Introduction and Importance of Topic:

Steve Jobs initiates a series of Chalk Talks by discussing a critical issue: understanding the target customer for their products. The talk aims to explore why customers choose their products over competitors and the distribution channels that can best reach them. Jobs emphasizes that new insights have emerged over the past 90 days, driven by customer interactions and data analytics.

Customer Identification Struggles:

Jobs confesses that historically, the company has struggled to pinpoint its core customer base. The reason for this, he suggests, is that their products share characteristics with both workstations and traditional personal computers (PCs), making it challenging to identify a specific niche.

Workstation Market Analysis:

Jobs analyzes the workstation market, identifying key players like Sun, HP Apollo, DEC, and IBM’s RS6000. He notes that their products share several features with workstations, such as multitasking capabilities, networking, and Unix-based systems. However, they also differ fundamentally in their focus on user interface and availability of third-party application software.

Comparisons with Personal Computers:

The other comparison Jobs makes is with the personal computer market, which includes PCs and Macintoshes. While the company strives to offer a user-friendly interface and application software suite akin to PCs, they also possess advanced multitasking and networking capabilities, which are far superior to standard PCs.

Identity Crisis and Market Position:

Jobs acknowledges that the company has oscillated between viewing their primary competitors as either PCs or workstations. This indecisiveness has led to challenges in establishing a clear market position. The talk sets the stage for a deeper exploration of this issue, as understanding the target customer is essential for future success.

Identity Crisis:

The speaker, ostensibly Steve Jobs, discusses the company’s past confusion about its target customer. He talks about how they oscillated between viewing their product as a more accessible workstation or a more powerful PC. This lack of clarity hindered the company’s strategic focus.

Market Segmentation Revelation:

The speaker highlights a pivotal moment when the company identified not just one but two workstation markets: the traditional market focused on science and engineering, and an emerging “professional” market. The latter includes a diverse range of sectors like publishing, medical, legal, and higher education.

Market Growth and Competition:

Data suggests that this professional workstation market is growing rapidly, doubling and tripling in size in the coming years. The speaker also identifies Sun Microsystems as the main competitor in this space, which dominates with an 80% market share. However, he believes that the company’s product is well-positioned to capture a large share of this expanding market.

Driving Forces for Market Growth:

The market is expected to grow due to two main factors: 1) PC and Mac owners needing more powerful systems and 2) companies transitioning from mainframe to workstation setups for better performance and economics.

Customer Needs:

The speaker specifies that the move towards professional workstations is driven by the need for custom applications, complex networking capabilities, and database-driven operations. These needs are not adequately met by traditional PCs and Macs.

Strategic Advantage:

The company’s recent head-to-head encounters with Sun Microsystems have resulted in 100% wins, indicating a competitive edge. Furthermore, the speaker suggests that Sun’s marketing efforts to grow the professional workstation market will actually serve their own interests, converting it into a win-win until the point of actual product choice.

Identity Crisis:

The speaker discusses an internal dilemma of whether their product is a more powerful PC or an easier-to-use workstation. This question was resolved through a revelation that showed them a bifurcation in the workstation market.

Two-fold Workstation Market:

The traditional workstation market has long been dominated by science and engineering needs. However, the speaker identifies a new emerging market: the “professional half,” comprising professionals who are not scientists or engineers but require powerful workstations for various applications such as publishing, medical, higher education, and legal tasks.

Market Growth:

The professional workstation market is projected to grow significantly, from 50,000 units in 1990 to 100,000 in 1991 and tripling to 300,000 units by 1992. The speaker is optimistic about their company dominating this rapidly growing segment.

Primary Drivers for Growth:

The growth is attributed to two factors: PC and Mac owners needing more advanced networking and development environments and users moving away from 3270 terminals or mainframe-based applications to desktop workstations for more efficient development and better economics.

Competitive Landscape:

Sun Microsystems is highlighted as the major competitor with an 80% market share in the professional workstation space. While Sun helps validate the market, once customers decide to enter this segment, the competition becomes intense.

Key Reasons for Adoption:

Custom Apps: Businesses have mission-critical applications that they need to develop. These apps often require advanced networking and database capabilities that PCs and Macs lack.

Productivity Apps: The speaker points out that as workstations penetrate deeper into an organization, the desire for excellent productivity apps like Lotus Improv or WYSIWYG WordPerfect increases.

Interpersonal Computing: Although less important now, the speaker predicts that improving group productivity and collaboration through sophisticated desktop computing will be a significant reason for adoption in 24 months.

Future Sales Dynamics:

The speaker suggests that while custom apps are currently the main entry point for their workstation sales, great productivity apps and interpersonal computing will become increasingly important factors as customers become more educated about the product’s capabilities.

Education as Marketing:

The speaker starts by emphasizing the role of education in effective marketing, positing that educating customers about “interpersonal computing” will eventually make these customers come to them, reducing the need for traditional marketing.

Role of Networking and Desktop Power:

Interpersonal computing, according to the speaker, requires powerful desktop computers and sophisticated networking. These features compel organizations to choose professional workstations over simpler machines.

Competitive Dynamics with Sun Microsystems:

The speaker acknowledges that most of their potential customers also consider Sun Microsystems. The aim is to invert this dynamic so that anyone considering Sun will also consider their workstations. Marketing strategies will be implemented to achieve this reciprocal consideration.

Three Competitive Strengths:

The speaker identifies three key areas where they have a competitive edge over Sun:

Custom Applications: Their development environment, as per customer feedback, is better than Sun’s. Customers’ technical experts believe their platform allows faster custom app development.

Productivity Apps: Their range of productivity applications is more extensive and user-friendly than Sun’s, including standout software like Lotus Improv and WYSIWYG WordPerfect.

Interpersonal Computing: They claim to have a superior offering in interpersonal computing, substantiated by demos that showcase multimedia and ease-of-use features.

Utilizing Software Camps:

The speaker suggests more extensive use of their “software camp,” where they train corporate developers. These camps have been successful in convincing customers of their technological advantage, but they believe this resource is underutilized.

Feedback and Future Learning:

The speaker concludes by stating that they have been actively listening to customers to refine their product and market positioning. They welcome further comments and feedback for continuous improvement, especially against their primary competitor, Sun.

Communication and Retreat:

Finally, the speaker seeks feedback on the effectiveness of this mode of communication and mentions a forthcoming retreat where they expect to meet most of the attendees.

The speaker outlines a focused strategy to outpace Sun Microsystems by capitalizing on their competitive advantages in custom applications, productivity apps, and interpersonal computing.