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Brand Differentiation

Why “Product” Is Experiencing A Renaissance


Why “Product” Is Experiencing A Renaissance

The key competence around building shareholder value in retail used to be location. People didn’t have the opportunity to go much farther than the corner store. Then it was distribution. The railroads gave consumers the opportunity to enjoy different products produced at scale, which lowered prices and gave them brands they could depend upon.

We then moved to an era of product, especially in the automobile and appliance industries, largely fostered by the innovation that was a peace dividend from World War II. We got better cars, washing machines, television sets, even better apparel. The leather bomber jacket was invented in World War II, as was Silly Putty, the radar, the microwave, the transistor, and the computer. That led to the financial age, in which a group of companies, using cheap capital to roll up other companies into conglomerates, built the ITTs of the world. This in turn was followed by the great brand age of the eighties and nineties, when the key to building shareholder value was to take an average product—shoe, beer, soap—and build aspirational, intangible associations around it.

We are again back to an era of product, as new technologies and platforms—be it Facebook or Amazon user reviews—let consumers conduct diligence across a broad array of products in a fraction of the time it used to take to shop. The ability to conduct diligence has never been easier, which reduces the need to default to brand or reputation. Now, the best product has a better chance of breaking through the clutter—whereas before, the best product without any marketing was like a tree falling in the forest. Moreover, the injection of digital “brains” into otherwise static, inanimate products has ushered in a new wave of innovation in which custom, personalizable apps can be quickly downloaded and upgraded without the need to replace the original “box.”

A mattress is a mattress until you get an iPad and some basic technology. Then you can program in an “ultimate sleep number,” and so can your partner. Or you can order the best mattress online, avoiding those damp warehouses called mattress stores, and have it delivered in a box and (cooler yet) watch it unfurl when dumped out of the box.

I have to take my car to the dealership to get a tune-up. My neighbor has his tune-up transmitted wirelessly into his Tesla’s operating system. The engine receives an upgrade and instructions to remove the speed regulator, and the car’s top speed increases from 140 to 150, remotely. Do you remember who made your landline phone, before chips and wireless set them free?

Nearly every product in the world, even products and services that appear to have been commoditized, have forged new dimensions and consumer value, enabled by cheap sensors, chip sets, the internet, networks, displays, search, social, and so on. Today, almost every link of the supply, manufacturing, and distribution chains has a new means of differentiation. All of a sudden, products driven by technology and defensible IP are the bomb.

However, don’t be trapped into thinking that product differentiation is about the widget you’re selling. Differentiation can occur where consumers discover the product, how they buy it, the product itself, how it’s delivered, and so on. A worthwhile exercise is to map out the value chain of your product or service from the origin of the materials through its manufacture, retail, usage, and disposal . . . and identify where technology can add value, or remove pain, from the process/experience. You’ll find that this value can affect every step—and if you happen to spot a step where it hasn’t, start a new company there. Amazon is adding technology and billions to the fulfillment segment of the consumer experience that will likely create the most valuable firm in the world. Before Amazon, ordering from Williams-Sonoma meant you would pay $34.95 to get the product in a week. Now it’s free in two days or less. The most mundane part of the supply chain ended up being the most valuable in the history of business.

The Power Of Removal

When brainstorming for new ideas, entrepreneurs have a tendency to focus on what can be added—how to enhance the experience— instead of what can be taken away, thus making it less painful. But I’d argue that the majority of stakeholder value created over the last decade has been a function of removal. We, as a species, have mostly figured out what makes us happy: time with loved ones, physical and mental stimulation, substances that heighten or deaden those feelings, Netflix, and sassy church signs.

You may be tempted to think that competitive advantage in the internet age comes down to simply “more for less.” After all, that’s an obvious edge enjoyed by Amazon. But what about Apple? It’s almost always the premium-priced brand—and though its products are typically better than the competition, they usually aren’t that much better for the prices Apple charges. I would argue Amazon could charge as much for its products as do its brick-and-mortar competitors . . . and would still dominate the marketplace. Why? Because it’s still infinitely easier to hit a couple keys on your computer to buy a book or a piece of furniture than it is to drive down to the local mall, find a parking place, walk a half mile, be overwhelmed by tons of irrelevant merchandise, and then lug your purchases back to your car for the drive home. Amazon has removed all that friction and brings your purchases to your door for less than the cost of gas for your own car.

So, while it may seem that the value explosion brought by the technology revolution comes from the addition of new features and capabilities, its greater contribution comes from removing obstacles and time killers from our daily lives.

Friction is everywhere. For example, there is a ton of friction in transportation. That’s why Uber saw an opportunity, via GPS, texting, and online payment, and removed the pain and anxiety of ordering a car, wondering “where the hell is the car,” and fumbling around in the back of the car at the end of the journey trying to dig out money and pay. How many of us recently have bombed out of a taxi without paying because we’ve become so used to frictionless Uber? Bottom line: paying is friction, and it is disappearing. Just as hotel checkout disappeared a decade ago, check-in will be a thing of the past in another ten years. Some of the better hotels in Europe no longer require you to sign a bill after a meal. They know who you are and will charge you. Less is more.

Each of the four dominant brands of our time has a superior product. It sounds old school, but Google really does have a superior search engine. The Apple iPhone is a better smartphone. The cleanliness of Facebook’s feed— coupled with the “network effect” (the fact that everybody’s on it) and a constant stream of new features—makes it a better product. Amazon redefined the shopping experience and expectations: from 1-click ordering to getting your product within two days (or in hours, soon by drone or a truck UPS used to own).

These are tangible innovations and points of product differentiation. All have been achieved through access to cheap capital set against deft technological innovation. “Product” is experiencing a renaissance. If you don’t have a product that is truly differentiated, you have to resort to an increasingly dull, yet expensive, tool called advertising.

Contributed to Branding Strategy Insider by Scott Galloway, excerpted from his new book The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google, in agreement with Portfolio, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC.

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