Organisations often spend a lot of effort on innovating their next product breakthrough but little time innovating the way they work. We need to shift our focus from just product innovation (the WHAT) to HOW our businesses are structured and function. Innovating the Enterprise Model is the imperative, here’s why.
Sharp Corporation (Japan) is in trouble and will not survive.*
I remember my electronic goods buying philosophy in the noughties was (A) check out Sony’s products and then (B) buy the closest Sharp product (cheaper but still made in Japan). Having worked with Japanese companies when based in Asia I knew their approach to quality and I defaulted to Japanese made electronics for years. If I look at my lounge room now I find an LG (Korea) TV and an LG digital recorder. It seems I am not alone, with Sharp’s share of the flat screen TV market having dropped from an impressive 22% to less than 5% from 2004 to 2012. Over the same period, market leader Samsung went from 10% to 29%. (recent market shares for Samsung and LG have been 22% and 14% respectively; Sony 6.5%, Sharp < 3%)
Now Sharp isn’t some hi-tech start-up that had a one hit wonder-product. Sharp is 104 years old and was made famous by the mechanical pencil. In fact, their company name came from this product; the Ever-Sharp mechanical pencil. They pioneered the first commercial versions of the transistor calculator in 1964, the LCD calculator in 1973 and the first camera phone in 2000. From 2005 to 2010 it was the market share leader in mobile phones in Japan.
Some amazing products, over such a long time and yet they will not survive. Most of today’s market darlings are just like Sharp. Most of them have an amazing new product or two that have taken markets by storm, Apple being Exhibit 1. But truly impressive product innovation is proving not to be enough because markets are fracturing along technological, geographic and demographic fault lines. (Think Kodak, Napster, Motorola, Nokia, Polaroid, Blackberry, Nintendo, Palm) Globalisation is relocating entire production industries to different countries, consumers adopt newer better products faster than ever, price and performance comparisons are easy to make and ubiquitous. Never before have we needed to innovate how we work as much as we worry about selling our next novel product. And beware if you haven’t even got a new product to sell.
Here is some advice on how to work the HOW, to design NEXT
COMMUNICATION MODEL
Where is demand for your product growing most rapidly? Does the same sales and communication model work as well for this growth market as before or is it better served in a different way? Sharp was less successful in emerging markets than developed markets. The two choices for you to make are
Should we sell face to face or over the airwaves?
And using either of the above, are we best to communicate directly to our customer or is someone else better positioned to do that?
What should your mix of Direct Sales, Distributors, Agents, Advertising and Content Marketing be?
BUSINESS MODEL
Is your current business model the best for the times? Sharp invested heavily in LCD manufacturing factories. Does a consumer brand and product innovation company have to manufacture and what is the cost to do so? Is your product under more and more price competition? Where does building a service business fit in your future?
DIFFERENTIATION MODEL
How do you differentiate? If I go to your competitors’ websites will they say the same things you do? Are you truly different? You must excel at ONE of these – Best Product, Best Customer Experience or Best Price and daylight needs to be a clear second along that ONE dimension. Sharp had the best calculators and the best camera phones but when they lost their positions – where could they have gone next?
REVENUE MODEL
What revenue model should you have? Do our customers want to rent or buy? The rise of subscription models are clear evidence that our markets are less predisposed to ownership than they used to be. Are we charging for utilisation or a definitive ownership transaction? This is often linked to the business model in place but changes can be made.
If you feel like you are constantly needing to SHARPen your pencil (so meant to make that pun), it’s a sure sign you need to innovate the HOW as much as the WHAT.
* very likely to be acquired by Taiwanese company Foxconn. Sharp has over AUD 8 Billion in interest bearing debt.
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