Positioning Guide #16

Innovation and technology are not customer benefits.

Many companies want to be the technology leader, the innovator in the category.  This is part of tech companies’ DNA and is probably confirmed by corporate vision or mission statement or a graphic like the one to the left.  Note the logic of this graphic – if the firm innovates and then communications, it will be successful in the market place.  I think that there are a few things missing in this graphic such as definition of a target market segment, brand positioning, distribution, pricing, etc.  Don’t get me wrong, there’s nothing wrong with wanting to be an innovator if one recognizes that there are challenges associated with being an innovator:

1.    Innovation Cost Money.  A firm’s devotion to innovation usually causes it to spend proportionally more on research and development than competitors.  This is one of the factors that usually causes such companies to be the high cost competitor in their product category.  If the product category is mature, the company may be headed for trouble as one of the keys to competiting in mature product categories is to be a low-cost producer.

2.    Innovators bear most the cost of innovation but share the rewards of innovation with fast followers:  Recall the concept of the product life cycle which is shown to the right.  In the development and introduction stages, there is only one competitor – the innovator.  Unfortunately for the innovator, these are the two stages where investments are heavy and there are little or no revenues.  A product category's profits tend to peak between the growth and maturity stages so that fast followers share the rewards of innovation without the cost penalty of the innovator.

3.    Innovators believe that innovation is a guarantee of long term business success.  I don't share this belief.  If one studies business history, one is likely to conclude that it is the fast follower rather than the innovator who is going to be the winner in the marketplace.  Whether one is an innovator or a fast follower, academic studies have concluded that it takes adequate marketing to insure long term business success.

Innovation is not a customer benefit.  While it is true that customer benefits may stem from innovation; innovation itself is not a customer benefit.  Thus, at best, innovation may be a benefit support.
If you work for a company that prides itself on innovation and you disagree with the statement that innovaton is not a customer benefit, leave me a comment.  All comments are welcome!