Sometime in the middle of next year, China will surpass the U.S. in gross manufacturing output and take the top spot globally, a position they haven’t held since 1830. The U.S. response – no big deal. At only 14% of GDP, product manufacturing matters less and less in the States. Like the rest of the world, what matters most is the service economy. But with so many firms turning to service as a source of income, differentiation has become much harder. With smart IT and even smarter people, we have all become fast duplicators of each others’ service models with not much staying power for the “new new thing” in service.
A few firms are going back to the fundamentals of market innovation in search of clues for how to stay ahead. These firms pull back from a specific product or service offering and attempt to understand the totality of a desired experience. Mapping consumer behaviour completely, organisations like Best Buys and Netflix, uncover and work with more extensive “end-to-end” models of what the consumer is trying to achieve: how they wish to live life to its fullest, please or impress others or in some way get ahead.
These companies are tapping into a vein of innovation which lead to new levels of competitive advantage, translated to greater share, reduced need for customer interaction and higher price premiums. Others who are too siloed or mentally complacent, will end up fighting at the price-end of the market, using incremental product change, channel redesign or simplistic strategies such as China off-shoring as their basis for competing. CEOs need to guide their organisations to think in the same vein of innovation: beyond product, channel, and traditional forms of service to find a new source of differentiation.
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