„Every industry has its own rules, that is how it is.„ You hear this statement again and again if you talk to long-serving co-workers and managers of a company. The general conditions of an industry serve as guidelines, benchmarkand many times as decision support for the own company. However, if a company takes industry rules as given, its products and services don´t differ from that of the competition. In conclusion the price dominates the buying decision of the customer.
Despite customer benefit no differentiation
Research, development and technical innovation are the driving force for market development and industry growth. Therefore, it is logical that leading companies of an industry compete for the title of the innovation leader. That technical innovation doesn´t always lead to the desired differentiation can be shown with an example of the window industry.
The companies of this industry have been concentrated on improving their windows’ thermal insulation properties. The benefit is clear because the customer saves energy costs. In the last few years, big window producers focused on lowering the u-values of the windows and also communicated this in every marketing document. For most of the customers these values were difficult to understand and the benefit of the low u-values had to be explained in detail.
Aggravating this situation, the necessary technical innovation, to improve the thermal insulation of the window, cause high costs.
We can mention here the R&D costs or costs for special items, which need to be purchased or produced, like glasses with more panes or special hinges that can hold the weight of the window sash. A differentiation through thermal insulation of the product WAS and IS for window producers difficult and the price remains the determining criterion for the window purchase.
Break the rules and revolutionize the market
The past has shown that especially the companies which didn´t follow the rules were the most successful and changed whole industries. We can mention here many international successful companies like for example RyanAir, Uber, etc. But we like to stay in the window business and mention here an Austrian company. The innovation efforts of this company did not aim to technically improve the product.
Rekord Windows discovered (for themselves) 10 years ago that delivery time is a field of innovation. At that time but even today windows have a long delivery time (4 to 8 weeks), which is very annoying for a tight building schedule and can cause follow-up costs. At Rekord, windows are produced only in 9 business days. Rekord produces a standard window even in 24 hours. This benefit can be easily identified by customer.
To buy windows and doors for a whole house is a big investment. You can inform yourself about the characteristics of the products at every window producer but there is no information about the price. Rekord has taken up this topic and launched an “Online-calculator” on their website. A benefit of this calculator is to give the feeling of security for potential buyers because they know the amount of the potential investment from the start.
Rekord can guarantee low prices, because the customer, if they want to, can take over processes (e.g. taking measures or install the windows) that take some time and cause costs.
Where is innovation necessary?
You should ask yourself this question at the beginning of all innovation projects. It is worth to analyse the industry and detect innovation gaps or how Kim/Mauborgne calls it, to identify a „blue ocean“. „Blue oceans“ are markets or fields of markets without competition. These markets are characterized by offering a relevant benefit for a broad range of customers or non-customers, which they can´t find at other companies.
This is how you can find out which rules you have to break and where is innovation necessary in your industry:
- Describe the dominant business model of your industry.
- Identify fields, which are always in focus regarding development and fields which were not developed for a long time.
- Ask yourself, how can you generate added value for the customer and reduce costs at the same time.
To lead your company to sustainable growth more effort is necessary than „business as usual“. You have to turn the general wisdoms of your industry upside down.
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