The Four Deadly Sins that Kill Strategic Product Innovation

BLog post 2Since new-to-the-market products are the essence of strategic supremacy, why are companies spending their time, money and energy on product extensions at the expense of new-to-the-market products?

Most companies commit one, or more, of four ‘sins’ that kill new product creation and lead to a company’s loss of supremacy over its competitors. Unfortunately, all 4 sins are self-inflicting wounds:

Sin 1: Too Much Focus on Current Customers

Who do most books on product innovation tell you to consult in order to get inspiration for new products? The obvious answer: your customers. WRONG – dead wrong! If a company focuses its entire effort on current customers as a source for new products, it will always end up with incremental products. The reason is very simple. Current customers are very good at telling you what is currently wrong with your current product. They can do this well because they do side-by-side comparisons and they identify performance gaps in your product relative to your competitors. Naturally, you go back to the factory, tweak the product a little and come back with an incremental improvement. And the pattern is set and keeps repeating itself.

Worse than that, your current customers can begin to dominate your product development process. You cannot rely on current customers for your new product ideas because they are not always aware of what they will need in the future. For example:

Q: How many of 3M’s millions of customers asked 3M for Post-it Notes?

A: None.

Q: How many of Sony’s millions of customers ever asked Mr Akio Morita (Sony’s founder) for a Walkman?

A: Not one.

Q: Did anyone on this planet ever ask Steve Jobs and Steve Wozniak for an Apple computer, ipad or iphone?

A: No. Never.

In order to propagate competitive supremacy and create new revenue streams, it is imperative to concentrate a company’s product innovation resources on new-to-the-market products. Livio De Simone, retired CEO of 3M, once said: “The most interesting products are the ones that people need but can’t articulate that they need”. New-to-the-market products satisfy the future implicit needs that you have identified and that your customers cannot articulate to you today. The upshot will be products that will allow you to change the game.

Sin 2: Protect the “Cash Cow” Mentality

Every company, over time, has products that become cash cows. Never worship at the altar of the cash cow. You will lose your supremacy.

IBM’s cash cow, as we all know, had been its mainframes – once the workhorses of the computing industry. In 1968, in its Swiss laboratories, IBM invented the first microchip – the RISC chip – with more processing capacity than its smaller mainframes. A small computer prototype, powered by this chip, was built and could have been the first PC the world saw. IBM, however, made a deliberate decision not to introduce that chip, because it could foresee the devastation it might have on its mainframe business. In 1994, 26 years later and maybe 26 years too late, IBM finally introduced the RISC chip under the name PowerPC. In the meantime, IBM lost the opportunity to be the powerhouse in the consumer market that it is in the business market.

The same happened at Xerox. The company worshiped so diligently at the altar of large copiers that it did not see the advent of a Stealth Competitor – Canon – with small copiers. Furthermore, it failed to capitalize on unique inventions that were developed in its Silicon Valley laboratories, such as the mouse and inkjet printers, both used successfully by Apple later.

Sin 3: The Mature Market Syndrome

“Our industry is mature. There is no more growth in these markets”.

Many people would claim that the reason products become generic, prices come down to the lowest levels, and growth stops is that the ‘market is mature’. Mature markets are something of a myth.

Who would have believed 20 years ago – when everyone owned a £10 pair of trainers – that people would pay £100 for a pair? Some of these trainers are solely worn for fashion purposes and unlikely to ever see a running track! Along came Nike and Reebok and the ‘mature market’ exploded.

A few short years ago Starbucks revolutionised the takeout coffee business by introducing unique products and marketing in a ‘mature’ industry. Now our high streets and public transport systems are jammed with takeaway-coffee-cup-hugging individuals.

Lawrence Bossidy, formerly CEO of Allied Signal couldn’t have summed it up better when he said: “There is no such thing as a mature market. What we need are mature executives who can make markets grow”.

Sin 4: The Commodity Product Fallacy

“We’re in the commodity business” is another mindset that can bring down a company’s supremacy. This is also a state of mind. Products become commodities when management convinces itself that they are. It’s a self-fulfilling prophecy.

An example is baking soda, a ‘commodity’ product that has been around since the days of the pharaohs. One day someone placed a small quantity in a refrigerator and noticed that it absorbed odours, soon afterwards the launch of deodorant with baking soda. We’ve since had teeth whitening baking soda toothpaste, not to mention dishwasher tablets and sink unblockers with this same ingredient.

Then there is the ‘mother’ of all commodities – water. Look at what the French can do with water. They have mastered the marketing of this mundance commodity by branding it under a variety of names such as Vitel, Evian and Perrier. Knowing that people are becoming more concerned about the quality of the water they drink, they began to market bottled water at exorbitant prices. This concept was immediately successful even in places where tap water is excellent and essentially free. Through brilliant marketing, they made water ‘trendy’.

Drinks manufacturers have taken the concept a big step further by adding nutrients to water to create a new category: sports water. Some of these even incorporate the ‘grandmother’ of all commodities: oxygen.

NEW TO THE MARKET PRODUCTS BREED SUPREMACY

Sony, 3M, Canon, Microsoft, Johnson & Johnson, Dyson and many others maintain their control of the ‘sandbox’ not be introducing ‘me-too’ products but rather by focusing their resources on the creation of new-to-the-market products. These have three inherent characteristics that contribute to propagating supremacy over their competitors:

A period of exclusivity. When you are the only product in the market, you are the only one.
Capability of charging premium prices. During this period of exclusivity, you can obtain premium prices, as opposed to me-too products, where every transaction comes down to haggling over price.
Ability to build in barriers. Being first to the market allows you to build in barriers that make it very difficult for competitors to gain entry into your game.
After all, that’s what supremacy is all about: changing the game and creating the rules to which competitors who wish to play your game must submit.

THE NEED FOR PRODUCT INNOVATION

DPI’S Strategic Product Innovation Process is a powerful tool that can help jump-start your organisation’s ability to generate a steady stream of innovative new product and/or service concepts, and to identify opportunities for entirely new markets and customer groups. The future holds vast opportunities for growth, if you know how to use change to your advantage.