Monday, December 1, 2014

Products are a Commodity

Products are a commodity.  Sustainable competitive advantage cannot be achieved through products.  In every product category, there are large global competitors with similar technology, similar products, and similar features.  As a confirmed product development engineer, this is hard to admit – but its reality. 
Now products can be a competitive disadvantage.  If you have inferior product performance, poor quality, or the wrong features set for the target market segment, your product can hold you back.  But a superior product will no longer set you apart because there will be others there with their superior products.  A superior product does not win the game; it just allows you to enter the game.
So what does win?  Pricing?  Market access? Service?  All of those are important, but none of those are sustainable competitive advantages either.  There is always someone else in the market ready to match your pricing.  In today’s economy, there are hardly any major markets anywhere in the world that are protected.  You may need to have a local partner, but there is no trouble finding one of those.  Even service has become a commodity.  With global logistics systems, easy access to internet portals, and global user communities, service systems are no longer a competitive advantage.
However, what is still a competitive advantage is a strong customer-seller relationship.  This has been a competitive advantage for hundreds of years.  People buy products or services from those that they know and trust.  The personal relationship took a backseat to other forms of competitive advantage in the 20th century as products rapidly evolved and mass production lines transformed the quality, price and distribution systems.  But all of those are now equalized again and it comes back to relationship; but even that has changed.
Relationship in the 21st century has graduated to a new level due to the electronics and communication technology that is ubiquitous.  Customers want to be able to talk to sellers at any time on any topic through at least one of their numerous communication devices.   This is the new competitive advantage.  Creating and building a relationship with the customer – not just be the sales person, but by the whole company.  Marketing has a relationship with the customer to co-create new applications for products and services.  R&D has a relationship with customers to test product features and performance.  Operations has a relationship with customers to let them know exactly where their purchase is in the operations and logistics cycle.  Service has a relationship with the customer to inform them when their product needs maintenance or upgrades.  The sales relationship is becoming one of the least important to the customer.
So what does that mean for product development?  It means that products need to be designed with communications technology embedded within them.  And that supporting services need to be designed at the same time to provide real-time continuous customer relationship interactions with the product.  Not just at time of sale, but throughout the product lifecycle.  The product’s features and functions may be a commodity, but when the product also enables and fosters a strong real-time customer relationship it can lead to a competitive advantage.  

No comments:

Post a Comment