Something you can sell
Product innovation: a new strategy for the next millennium
By Robert J. Lyons -- Industrial Distribution, 4/1/1999
BUSINESS GROWTH: IT'S THE KEY TO SURVIVAL in today's increasingly competitive business climate. But while the means of growing a business can vary from company to company and industry to industry, it's clear that some ways of achieving growth are -- in the long run -- more successful than others.For example, acquisitions and mergers -- whether fueled by junk bonds (as in the 80s) or the ongoing trend toward market and supplier consolidation of the 90s -- have proven to be one way for companies to grow their bottom line. So, too, have the trends toward alternative markets, aggressive pricing strategies, and global setting. But increased exportation and an emphasis on new markets and pricing strategies can take a company only so far. Worse, when over-relied upon, they can actually undermine an organization's existing customer base (i.e., the distributors who contributed to the original success of the company.)
Though this is by no means an argument against acquisitions, global selling, or any of the other strategies mentioned earlier, I would like to encourage a rededication to the seemingly old-fashioned notion of innovation.
Remember: innovation can take many forms. In some cases, it can mean new product offerings, new packaging, or new marketing programs; in others, it may translate into better training, service and information systems.
But whatever form it takes, the single thing that separates innovation from the other types of growth I mentioned earlier is its ability to increase margins for both the manufacturer and distributor. In fact, there is no greater way to build trust and partnership between a manufacturer and a distributor than for both parties to increase sales and profit together.
Note, however, that innovation is impossible without a thorough knowledge of your customers and products. At our company, this goes beyond knowing our distributors and the significant impact they have on the value of our products. We acknowledge and applaud the fact that our distributors continually seek new and ever-more innovative strategies for information sharing and electronic data interchange. Obviously, these issues significantly impact transaction cost and therefore result in major savings for everyone involved.
But important as this is, is it really the only way to encourage innovation? What about learning the likes and dislikes of the end user? Or discovering what constitutes quality and long performance from his point of view? Finding ways to make a product more user-friendly is still more important in the long run than any other type of innovation we can implement.
This has been a successful strategy at our company for some time. In recent years, we've introduced more than 50 new products -- all of which incorporate significant product innovations benefiting the end user. In some cases, this meant ease of use; in others, longer performance life. Many products offered both.
But most importantly, these innovations offered our distributors something they could sell -- a way to differentiate our products from the numerous other brands available, while simultaneously establishing increased value for the end user. And no matter what business climate you're operating in, product enhancement, differentiation and value always equals increased margins and profits for distributors and manufacturers alike.
-- Robert J. Lyons is president and COO of HBD Industries, Inc.
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