To Innovate or Get Back to Basics?

This is not really and either or proposition as the title suggests.  I do find that many companies are seduced by the glamour and sexiness of innovation – coming up with new products that create the so-called Blue Oceans where little if any competition exists.  Such was the case of one company I worked for.

They were operating in a very mature industry and were seeking a way to differentiate themselves in a highly competitive and concentrated industry.  I went on a tour of their dealers – a tour that was ostensibly designed to elicit from the dealers ways that that the company could increase its market share.  They were losing share to competitors who were felt, by the manufacturer, to be more innovative.  The truth was the competitors’ products worked better.  Market share loses were being experienced by the manufacturer, not the dealers, who were selling competitive product.  Their share in this product line was actually increasing.

The boys from the manufacturer came into these meetings armed with new ideas on how they could transform their product into something more exciting and hopefully desirous.

Dealers were asked what could be done to improve market share.  They responded with a bunch of suggestions such as:

1. Understand who you are pricing against.  Our product cannot compete against the top tier products so it should not be priced against them but rather against the lower tier products.  In short our prices are too high for the quality we offer (sounds like a value problem).
2. Provide better technical support.  We can’t get questions answered in a timely manner.
3. We can’t get parts to fix the products.
4. Attachments do not arrive with the product resulting in delays in getting the purchased product into the customer’s hands.
5. Why can’t we get quality product?  Our product does not stand up to competitive product in a number of key areas.

The boys from the manufacturer essentially dismissed these comments and instead began running out their ideas about “new and improved.”  These were ideas from engineering and product development and after each one was explained they asked, “Do you think you could sell this?

The dealers were incredibly frustrated.  Finally one dealer stood up and shouted:

“Do the basics right before we bring out more product that we can’t get parts for or can’t get technical support for or can’t sell because we are charging too much for the quality we are delivering.”

Not surprising the boys from the manufacturer took note and continued running out their ideas.

This was a really interesting experience that clearly pointed out a number of problems with the manufacturer:

1. They were almost exclusively product oriented.  The company was dominated by engineers who did not understand markets or customers.
2. There was insufficient control over the entire supply chain.  Their response was they couldn’t do anything about that.
3. They were deaf to what the dealers were telling them about what was occurring in the market place.  There was no room in their thinking for feedback from the market.  They operated in a vacuum.
4. They did not understand how the targeted markets defined value.  To them, value was an abstract concept that they talked about.  Their sense of value was one that focused on product features such as fit and finish, engine reliability, weight to power ratios, all at the expense of what customers wanted – a strong dealer who could fix things when they were broken, the ability to get parts in  a timely manner, warranties, etc.

This experience points out the tradeoff between innovation and doing the basics.  This company was not losing share because they were not innovating but because they could not deliver on the essentials that the buyer wanted after the purchase.  I’m not advocating that companies shelve their new product development efforts but I am advocating that they make sure they can provide the kind of value that the customer wants.  Do the basics right, not glamorous but critical.