The Press, March 2005
It's official. Kiwis are not the great innovators our number eight wire mythology would suggest.
According to the Government's Economic Indicators report (February 2005), New Zealand lags behind many other developed countries in our ability to produce commercially successful innovations. We are "introducing new products and processes at a similar rate to EU firms," says the report, but "patenting, an indication of the effectiveness of R&D in generating commercial applications, is . . . well below the OECD average." Overall the report gave New Zealand a low, but improving, ranking on innovation.
We are up there with anybody in the world when it comes to dreaming up new ideas - our garden sheds are full of budding Bill Hamiltons, Gil Simpsons or John Brittens. But we struggle to consistently translate this talent for invention into commercial success. That's because you can't rely on a clever product to differentiate yourself in a market. Sometimes a clever product is only a 'table stake' i.e. what you need to get into the game.
Four broad strategies exist for competing in a market:
- having a better product, like Sony, Apple or 3M.
- offering a better price, think the Warehouse, Pak'n Save or Challenge.
- delivering better performance (easier/quicker/stronger), McDonald's or NZ Couriers are examples
- creating personalisation - in experience (e.g. Koru Club, Corporate Cabs), or in what people identify with (e.g. Nike, Heineken).
This is not to say you can be successful by focussing exclusively on one strategy. Any successful company will have elements of most, if not all. What is important is choosing one where you can be clearly better than your competitors.
Some local examples help illustrate the point. Two Christchurch-based success stories are payroll software provider Payglobal and the local branch of Tony's Tyre Service. Their products are not particularly innovative in themselves - payroll was one of the first areas of business to be computerised, and tyres are tyres. They have not invented anything fundamentally new in a product sense, but they are still creating value for customers in a new way, which delivers financial success.
Technology companies can see product innovation as the only route to success, but PayGlobal hasn't built its success on creating a radically different type of product, but by delivering that product better than many of its competitors. Of course PayGlobal have innovated with their product, but they have probably differentiated themselves more by offering better performance for their customer - it works more reliably, it's easier to install and manage etc.
Tony's Tyre Service is another great example of competing on something other than product. Virtually every garage in Christchurch sells car tyres, but Tony's have made a real impact with a strategy of focusing strongly on their customer, creating a unique, personalised experience.
I first heard about them from a neighbour. They provide free tyre fixes as long as you place a small promotional sticker on your back window. I needed two new tyres so went along. From the first contact they were intent on looking after me and making my experience a great one.
They clearly explained the steps to get my tyres sorted, offered me a car to use for the morning and sourced the cheapest tyres. When I came back to pay they spun a prize wheel which gave me a 50% discount. What an experience, the service was amazing and so personalised. I have told at least 12 people and am now writing about them.
Another company which up until now had a clear competitive strategy has been in the news lately. The Flight Centre has been a strong competitor in the travel market by consistently differentiating on price. Now a powerful new competitor in the form of the Internet has entered the market, and the Flight Centre's market space is not so clear. If all you want is the cheapest ticket - no extra service, no product innovation, just the cheapest - then the Internet is the answer. Either the Flight Centre can try to build on its reputation and compete against this new threat or it may have to change its positioning, a much harder ask.
To become a nation of successful innovators our number eight wire heritage isn't enough. Garden shed genius needs to be augmented with the kind of market understanding that reveals where a company's competitive strength lies. Understanding and focussing on the most effective competitive strategy - whether its product, price, performance or personalisation - is crucial to sustained success.