Stop—What If…It’s the Product?
Wait. Don’t skip this section because you think you are a service, not a product. Does a restaurant, for instance, have product issues? Maybe you specialize in steak—surely that’s your product and if you offer too many or too few choices that may be your “product” issue. Alongside steak, do you offer too many or too few alternatives? Are the vegetarian choices obvious? Does the menu need a complete overhaul? Would a new restaurant name, or a new theme, or simply redecoration help?
Having some of these thoughts in your head will help you as you go through these pages—and don’t think because you run a landscape business and not a restaurant they don’t apply either. Or to you, if you are a firm of architects, accountants, doctors, scientists…
Product (or Service) Reality
When you came up with your original product, it wasn’t actually original but it was certainly innovative. When widgets were only ever available in gray, you produced them in Day-Gloop yellow; where they’d only been right-hand threaded you made them ambidextrous and where they were only ever sold in boxes of 100, you launched the handy 10-pack.
The market liked the color change and although multithreading has advantage to a few, for most it was simply a nice to have feature. The 10-pack didn’t just break bulk for those wanting smaller quantities; to your relative surprise it was taken up by many of the bigger users too, as it kept the product safe from wandering hands and the widgets chemically clean inside their hermetic seal.
At launch, you created an ocean of clear blue water between your business and the competition. Whilst perhaps the widgets didn’t initially fly out in the volumes you had hoped for, we think it safe to say that after that piece you did on television, they were selling handsomely.
You were probably right to stick to the single color, as adding color variety was only going to increase your costs and cannibalize your Day-Gloop yellow sales. Costs needed control because although sales growth was good, costs have been climbing steeply as well and for a while there was a chance of you overtrading. That is because you were frequently having to pay your bills before several of your important, larger, customers paid you.
And you are still making the same product today. Volumes are not as high as at the peak, even after adding in those specials you now do for a few important customers.
Why? What might have gone wrong?
It could be simply in this age of enormous upheaval in the geopolitical landscape, many of your customers have now opted for dual-sourcing in case you (or the other supplier) for whatever reason—from Icelandic volcanoes exploding to unrest in a country of raw material source—fail to deliver on time.
But that’s unlikely.
It could be that actually Day-Gloop yellow is no longer a fashionable color—but we doubt that too. Maybe your widgets are being underpriced by some cheap, nasty imports. No, we’ve not seen many imports of any quantity show up on these shores.
So stop and look really hard.
Just as you do specials for important customers, so do your competitors. They’re not in the competitors’ literature—any more than they are in yours or even referenced on respective websites—but they do them. Similarly, there is off-slalom pricing, extended payment terms, long-term contracts, and similar devious tricks all designed to win, to win back or simply for your competitors to retain existing business, so that new customers for you are no longer low hanging fruit. Therefore, if you lose one through defection, change of business, or bankruptcy, replacing it with two others, as you used to do, is no longer easy-peasy.
Strange to say, that’s only part of it. What has almost certainly happened is your competitors have innovated past you. Not simply copycat-style improvements like offering post-box red or grass-green widgets. No, they’ve gone much further. The market leader now offers a completely threadless, self-sealing widget at the same price as their previous model. They guarantee their customers a 50 percent saving in assembly time and for only pennies more can provide a digital interface so that their widget can be monitored in real time by anyone with a Wi-Fi connection.
You won’t have missed the publicity razzmatazz for these innovations but you have probably dismissed them as both gimmicky and something you cannot compete with directly, as you are still a few years away from paying off the financing, for the tooling, of your original widget?
So we imagine you’ve tried to guess the future and work out what next year’s widget will look like so you can shoot for that and gain competitive advantage. But can you?
If you look back on your own launch, you hit the market with a Spanish Armada style broadside. The market had been stuck in its repetitious rut since, we don’t know, let’s say the war? Maybe the Civil War? Your revolution awoke a number of slumbering dinosaurs who probably didn’t realize the rest of the world, like you, regarded them to be in some sort of long-term terminal decline.
Your innovation should have destroyed the competition but instead led to some amazing invigoration. Hence where you are now. Fighting the established giants, who seem to have come back against you stronger than you could ever have imagined, and with better widgets than you. How?
Again look closely at what you did. You brought step-change to widgets. After implementing this strategy, you had planned post step-change—and doubtless by now have introduced—a number of additional changes along the way as the market swung toward your widgets. But what were these additional changes? More step-changes? No, we’re sorry to tell you, they were cosmetic—more akin to rearranging the deck chairs on the Titanic than reviewing the true capabilities of watertight doors.
