Bruce Burton

Are your products and services becoming commodities? Here’s what to do about it.

A different kind of double-exposure

I read with interest the article in SmartCompany’s Trends & Ideas column earlier this month, on a report in The Australian Financial Review by John Davidson, lamenting the somewhat surprising decline in sales of compact digital cameras. Both volume and value fell in 2006.

Davidson wrote that GfK  researcher Derek Nash believes it is a maturing market now that, with seven million cameras across Australia, many people are on to their second or third model.

It seems that these tiny bundles of technology are going the way of desktop computers and becoming simple commodities despite being armed with ever-greater technical capability. It is probably not surprising, since they are competing with the ubiquitous mobile phone camera.

The story made me think about what the giants of camera technology, including Canon, Sony and Nikon, could do to prolong the life of an important product category, and how they could prevent their offerings becoming irrelevant. Last time I counted, there were at least five typical strategies that need to be considered, when faced with such an inevitable situation.

The first and most typical option is to continue to improve the performance of the core product; that is, improve its ability to perform the job/s for which it has been bought.

To do this successfully, it means finding any important but unmet customer needs (innovation opportunities) that have yet to be identified, rather than simply adding to the technical performance as the incumbents seem to be doing.

It’s not uncommon when performing this type of job that customers have upwards of 150 different needs, outcomes or metrics of value. And even finding a few needs that are very important but poorly served can lead to a breakthrough product (the heart stent had only one).

Another approach is to zoom in on segments of consumers rather than trying to be all things to all consumers in the broad market. I’ve found the best way to segment for innovation is to find groups of consumers that all have the same important but unmet needs, and this rarely if ever leads to traditional segments defined by demographics.

The advantage of this approach is that it allows you to create products carefully tailored to the needs of the segment and follow it with targeted promotional messages that connect solidly with consumers. (Have you noticed one camera manufacturer targeting a segment for which it is likely their camera will be eaten by a slobbery dog?)

Of course the camera producers could always try the Apple iPod strategy, of enabling the next generation of products to do lots more jobs than they can now. Just as the iPod enabled teens to do lots more jobs than standard MP3 players could (share music with friends, create playlists, access new music etc), there are no doubt many other jobs that cameras could be configured to do.

Even then, innovation doesn’t have to focus just on the core product. Why not apply innovation techniques to the augmented product; you know, service delivery or the business model. Pioneer has been successful with its “complete plasma experience” by adding free installation and set up. And Michael Dell  reinvented the business model for how PCs are ordered and shipped to customers, in the process significantly expanding margins and his return on investment.

But if all else fails, there is always a disruption strategy. I’m sure it won’t be long until we see an inferior but vastly cheaper technology selling for under $20 and being sold to Luddites like me who just want to take a simple photograph!

Bruce Burton is the managing director of Nascentii , an advisory firm that helps its clients find and exploit market opportunities.

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