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Innovation And Commoditization

by Doug Davidoff | Mar 1, 2007 11:50:56 AM

Lori Colman has an interesting post on B2BMarketingTrends. She writes that Innovation is the Antidote for Creeping Commoditization. I encourage you to read it because she makes some nice points about the importance of commoditization and how to identify signs of it in your company.

There are, however, two points, where she misses the mark. The first is in the very claim that innovation is an antidote for commoditization. Most innovation actually has the effect of further commoditizing an offering. Why? Because all most innovations do is increase complexity. This increased complexity further frustrates and overwhelms customers who were already having difficulty understanding how the original product would improve their life. The innovation you add becomes another thing they don’t understand. In the process of trying to understand, buyers are forced to simplify. As they simplify, the innovative differences you’ve presented to them become more and more meaningless. When the customer reduces your offering to the lowest common denominator, it is difficult for them to see any difference between you and the rest of the market. This drives them to commoditize your offerings even further.

The second point is in her concept of what a ‘brand’ is and the importance of ‘differentiating’ your brand. She says:

Identify the basis for differentiating your product from all the similar products in its category. Analyze product features and product quality. Look at service and support systems.

This is the classic mistake that companies make. They try to ‘differentiate’ themselves from others based on product or service attributes. What they fail to realize is that the product or service is the very thing that is being commoditized! This leads to messaging and sales efforts that focus on the offering. When that happens, customers commoditize.

The difference, especially in B2B offerings, lies not in the offering itself, but in the expertise and knowledge a company has in applying their offering to solve customer problems. I call this ‘wisdom’. It starts with understanding your customers better than you customers understand themselves. When innovation is focused on solving customer problems, rather than ‘making offerings better’ it is a great start to avoiding or escaping commoditization.

The idea that companies control their brands or that they can control whether or not they differentiate themselves is an old, industrial-age based idea. Today, customers control your brand – the best you can do is to put everything you’ve got into enabling customers to give your brand a compelling, positive meaning.