May 6, 2009

Untapped Innovation Opportunity

Business Week recently published its annual survey of  top executives’ ratings of the world’s “25 Most Innovative Companies.” About 80% are manufacturers. In every case but one, the spotlighted innovations have to do with the manufacturer’s product-service bundle: Nokia’s high-end devices, Samsung’s ever-better memory chips, Toyota’s “green” car interiors, Coca-Cola’s 2800 products (versus a few hundred ten years ago).

So, you may say, What else did you expect?

I expected – or rather, hoped also to see – some innovations in distribution. I was looking for creativity, success, and growing differentiation in the way companies design their channel systems, relate to their partners, create distinctive ways for customers to shop for their products, protect their retailers from competition, surprise their end-customers with whole new ownership experiences. There are a thousand possibilities that have nothing directly to do with a manufacturer’s basic product/service offering and everything to do with the way customers get that offering.

Admittedly, distribution is not always as sexy as creating an iPhone or Tata Industries’ $2,000 car. And that’s exactly my point. Don’t smart businesses seek whitespace where the competition isn’t? Don’t they try to win over the customer on a dimension where copying and fast-following is inherently difficult? If all the action is in new products, add another destination to the mix.

I monitor over a hundred industries for my work and teaching. And if there’s one generality I can safely assert, it’s this: Distribution is not yet the hotbed of innovation it will be soon.

That should tell you something about where the opportunities are today.


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