Extreme makeover

Extreme makeover

Mohit Kirpalani’s own team thought he was nuts when he decided to reinvent his entire company in 90 days. It worked. Now he’s going up against Apple and Samsung in the tablet market. Here’s how Hipstreet uses incremental innovation to hold its own

Hipstreet has a history of taking wacky ideas and turning them into big hits. One of the consumer electronics maker’s prized products is a USB key that comes in the shape of a dog, a pirate or a princess – a huge hit in the United Kingdom. The Toronto-based company has also made Nintendo Wii controllers that look like pom-poms, stylus pens topped with the heads of Disney princesses, a large-print keyboard and much more.

But when a project manager at Hipstreet brought up the idea of creating a mid-priced tablet computer to sell at Walmart, Future Shop, The Source and other big-box chains, founder and president Mohit Kirpalani gave him an earful. Why would his company want to abandon the lucrative consumer electronics accessories market to venture into the ultra-competitive hardware space? “I was challenging the guy,” says 47-year-old Kirpalani, who moved to Canada from Mumbai in 1992. “I asked him how we would do this – and why we would do this.”

At the time, back in 2012, Apple commanded about half of the tablet market, with Samsung’s market share jumping by more than 100 per cent year over year. Amazon had recently gotten into the game, and computer companies Acer and ASUS were vying for consumers’ hard-earned cash, too. But the more Kirpalani and his team talked about it, the more the idea made sense. The tablet market was – and still is – growing at an incredible pace. According to Gigaom Research, the research arm of the popular technology website, the global tablet market is expected to grow at a 29 per cent compound annual growth rate between 2013 and 2017, overtaking personal computer sales by 2015.

Still, while demand for tablets may be growing, how could a small and unknown Canadian company play in the same space as Apple, Samsung and other massive global giants? The answer lies in its innovative and unusual approach to business.

The 90-day makeover

Kirpalani seems to have a gift for knowing before everyone else where a market is headed, and he’s not afraid to take risks. He started Hipstreet in 2002, after working for 10 years as a computer engineer. He’d forged relationships in the fast-growing Far East and figured he could do just as well building Windows-based computers on his own – computers he’d then resell to electronics companies to sell in their own stores. It manufactured parts of computers, such as the motherboard, too.

Giving up a cushy job, and a six-figure salary, to start Hipstreet was a huge risk, but it was one he felt compelled to take. “There was no real reason for me to leave my job,” he says. “But I wanted to create a brand, to create something that had value.”

By 2007, the company was bringing in more than $30-million in revenue, with its products on store shelves in North America, Latin America, India and the U.K. That year, though, he decided – on what seemed to his 45 employees to be a whim – to change course. He told his team that he wanted to stop making computers and instead begin designing tech accessories. Oh, and he wanted to complete the transition in 90 days.

For employees like Sri Subramanian, the announcement was troubling. An accountant who had emigrated from India five years earlier, the low-level number cruncher was worried that Kirpalani was about to put him out of the job. “It was a sudden change in position,” says Subramanian, now Hipstreet’s chief financial officer. “For the people who were under the decision makers, this was discomforting.”

Many on his executive team thought he was nuts, too. “They looked at me and said, ‘You need a drink,’” Kirpalani says. Instead of grabbing the nearest scotch, the president explained his rationale. Though Hipstreet’s revenues were still growing, the company was headed for trouble if it stuck to the PC market. When he’d started the company in 2002, Kirpalani could sell one unit for $1,200. By 2007, the unit price had declined to $300. That same year, Apple released the first iPhone, and the tech community had started buzzing about tablets. It was clear to him that personal desktop computers were inching toward obsolescence.

Kirpalani and his team hashed out the pros and cons and, in the end, decided that the benefits outweighed the negatives. And with technology moving so rapidly, they all agreed that the shift had to happen quickly. Over 90 days, the team re-evaluated the entire operation, says Subramanian. Department heads met with staff to ask why they were doing what they were doing – a nervewracking process. “Everything was being ironed out, thrashed out, and ideas where thrown about,” he says. Along the way, the company managed to design, prototype and manufacture 40 new products and get them ready to ship to stores.

Despite Subramanian’s apprehension at the time, now that he knows Kirpalani better, he isn’t surprised he pulled off such a quick turnaround. “He’s a go-getter,” says Subramanian. “Every moment he’s awake, he’s trying to make the company better.”

As for Kirpalani, he still can’t believe how well it turned out. Not only did the team successfully reinvent the business in three months, but revenues didn’t drop at all that year – and they’ve only risen since. Plus, he didn’t fire a single employee. The transition has influenced the way he runs his company today. “You don’t quit when things are bad,” he says. “You quit when things are good, and you realize you can do them even better.”

