Technology Companies Must Follow The Fashion Leaders!
Dave Brock, Partners In EXCELLENCE
(Download PDF Version)
Recently, I was speaking with a senior
executive for a networking systems company. He painted a scenario of a
new environment his company and their competitors were facing. It’s a
scenario, I believe, many technology companies face. Here’s how it
Today this company outsources all of
its manufacturing. It is done in several countries around the
More of the product development is
outsourced to other organizations, around the world. Product
specifications, system architecture, and high level design are still
done by the company, but the detailed design of the products is
The company invests significantly in
developing its brand, marketing, and distributing (through a variety
of channels), the product.
competitors, this company faced ever shortening product life
cycles. Competitors, “white box” designs, and other functionally
equivalent copies of their products emerged on the market within 90
days of their introduction of products.
Any feature/function/performance advantage they may have had was
rapidly eclipsed by these alternatives.
The rapid emergence of competition,
forced pricing and related actions, challenging profitability. The
shorter product life cycle also meant the company had to make its
money in a much shorter time than they had traditionally
This executive was struggling with these
issues as the new reality of the business and trying to develop
thoughtful strategies for continuing to build and grow the business. He
sought to better understand, where his company added value,
differentiated itself, and how it could profitably compete in this new
As this executive explained his plight,
I got one of those feelings of “deja-vu all over again.” This has been
the reality faced by both the fashion and consumer electronics
industries for decades. Much can be learned from them and how they
build their businesses.
What Do Consumer Electronics And
Fashion Companies Do To Differentiate Themselves?
The answer lies in about several key
Rapid recognition of new
trends/fashions or even creation of new trends/fashions.
Move fast, leveraging iconic products
in responding to new trends and fashions.
Rapid product development to respond
to those new trends and fashions.
Super targeting and segmentation.
Overpowering marketing and
distribution capability to rapidly capture the opportunity and
leverage the trend.
The willingness to have products that
don’t hit and the courage to kill them quickly.
The ability to make money with very
short product life cycles.
Let’s look at these in
Both fashion companies and consumer electronics companies invest in
building the power of their brand. Often the brand is their most
powerful differentiator. They create strong awareness in the
markets of the brand, they drive passion and excitement for the
brand, they create trust and confidence in the brand. For those
customers that are brand sensitive, they create a willingness to pay
a premium for the trusted or fashionable brand.
Rapid recognition of new trends,
creation of trends: Consumer electronics and fashion companies stay
at the forefront of trends, fads. They know their customers
extremely well. They engage their customers where they live,
identifying needs and opportunities the customers may not yet be
aware of. Their customers also look to them for identifying and
setting new trends.
Move fast, leveraging iconic products
to capture the hearts and minds of customer in responding to the new
trends. Products like the , the Motorola RAZR, the original Sony
Walkman create almost cult-like devotion, strengthening the brand
and the company.
Rapid development to address new
trends: These companies respond to new market requirements very
quickly, often they lead in hitting the markets. The development of
common platforms that can be easily adapted to the unique needs of
the markets facilitate this process. Consumer electronics companies
change features rapidly. Fashion companies adapt new fabrics,
colors, materials, style variants quickly. Many of these companies
have extended this ability to enable customers to custom design
their own products. I can design and order my own custom pair of
Nikes or Levis. I can “accessorize” my Motorola phone with new
faceplates, colored lighting alerts, and ringer tones. I can
customize my motorcycle helmet with graphics, liners, and other
Super targeting and segmentation:
Thee industries are great at targeting products and solutions to the
unique needs of each segment or niche. They may have a basic
“platform,” but this is modified with special features, functions,
or capabilities to address the requirements of each niche or
market. They use this capability to help differentiate their
products within the segment. Think of the success of the in
addressing a very wide variety of customers. Think of the various
versions of the addressing the unique needs and passions of their
customers. Their targeting is brilliant, imagine a model targeting
U2 fans! Imagine where this can go and how subtle but important the
differentiation is in engaging the passions of their customers. I’m
looking forward to the P-Diddy version!
Overpowering marketing and
distribution: These companies create strong marketing programs,
leveraging the power of their brands and the intimate relationship
with their customers. They leverage multiple channels, creating
wide distribution and availability of their products. They know
where their customer shop and how they want to buy. These companies
focus not only on the products, but also on the customers’ buying
experiences. They create environments through merchandising, stores
within stores, specialty stores, and other vehicles to create
environments that attract the customer and make them want to buy.
They are nimble in shifting channels through the product life cycle,
choosing the most efficient and effective channel to reach their
customers. They collect data and information about their buying
trends, constantly analyzing it to refine their messages, promotions
The willingness to fail: These
customers are fickle, not every product will be a hit. These
companies monitor the customer acceptance, quickly adapting their
strategies and willing to kill bad products quickly. They create
real life labs and experiments, launching products in test markets
before they launch widely. They don’t focus on building the single
killer product or application, hanging their future on the success
of that product.
They make money fast: If they are
leaders, they know their products will be copied by competitors.
They know they may not be able to support premium pricing, or that
fashions may change and demand may disappear.
What’s this mean for technology
There are many lessons technology
companies serving business market can learn and apply. Technology
companies servicing consumers are already doing these things.
Technology customers focused on the enterprise (large or small) may be
doing some elements, but may need to shift their business models.
Manufacturing and detailed product design
and development will be less important as differentiators for many
companies. Product definition, market understanding, responsiveness to
unique market and customer opportunities, and effectiveness in
distribution will be increasingly important.
