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Recently, word leaked out that Intel (INTC) is evaluating whether to launch a new online television service that competes with cable. It will be a bold move for the chipmaker, which has developed a strong brand in the minds of the consumer, thanks to the long-running Intel Inside campaign.
Such a radical shift into the world of Internet television requires Intel to develop a completely new business model, in which it creates a service it sells directly to consumers. Developing a new business model inside a large company is the triple flip with a half-twist of management challenges. Intel has never successfully designed or sold anything directly to the consumer. In fact, it’s bombed on several occasions. Remember Intel Online Services, the company’s failed attempt to shift into the Web-hosting business?
The television business is ripe for reinvention. Despite the emergence of Netflix (NFLX), Tivo (TIVO), Hulu, and numerous other small startups, over half of Americans still put up with big cable (a number that exceeds 70% if you include satellite television) despite cable’s 1990s-era user experience and 1980s-era customer service. None of the newer digital companies has nailed the mass market consumer experience.
If Intel is to succeed as a television service provider, it must do something its managers may consider unnatural: Learn to put the consumer first and let the chip play a supporting role. Nintendo (7974:JP) managed to do this when it stopped trying to compete with Microsoft (MSFT) and Sony (SNE) in the battle for the high-end console market and focused instead on delighting consumers and creating new gamers.
Intel will need to look beyond the heart of the machine to figure out how to win the heart of the consumer.