"The Cure for Industry Incest"
By: Perry Sink Marshall
Let’s just admit it, all industries are incestuous.
I work in not just one, but three different industries. And it’s not just true in automation; people in all specialized industries look to each other for ideas, direction and even employees.
If you make terminal blocks and you need an injection molding production specialist, why risk using a guy who’s been making rubber wheels for the last 20 years when you can hire someone from a competitor instead? You get a ”known quantity“ who already knows about terminal blocks.
That’s all well and good, but when we spend all our time watching each other, we lose our ability to see the forest for the trees. Incest within a niche has a funny way of making us all get a little bit dumber every year. Many of us are smarting from the recessionary doldrums, and now that companies are starting to regroup and recover, it’s a good time to re-think some traditions and look to the outside world for innovative ideas.
The Dark Specter of Commoditization
The convergence of software platforms, the rising power of computer chips, the declining prices of PCs, the use of consumer products for industrial applications and the globalization of everything has most companies scrambling to keep their margins up.
Well I have a success formula for escaping commoditization. We’ve all heard the term ”value added,“ and it’s the right idea, but I’m here to tell you that just adding value isn’t enough. You have to go much further than that. All of you will recognize this but you probably do not had a good term to describe it. I call it ”widget making.“
The term widget, the way I’m using it, is the creation of a business within a business, a category within a category and an experience outside of the ordinary. Widget creation is the invention of a quasi-category that didn’t exactly exist before. It’s the real magic behind brilliant marketing and it’s best taught by example.
Free Computer + three years ISP
A shining example that came out in 1999 was the free computer with three years of Internet access. What a brilliant model. This appeals to customers in all sorts of ways: little or no money up front to buy a computer, paid for by a monthly fee. Most customers were new computer users who didn’t have any prior experience with an internet service provider (ISP) who might have made them cautious of a three-year commitment. It’s great from the company’s point of view because the ISP controls the information.
The formula: product + long term service commitment = attractive rebate on product and guaranteed revenue stream for several years.
America On Line (AOL)
AOL has done an impressive job of creating a widget especially for non-technical and inexperienced computer users. AOL started entering the limelight back in 1995, and at the time the world wide web was in its infancy–talk about missionary work. Of course prior to 2000, the Internet was a very dangerous, ”wild-west“ proposition for all businesses that played the game. AOL acquired customers profitably all along the way, and in fact some people think that AOL is the Internet.
AOL’s formula: multiple AOL CDs distributed to everyone in North America + very easy setup + 100 free hours + responsive customer service + software that funnels the user into AOL’s communities + AOL chat rooms and message boards + the proprietary AOL instant messenger = the world’s largest ISP; enormous profit; the industry’s highest monthly charge for dialup service; a captive audience for targeted AOL-originated spam; product and service promotions and enormous leverage with partnerships; and a merger with Time-Warner.
AOL’s entire success is based on relentless promotion and the non-stop creation and addition of widgets. A brilliant business–one that you should copy in every innovative way you can.
Widget making is based on any or all of the following concepts:
- Don’t just make a promise. Make a bold guarantee;
- Don’t cut price. Add value;
- Don’t sell a la carte. Sell in packages;
- Don’t sell a product alone. Combine it with a service;
- Don’t sell a service alone. Combine it with a product;
- If you’re selling a product, promote the service aspect;
- If you’re selling a service, promote the product aspect;
- Once you have figured out how to bundle products and services, take it to the next level: create an experience for the customer;
- Use this total experience to tangibly sell the emotional benefits of your company to customers and skillfully push the customer’s hot buttons;
- Develop the total experience into multiple levels of involvement, with increasing status and rewards associated with each higher level. Create an esteemed status where "elite customers" have special access to you.
So my challenge to you is this: look at everything you do, even the stuff that you don’t sell or charge for, and ask yourself, Can I promote this and offer it to our customers in a re-packaged combination that’s somehow different from everyone else? Is there value we can deliver that we’re not taking advantage of?
I can assure you, there are synergies in you that you haven’t discovered yet. Put them to work and escape the fear of commoditization forever.
"Originally appeared in Manufacturing Automation magazine, (C)2002 CLB Media, Canada"