The realities of the
global economy and the need to focus on core competencies, manufacturing
will increasingly outsourced to companies that can build products most
effectively and efficiently. Major portions of detailed engineering and
design will be outsourced to other organizations.
Technology companies will differentiate themselves on the richness of
the capabilities they offer their customers and the speed with which
they can identify and respond to customer needs.
Many technology companies will find
critical skills being platform definition and architecture, market
understanding and solution definition, product/solution management and
marketing, solution integration, marketing, sales, distribution, and
support will be key to the value they create and deliver. They will
outsource everything else to those that can provide those functions
Companies need to become more
customer focused. They need to live with their customers,
understand their needs, identify needs that customer have not yet
recognized. One of the most interesting fashion companies I have
worked with, lives with their customers every day. Their employees
are their customers, they know the thought leaders and fashion
shapers, they engage them in their business and product planning.
They are constantly at the events, concerts, shows, and activities
their customers participate in.
For years, much has been published about
sales becoming customer and solution focused. Today’s mantra must
be that companies must be customer and solution focused. Product
marketing, management, design need to live with customers.
Customers need to be embraced and become part of the entire product
definition and design process. Borrowing the advertising line from
a fast food company, customers will want to “have it their way.”
In 1993, Joe Pine wrote a great book
on mass customization. More than 10 year later, not much progress
has been made. Companies need to make their products very
configurable. When we speak of products, we are speaking of the
total product. Configuring the product features, services, buying
experiences, service and support experience is critical. Companies
will have to give customers the specific product, services, and
support they want, at a price they are willing to pay and that the
company can deliver profitably.
Create iconic products, that capture
the hearts and minds of the users. Use the power of this to create
raving fans in your customers, driving the power of your brand and
building the sales. In the bubble, we saw the trend of creating
“iconic leaders.” In all but a few cases, this has failed, but
iconic products still have great strength. Think of the power
created behind Salesforce.com, transforming the CRM industry.
This will change the product design
approach for many companies. Configurable platforms become more
important, modularity is important, standard interfaces with the
ability to integrate products from other companies will become more
important. “Plug and play” concepts become more important. Without
these capabilities, companies will not be able to respond to the
unique needs of specific customers or target markets. They will not
be able to profitably produce these unique products without this
strategy. They will not be able to introduce at the speed required
to capitalize on new requirements and needs without new approaches.
Much of the value of product design
function will be in producing the architecture and design definition
of configurable platforms, outsourcing the detailed engineering to
other companies. They will create further value by quickly
identifying and defining the new configurations and modules to
accommodate specific market needs.
Companies need to become packagers
and integrators rather than unique designers. This will cross all
product definition/design, marketing, sales and support. No company
can respond to all the needs of customers, the ability to rapidly
integrate other’s products, service, components into an offering to
the customer will is critical to creating differentiated value for
the customer. Packaging a solution to meet the unique needs of a
niche market; perhaps supply chain management solutions for cabernet
sauvignon producers in the Napa Valley, as an example; will be the
way companies deliver solutions that create unique value, responding
to the needs of markets and customers.
Strategic partnering may become less
important and project partnering may become more important.
Companies will need to become more nimble in quickly establishing
partnerships to address the unique needs of the customer. These
partnerships may be one time, for a specific customer project, for a
specific product requirement to address the market need. Skills in
building partnerships will have to be developed across development,
marketing, packaging, sales, and support. Companies will take many
roles in project partnering, sometimes they will be the lead in
delivering the end product to the customer, sometimes they will
support or be the supplier for the “prime.”
This practice will not only apply to
services companies, classic “systems integrators,” but to product
manufacturing companies. Dell, for example, has given its customers
tremendous flexibility in configuring systems to meet their unique
needs (note I said systems, not PC’s). I can buy my computer, the
software, printers, displays, and other devices from them and have
it integrated and delivered to my office as a complete system.
Sales and marketing will have to
develop new skills. They will be at the point of identifying
customer trend, requirements and needs. Marketing will do this for
markets, sales will adapt this to the unique requirements of the
customer. To be effective, each function will have to become
“expert” in the target markets, industries and customers. They will
have to become very good at listening to the “voice of the
customer.” They will have to learn to better question, probe,
quantify and qualify value. The key to defining, selling and
delivering these new solutions to customers is in the questions that
are asked. Additionally, they will have to become better and more
nimble in developing and managing project partnerships to deliver
these solutions to the customer.
Companies will have to become more
effective in collecting and using data about markets, customers, and
trends. They will have to have the ability to effectively mine the
data they collect, slicing and dicing it to discover new ways they
can approach their customers.
We work with many technology companies in
helping them identify and address new market opportunities. These
companies are very knowledgeable about the best practices within their
industries and with their competition. Sometimes, they look at best
practices of companies in closely related sectors.
There is much we have learned from the
fashion industries that creates great innovation in the technology
business. Watch the market savvy leaders. Don’t limit your focus to
the big brand leaders like Nike, Hilfiger, Oakley’s and others. Look at
some of the smaller fashion companies in specialized niches. Learn
from these companies and adapt their best practices to drive innovation
in your company.
Partners In EXCELLENCE helps organizations
develop and execute business, sales, and marketing strategies to
OutPerform the competition. We provide consulting, training, and
related services, developing the highest levels of performance in the
organization. For more information On Partners In EXCELLENCE services,
visit our website at
www.excellenc.com, or call for information at (949)305-7146.
Dave Brock is President and CEO of Partners
Credits: I would like to thank Eric
Anderson of Scorpion Sports, Patrick Lelorieux of Linksys/Cisco, and
Bill Taylor of Motorola for their insights and comments on this
Copyright 2004, Partners In EXCELLENCE, All