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Monorail Inc.

Monorail will rise again. All has been quiet on the Southern front since Fast Company last spoke with Monorail Inc. (www.monorail.com), a Georgia computer manufacturer with no factories, no warehouses, no credit department, and no help desks or call centers. Two years ago, the fast-growing startup appeared poised for success in the competitive and crowded PC market. The 14th leading manufacturer of desktop PCs, Monorail was growing at a rate of 50 percent per quarter and looking to become a $2 billion company by 2003.

Monorail will rise again.

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All has been quiet on the Southern front since Fast Company last spoke with Monorail Inc. (www.monorail.com), a Georgia computer manufacturer with no factories, no warehouses, no credit department, and no help desks or call centers. Two years ago, the fast-growing startup appeared poised for success in the competitive and crowded PC market. The 14th leading manufacturer of desktop PCs, Monorail was growing at a rate of 50 percent per quarter and looking to become a $2 billion company by 2003.

Then the buzz died. And Monorail was no where to be found.

While fellow Southerner Dell Computers went on to dominate the market, Monorail took a step back in order to analyze its strategies and procedures. It was encountering glitches in its outsourcing model, and desperately needed to reassess before attempting to grow or expand. As President and Chief Operating Officer, Andrew Watson, explains in the following interview, Monorail is now back in action with stronger, more streamlined partnerships and a renewed dedication to providing low-priced, built-to-order computers. Read on to learn how Monorail saved itself from extinction.

How have your objectives and vision changed since the last time you spoke with Fast Company?

Our objectives have not changed, we’ve just had to re-pour sections of the foundation. The objectives are there, the overall strategy is still intact, we just had to rethink some of the dirty details, and the basic tactics.

Starting in late September, Monorail is going to launch a substantial advertising campaign in newspapers, on the Internet, and on the radio. It will be focused on delivering several key points that we believe separate us from the pack. One distinguishing feature is that we are relatively small, yet advertising nationwide.

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We have a brand name, it’s called a Monorail and it’s always on the front of the unit, but we’re an unknown brand. And there are a lot of companies out there who are “unknown brands.” We seem to be one of the few who really has the desire and willingness to change that.

To a large extent, a PC is a PC. There is not a whole lot of difference between a Compaq, an HP, an IBM, and a Monorail. But in order to get that message across, we have to either offer our product at ridiculously cheap prices – which raises questions about the quality of the product – or we go send that message through a multi-tiered awareness program using PR, advertising, and promotions.

Do you feel that your production and delivery cycles are now operating at 100 percent?

We are probably at 99 percent. We are completely built-to-order, so when Best Buy or CompuCom or Value America calls us to order 500 models of a particular configuration, we can build all of those and ship them within three to five days. We can custom configure every unit that we build. For example, Value America advertises heavily in newspapers. They call us and say, “On Friday, we want to advertise this configuration: a 366 Celeron, 32 megs, 4.3 gig hard drive. We want to take orders for it on Friday, and ship the models on Monday. Can you do it?” And the answer is: “Yes, we can do it.”

It’s working. But it has been painful, very painful. Our contract manufacturer is SCI Systems, which doesn’t do much build-to-order manufacturing. SCI wasn’t set up to receive an order, build it specifically to specification, and then ship it out one-per-customer. But none of our previous contract manufacturers were experienced with that either. Monorail believed it was absolutely critical to have that capability, so we came in to an inoperative SCI factory and started from scratch by building the infrastructure, building the systems, and setting up the manufacturing line the way we wanted.

What initiatives does Monorail plan to unveil in the near future?

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We have held off on being a really substantial player in the $500-and-below segment of the computer market because we rely heavily on outsourcing. Quite frankly, we have spent the past two years tweaking our business model. It worked great at first, then as we grew we had all kinds of hiccups and production problems. Now, we have adjusted things and selected new partners, so we can revisit some of our major initiatives. We are launching into the sub-$500 PC market with a variety of products costing $399, $499, and $599 this Fall.

We are also becoming a vendor of ISP rebates through a relationship with Microsoft that allows us to offer $400 rebates on all our systems. We decided early on that if we’re going to play the rebate game, we’re going to play it with a serious player. We didn’t want to do something on the next tier down. That’s been a major win for us.

How has your playing field changed since you last spoke with Fast Company?

It’s gotten increasingly competitive, but the opportunity still continues to grow. Probably 110 million units were sold in 1999, so you don’t have to get a huge dominant market share to make for a really good living. One reason for that tremendous growth is the Internet. Four years ago, a lot of potential computer buyers had not yet answered the question, “What am I going to do with it?” The Internet opened up computers to a much broader segment of the market, and the change in just a few years has been unbelievable. In my humble opinion, everybody wants to be on the Internet. Everybody wants to get connected.

What are you predictions for the future of Monorail and the PC industry?

I could never guess where the market is going to be. But I can guess where we will be. We built this business because we thought that a unique, lower-cost way of doing business was necessary to survive in the PC market. The PC is going to evolve into a variety of different products – all of them driven very much by what’s happening with the Internet. We do believe that single-function or Internet appliances are going to become significant parts of the market. Instead of a $599 PC with a monitor, people will be shopping for a $299 and $399 e-mail device or Internet device with some sort of display that gives you much broader access within homes.

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The other area that’s very interesting to us is our commercial business. We sell Monorail NPCs, as in Nancy Peter Clyde, which are network-ready products for businesses. And that’s an area of great interest to us also because there are lots of opportunities to deliver business products at substantially lower costs. The $399 and $599 PCs have really hit the consumer market hard, but there’s nothing like it in the business market yet.

Previously featured in issue 12, page 48

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