with the responsibility to spend additional money towards deployment cost, maintenance and support cost, teachers training, and additional software cost. As a consequence, many countries canceled deployment of the $100 laptops. For example after showing significant interest in the OLPC Laptops, the Indian government decided to allocate the budget to traditional methods of education. (from book p234).
In addition, many governments opted for the competition. OLPC wanted to create a buzz around the idea of the$100 Laptop. However Negroponte went public before the product and projects were finalized. Thus OLPC was not able to take advantage of its First Mover advantage in the industry. Although Negroponte’s goal was to
distribute millions of laptops to poor children, he ended up creating his own competition by motivating the PC industry a late mover advantage to enter the developing country market with low-cost computers. ? The Intel “CLASSMATE” PC was
launched in 2006 as part of its “World Ahead”
program which targeted developing countries. The laptop ran Microsoft Windows XP and was priced at $285 and was expected to go below $200 when mass production started. ? The Encore Software “MOBILIS” PC was attractive to the Indian governments
as it featured Indian languages like Hindi, Kannada, and Maranthi. In 2006 Encore also captured the Brazilian government by supplying it with 40 evaluation units, which should in turn generate an order by 2007. ? The AMD “PERSONAL INTERNET COMMUNICATOR” was also competing with
OLPC and announced its goal to have half of the world connected to the internet by 2015. Thus governments in developing countries had many low-cost PC options to choose from. Although the competition price tag was higher than the $100 laptop, their package often ran Microsoft Windows and usually included distribution, training, updates, maintenance and software. It made the competition more attractive and more affordable in the long-term.
With new competitors offering lower cost machines, what are OLPC''s strategic options?
Because the non-profit OLPC started from scratch, it did not have well defined internal resources and strategy. Although the OLPC had a noble goal, it lacked experience; a well defines strategy and the appropriate structure to support this strategy. The OLPC correctly determined that the way to distribute the $100 Laptop was to go through the governments. However, the OLPC clearly underestimated the competition they created and the difficulties associated with diffusing new technology in developing countries. This partnership may give the OLPC access to knowledge and experience in doing business abroad; existing distribution channel; scale and scope economies. It may even provide alternate market entry points as the OLPC was strictly limited to exporting.
The OLPC’s marketing mistakes allowed the competition to provide new technology tools for children in developing countries. It also revealed that a PC industry company couldn’t be largely profitable distributing low-cost computers to the
poorest developing countries. It is clear that Negroponte’s vision cannot be solely attained via the commercial channels. Therefore to sustain its non-profit efforts, the OLPC should also seek the support of non-profit entities and philanthropic programs. For example the OLPC experienced success when it sold 167,000 XO Laptops through the philanthropic program Give One Get One (G1G1)[i] which enable people in the U.S. to buy two XO Laptops for $399; one was sent to them and the other to a child in a developing country.