September 23, 2007
Businesses can never be in equilibrium
Business organizations can never be in equilibrium or achieve stable position. Either they are moving up or they are moving down, depending upon their innovation quotient.
If you are trying to keep things stable, they won't remain so. You will slowly slide down simply because:
there is no exclusivity,
competition will catch up on the technology front and –
either cut price – if they too are not innovating (resulting in your margins to shrink)
or innovate and better the product – if they want to add value to the product and move up the value chain (resulting in your market share to shrink)
And if you continuously innovate and apply new ideas (refer to my post on manufacturing ideas), you will continue to move up.
It is unfortunate that in some cases, the entire industry decides to stabilize their position and take customer wants for granted. For example, consider:
alarm clock manufacturers,
camera manufacturers (there are some really big names out there)
They decided to stay at their position and were swept away by mobile companies like Nokia (who is the largest digital camera manufacturer in the world today). They decided to experiment and give more to their customers by integrating digital camera in mobile phones (possibly the thought process was that mobile, camera, clock, alarm are all things that need to be handy). It took some time to gather market acceptance which was created by the initial hype, but later on sustained due to the instant-in-the-hand value of the additional gadgets.
Seth Godin has highlighted how alarm clock manufacturers can still make a small change in their product and make it stand out. These are simple improvements which can make a product stand out and desirable!
Are you moving up or moving down?