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By defining Innovation, you draw your future (Part 2 of 3)

Let’s spend some time on this last topic because it can have very dangerous effects.

There is nothing wrong with the intention of maintaining high price levels and significant markups. Innovations, as opposed to commodities, meet these characteristics. That’s the reason why everyone wants to position their offerings as Innovations to achieve these goals. However, as you may have noticed, “position” something as an Innovation doesn’t turn it into a real one …

ComoditizationProcess-201208-0 InnovationProcess-201208-0


The problem is that, once we have missed the point of what an Innovation really is, we can completely miss our direction in the market. For example, if we operate in a volume market and approach our customers with price ranges and strategies of value markets, we are, more than likely, going to fail. In other words, not because you “want” (and try) higher prices it means that it is a good idea. In fact, if your prices are out of range, you won’t be competitive at all.

Does it mean that we cannot fight for value in a price-driven market? Of course not. You may perfectly target the higher band of the price range that Demand accepts for this sort of goods/services in that market. Maybe, there is a luxury segment in your market … So, who knows?

Anyway, you will have to pay attention to other relevant factors that might be affecting you: the degree of commoditization (vs. a market of luxury goods), the price sensitivity (demand elasticity), the degree of competition for that market (perfect competition vs. monopolies), etc.

Another way of “missing our way in the market” happens when we overdo with certain upselling strategies because we are convinced that we are innovating. Let’s consider the “ice cream toppings” strategy as an example. It consists of adding secondary elements (“the toppings”) to the product or service (“the ice cream”) in the hope of making them more attractive or as a way or differentiating them from the competition. Ideally, these add-ons cost very little but allow us to increase margins more than proportionally.

This strategy works well for certain products or services but it doesn’t, at all, for others. For example, price-sensitive markets might ignore the add-ons or force you to include them for the same price or even less. In other words:

  • just because your ice cream includes “toppings” it means that you are more competitive.
  • just because you can innovate in Product Development by combining different things, it means that adding more “toppings” to your product is something innovative or an innovation.
  • and, of course, upselling is not Innovation, but a sales and marketing technique.

Innovation = Marketing

This paradigm states that we only need to have a “Vision speech” that position ourselves as “though leaders”. This position would allow us become influencers or prescriptors for certain audience in a number of markets …

This is obviously an interesting (and needed) marketing tool but, again, it is not Innovation. Unfortunately, it usually means repeating a mixture of what Industry Analysts say about something. At the end of the day, when someone has his/her own vision, you really notice it.

Picture: “1966 – Fantastic Voyage 2” by James Vaughan. Licensed under CC-BY-NC-SA-20.

Published in Strategy Vision


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