Meanwhile your competitors were faced with the innovate or die conundrum. Those that picked up the challenge went to the suppliers of widget-making technology and specified their next generation of widget tool, to not only be up and over your step-change but also be capable of making further step-changes in the future. So there you are. We’ve told you. You brought the first significant change and your competitors have gone for future change-proof constructions.
That means the time period, or in the parlance, first-mover advantage, is much reduced and rather than playing catch-up, you are in a market where leap-frog is the game. Worse, alone out of all your contemporary competitors, you can actually make fewest future step-changes.
And it is not all fiction. One of the author’s clients did indeed steal an early first-mover advantage by the simple expedient of buying in bulk (in his case 200s) from the manufacturer and repacking in customer-friendly dozens. Of course it didn’t take long for the manufacturer to see the market opportunity for themselves…
Stop Leading the Incremental Innovation
Look carefully. Are you in a market where incremental innovation costs you disproportional time, money, and your personal energy, yet this increment is probably not recoverable from your customers? Doesn’t that make it a lose–lose for you? What’s more, in such a market it is probably easy for a competitor to replicate your ideas and quickly return to level peg you.
Why not reverse the roles and wait for their incremental innovation first? Then you can promptly introduce only if your customers desire it. So rather than start the competitive surge by throwing the first stone on anything incremental, think of the alternative gain by not throwing it at all. And potentially keeping the savings for the next disruption (covered in the Grow section of the book).
What do you have to lose? Ask yourself what happens if you slacken the pace of your updating of the standard widget?
Well, first, you have your special customers, the ones whose widgets require sophisticated changes to the core design. The ones who appeared as bright opportunities initially, but by the time you had built the first widgets that conformed to their final specification, you really wished you hadn’t started. But you have them, you are over all the initial pain, you have made or paid for all the special tooling, and your workforce can now bash them out as easily as your mainstream widget.
These guys are loyal—they have to be—because their production cannot easily change unless you were to hand over the tooling. And, of course, you’re not going to do that. They also don’t want to see massive innovation in the product because what you supply now works for them and all the other components that go in alongside your widgets into their final product. So look at them as a cash cow—that is a product that remains unchanged into the future, continuing to supply an existing customer base providing valuable margin to you without constant attention. And you won’t have to load its pricing to pay for future product step-change.
Second, and with this slowdown it is the bit you are scared of, a few of your more exciting, cutting-edge, customers might move away. You like these guys, they like you. You’re all chummy and you believe the product gets better because of your frequent interactions with them resulting in new ideas. But actually, in total they don’t buy very much and, however strong their opinions, they are not opinion formers for an industry, they are simply legends in their own lunch boxes.
The third impact of you slowing your pace is far more remarkable. Rather than being left behind by a bunch that barely sentences ago we wanted to write off as dinosaurs, you will find they slow the pace down too. In a race with no end, it is the pace-setter that determines the speed and the running pack just tuck in behind. After you slow down the incremental innovation, and if your competitors tuck in behind you, then you take the pace-setter role, but at a slow and steady manageable pace. However, if they relish themselves instead in the pace-setter role, you tuck in gently behind them, taking advantage of their wasted energy in incremental innovations that are easily replicable by you. Either way, you reduce your energies allocated to maintaining an incremental innovation pace and apply that energy to larger things discussed in the Grow section.
The good news from slowing down is that inertia will keep most of your customers loyal to you for far longer than you ever imagined, even if you don’t put as much as a toe in a forward direction. On that basis most of these guys can be looked on as cash cows too.
Then, climb aboard your business helicopter and go for a 10,000-foot view of your activities. No, we don’t mean a real one; this is brainwork not joyriding. From a detached perspective, ask yourself the final product–related question here: Is the market for widgets finished? Because if the answer is yes, you have to decide between them being a cash cow until people stop buying them or if you are fast on your feet, a great time to sell up. Holding on for the nostalgia market might be a one-way ticket to oblivion.
If the answer is no, then give a thought to disruptive innovation. True innovation has to be disruptive. That’s what a step-change represents. A new way of doing business like using mobile phones we all have now instead of holding pocketfuls of change for use in phone booths, as we once had to do. Or a price reduction. Not by the odd 10 percent, but instead down to 10 percent of the previous price. Disruptive is not a little bit of styling or a modest tinkering with the price. It’s not evolution; it’s revolution. Stopping incremental innovation frees up funds, energy, focus, and all-round mind-space for you. Replacing it with disruptive innovation will consume most of these, and we will cover that as a topic in the change section.
Pause: Did you make notes of things in the Action This Today section in the back of this book? If not, please take this opportunity to review the prior pages to identify again any thoughts and ideas you want to follow up on.