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From the author of A More Efficient Icemaker

A More Efficient Icemaker

When companies run into situations where their products cease to sell, or they're unable to produce new market innovations that deliver increasing revenues, it's common to attack the sales force. After that approach fails to deliver new sales, another common tack is to change directions completely. Instead of trying to understand why the Eskimo consumer doesn't want our "new and improved" ice, we cease trying to innovate new ice, focusing instead on improving the company's internal icemaking machinery and processes. Instead of increasing revenues, let's cut costs!

I'm all for decreasing production costs and optimizing supply chains, provided that—wait for it—the consumer still gets exactly the same product as before. Not ice made with corn syrup instead of sugar. Not plastic components instead of metal. Not "five miles per hour" bumpers that are really just cheap plastic shells placed where a bumper is supposed to be. Repeat it with me: exactly the same product!

Otherwise, you've changed two things, not one. Yes, you may have lowered your costs. But, at the same time, you've decreased the value of your product to your consumer: short-term revenue gain, long-term innovation loss.

Let's consider my favorite candy bar example. (Sorry, I don't have an ice example.) Growing up, I had a favorite candy bar. (I won't mention the name.) It was a staple afternoon snack for many of us while working construction crews on hot summer days in Texas. Truly energizing, and it helped to replace lost electrolytes in the days before energy drinks came along.

Then the manufacturer of my favorite candy bar replaced the sugar with corn syrup. Replaced larger peanuts with tiny little "leftover" peanuts. Shrank the amount of the central nougat layer to the point that it was hard to find. These changes occurred over probably 10 years. I don't eat this candy bar any longer. It no longer has the appeal it once had. It's too sweet (from the corn syrup), too prone to have nasty-tasting nuts (using tiny nuts increases the likelihood of one or two little nasty-flavor bombs), and has very little actual candy left in it (shrunken nougat). The manufacturer kept cutting costs in order to maintain/increase revenues, and in the process incrementally destroyed the value of the product. Now it's a sad reflection of the quality product of the past.

Allakariallak, our Inuk Eskimo, doesn't care whether you saved money when making his "window ice." If he can't light his igloo as clearly as before, your product is a loser. The problem is that decreasing costs incrementally over time can decrease the quality of your ice in increments that are imperceptibly small to you, staggeringly visible to your consumer. We assume that the consumer has accepted these "small" changes and that the market is secure. In reality, the value of the product continuous to fall and one day appears to plummet.

Recommendation: Never, never, never stop innovating your products. NEVER! Did I say it loudly enough? Stop depending on recursive incremental innovation, and shift to more disruptive innovations.

If you think that you can't innovate your products any more, and that the only way to increase earnings is by cutting costs, it's time for you to change markets. Sell off the product line. Give up. Go! Don't destroy what your company spent so long creating. Don't destroy the foundational value of the product.

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