Taking on tablets

The biggest difference between the old Hipstreet and the new one is its focus on speed, volume and innovation. Maybe because of the company’s experience with that 90-day transition, product managers – there are three locally and three based in China for each of the company’s six product channels – have to be constantly coming up with new ideas. Each offer up about two or three in weekly meetings, and the good ones go into design as quickly as possible. Products typically go from conception to sale within 60 days, says Hani Henein, Hipstreet’s product manager in charge of tablets. In any given 12-month period, the company will introduce between 30 and 60 products.

Not all of them are successful, of course. Hipstreet’s office has a “wall of shame” that showcases the company’s biggest flops, including a bilingual keyboard that went nowhere because the packaging was in English only, and a webcam designed for children. About 40 per cent of its products are big sellers, says Subramanian, adding that just 20 per cent end up being pulled from store shelves. Geography plays a big role in product development. Some of Hipstreet’s efforts have caught on globally, others just in a particular market. Those dog- and princess-shaped USB keys, for instance, nearly made it to “the wall” after going bust in Canada and the U.S. But in a last-ditch effort to unload inventory, Hipstreet began selling them in toy stores in the U.K. It worked. Now, says Kirpalani, “they’re selling like crazy.”

When Hipstreet waded into the tablet market, Kirpalani knew that speed and choice were key. Dethroning Apple’s iPad – the world’s reigning tablet king – would be nearly impossible, so Kirpalani knew he had to do something different. By 2012, most of the people who could afford to pay $500 for a tablet already had. But there was still a huge market for people who wanted one, but didn’t want to, or couldn’t, shell out big bucks. Kirpalani figured he could snag those consumers with a tablet that retailed for less than $200.

He also saw a hole in Apple’s business model. At the time, the company sold just one tablet, with a 9.7-inch screen. (It has since introduced the iPad mini, with a 7.9-inch screen.) A few other tablet-makers offered more choice, but many focused on selling just one or two models. If Hipstreet could create tablets like it created accessories – lots of options for different types of consumers – it could be the tablet maker for the masses.

That’s exactly what Hipstreet has done. Over the past two years, it has marketed 12 tablets, running the Android operating system, ranging in size from six to 11 inches, and retailing for between $69 and $199. Kirpalani also says Hipstreet has partnered with Intel and Microsoft to launch a Windows tablet in September. With such a low price point, the tablets – built in partnership with more than a dozen factories in China – aren’t the highest quality. They have lower resolution and slower processing speeds than the iPad, but Henein brags that no one else gives consumers so much bang for their buck.

Unlike Apple, which releases new versions of the iPad once a year, Hipstreet tries to put out a new tablet, on average, once every month or two, and removes outdated versions from shelves after just a few months. Henein explains that the company isn’t making device-altering upgrades, but rather incremental improvements – like slightly altering the size or adding a new proprietary app. It recenlty introduced a GPS tablet (on sale at Canadian Tire) that gets users where they want to go without a data connection, an innovation that required Hipstreet to create its own mapping software with offline maps that don’t require any sort of connection to function. Kirpalani says the software is the first of its kind.

Marketing challenges

It’s been less than 24 months since Hipstreet’s first tablet went to market, and already it accounts for 30 per cent of revenues. Kirpalani thinks it could hit 45 per cent sometime next year. He won’t reveal how many tablets the company has sold or how much of the tablet market it owns, other than saying, “We’re very small compared to Apple.” Henein, though, doesn’t see why Hipstreet couldn’t one day sell more devices than Apple and Samsung. He makes a point of saying that big-name brands aren’t their true competition anyway. “They’re the Ferraris of the world,” he says. “No one’s buying them to save money. If we stick to what we’re doing then the sky’s the limit.”

But the secret to the company’s success – that it offers consumers lots more choice, and at vastly lower price points, than the big-name brands – is also the reason it might end up remaining a small player in the market. Hipstreet isn’t even close to being a household name; it has made inroads by simply being the cheaper option. There aren’t many people who buy a Hipstreet tablet because it’s a Hipstreet tablet.

Henein admits that marketing is the company’s biggest challenge. “We’re not Apple or Samsung, we’re a third party,” he says. “So getting our name out there, that’s the hardest thing.” It’s trying to increase its brand presence using social media, and it’s working with retailers to push its value proposition out to the masses, by using Hipstreet’s name in flyers and signage. It also recently hired a marketing agency. If people start associating quality mid-priced tablets with Hipstreet, as they do high-quality technology with Apple, then things could really take off.

For now, the company will continue doing what it does best: identifying people’s technological needs, then creating a product to fill the void. It will likely develop a “phablet” – the part phone, part tablet has taken off over the past year – and continue making small upgrades, such as camera and resolution improvements, to its current lineup. What it won’t do is sit still. Kirpalani has no intention of dramatically reinventing his business yet again, which means he always has to be a step ahead of his rivals. “We have to constantly innovate,” says Kirpalani. “We need to keep our consumers – and ourselves –excited.”

- Bryan Borzykowksi / Photograph by Lorne Bridgman