Summary: PCs do not need to be commodities: a focus on quality can differentiate both products and services. Software has great potential for getting better, as shown by an under-appreciated feature in Windows XP that can save users $2,000 per year.
It is often said that personal computers are pure commodities and that low prices are the only way to compete. Not true, but differentiation does require an approach to quality that may be beyond most technology vendors.
One counter-proof is that Steve Jobs succeeds again and again in creating excitement with good-looking new hardware. This strategy is incredibly easy to emulate: just give a million dollars to a hot industrial design firm and they will give you a shape that looks much better than any non-Mac computer. No deep thinking is required, just write the check.
We desperately need better-looking computers, considering the prominent place they have in modern offices and homes. When you stare at the thing all day, it might as well be attractive.
However, industrial design is not the main road ahead for computers. Improved software design is much more important. This does require some thinking, and it's not Steve Jobs' strategy, but I believe that software innovations are the main way to differentiate both high-tech products and websites.
Crisper Screen Fonts
Much has been made of the flat-panel display on the new iMac, but the use of anti-aliased typefaces in Windows XP is the true revolution in screen design this year. The new ClearType technology that is included in XP probably increases reading speed by somewhere between 10% and 15% for users with flat screens. Going beyond simple anti-aliasing (which has been available for a few years), ClearType provides approximately three times the rated monitor resolution by directly addressing the sub-pixels for each of the three colors.
Unfortunately ClearType doesn't work on traditional CRT monitors, but even worse, it's turned off by default in new installations of XP, even for users with flat screens. And due to the clunky nature of user preferences in Windows, few users will find it if they don't know where to look.
To turn on ClearType, go to Control Panel > Display > Appearance > Effects and turn on the checkbox for "smooth edges of screen fonts," making sure that the popup menu reads "ClearType."
There, reading the Alertbox just saved you $2,000.
To estimate the cost-savings from anti-aliased screen fonts, consider a business professional who makes $50,000 per year. If this user spends 20% of his or her time reading emails, intranet pages, and other documents on the computer screen, then the screen costs the company $20,000 per year (using the traditional rule that employees cost twice their salary due to benefits, overhead, etc.). ClearType will make this user at least 10% more productive while reading from the screen, for a gain of $2,000.
Windows XP has another interesting usability innovation: the task panes that integrate selected commands and features into places where users are likely to need them. This design may make advanced features more discoverable and yet is not as intrusive as the infamous paper clip. I reserve final judgment until I have seen more user data, but task panes seem a good approach to overcome asymptoting user performance -- the fact that people stop learning about a user interface as soon as they know enough to get the basic things done.
Software: The Great Differentiator
My theory for why so many companies don't want to improve their software and websites goes as follows: in most other lines of business, it is very expensive to serve customers better. Thus, it is preferable to talk about how good the products are, rather than actually improving them.
Truly, there is not much difference between Coke and Pepsi soft drinks or between Hertz and Avis car rentals. A car rental company can achieve a competitive advantage by introducing a way for the best customers to not have to wait in line for their cars, but that's incredibly expensive to do and requires special staff, special wireless terminals in the rental buses, and special parking areas at thousands of locations.
For several years, most "analysts" claimed that search engines were commodities and that image and gimmicks were the way to differentiate a search provider. No need to invest in designing a better search because that's not what users want. We now all know that this was false: it was eminently possible to do search better, and once a better search engine was on the Web, it conquered the field.
Websites are so difficult to use that almost any company can differentiate itself through a relatively small investment in usability and programming. The key benefit is that you only need to invent something once and implement it once, and it's online for all of your customers to enjoy - not just the best ones.
Similarly, for PCs, vendors could add software that was actually good at handling digital media and that were easy to use instead of the low-grade applications they bundle now.
Hardware and Support as Differentiators
Many users would pay more for a system that actually worked and that was easier to fix when it broke. A vendor could take the high road and build a PC out of the best components -- all that's necessary is to be smart enough at marketing to communicate the value proposition and break out of commodity land where people think that all PCs are bad.
Many computer companies sell low-quality hardware that cost users many times more than the amount they save. For example, I once owned a laptop that included a low-cost modem that might have saved the vendor a dollar. This lousy modem cost me $200 in payments to various hotels around the world for extra calling attempts when trying to get my email (often at a dollar a pop, even when the modem handshake fails) or stay on the line longer due to slower connection speeds than could have been achieved by a better modem.
Tech support is an under-appreciated opportunity for differentiation: users know that computers fail, but a company that would stand by its products and give good support would be the one to buy from. Support that works and solves your problems could be the differentiator. For many years, that was IBM's reputation in the mainframe field: their machines might not have been exciting, but they sure serviced them well. Today, a good support area on a vendor's website is worth more than an army of blue-suited service techs.