Factfile 29
The challenge facing product-centric companies
For a business to be viable at all, it has to do something well. For it to win in a competitive market, though, it has to do something better than its competitors.
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This familiar idea, competitive advantage, says simply that you have to be better than your competitors, at something important to your customers, to make sales. That ?something? could involve better products, or lower prices, or better service, or whatever else matters to customers.
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Short-term, modest competitive advantages are not difficult to find and exploit. A small rebate on a Ford Taurus will lead to increased sales; a better cup holder in a Honda Accord will steal some of those sales back (at least in the US).
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Competitive advantage is constantly in flux as competitors vie back and forth on product features and price. Short-term, small competitive advantages, though, are not the answer for most companies, for the obvious reason that they don?t last.
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The issue is finding and maintaining a sustainable competitive advantage: an advantage that has some staying power in a competitive market place.
It?s when you think about sustainable competitive advantage that you realise what a fix many companies are in today. Product competitive advantage isn?t measured in years anymore; it?s measured in months, or weeks, or sometimes days.
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When Lotus Development Corporation came out with the Lotus 1-2-3 spreadsheet program in 1982, it had a huge and profitable market largely to itself for a few years.
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Today, Netscape Communications comes out with new Internet browser software and before you can say ?I?ll take one!? Microsoft comes out with a similarly featured version of its own browser. Millions of dollars in R&D creating only fleeting moments of differentiation.
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Levi?s had the denim jeans market to itself for half a century; today popular fashions and fabrics are copied in days and appear in retail stores almost instantly.
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Do you have a better pizza, video rental concept, or cellular phone to sell? You probably have a few months or less before Pizza Hut, Blockbuster or Nokia figures out what you did, replicates it (if it?s a good idea) and gets it to market quicker and probably more efficiently.
The forces behind this crunching of competitive lead-time are well known.
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Communication technologies and new media have increased the speed at which companies can find out what competitors are doing and feedback new design concepts into their own product releases.
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Manufacturing technology has radically lowered the costs, and the barriers to entry, for getting into a market with a high-quality, market-ready product.
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Today?s global corporations have the resources and economies of scale to scour the planet in search of every last customer, leaving perhaps a few desolate islands up for grabs.
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Advances in distribution and logistics systems have enabled companies to send products all over the world and get them into the hands of customers in a matter of days ? and in some cases, hours.
Put all of this together and you can see why companies are worried about whether a new and better gadget will result in any durable competitive advantage.