Persistent Value PropsMay 19, 2010
I’ve been asked at times to describe the I3 Principles (innovation, indispensability, and inspiration) for the value propositions for companies that have been in the lead for a long time. That is to say, how can they still be innovative after all these years? How are companies like Southwest or Nordstroms still innovative today? How are some of these other companies innovative in the context of – or in consideration of – the fact that their value proposition has been around for so long?
And so I started thinking about the different structures for mature companies that are clear leaders in their field and who maintain their leadership. I thought about things like reputation and reliability and the basic continued return on investment for their buyers as possible principles around those value propositions that seem to be perennial. As I thought about it, I realized that innovation maintains its freshness in contrast to the lack of innovation from competitors.
To put it in another way, Apple’s iPod and iPhones were themselves major innovations when they came out. In fact, they were hyper-innovative. Yet in many ways, they have been duplicated by competitors (ie: Microsoft Zune and some of the other smaller MP3 devices). But in reality, they have not been outclassed or transcended by any other development.
At Southwest (as I have opined in prior blog posts) has dialed into its customer value proposition that makes regular travelers into raving fans. [The Real Thing… The Heart Thing] Yet in spite of the fact that they practically offer a cookie-cutter template that competitors can observe – those who have tried to imitate them have failed [see the aforementioned TED and SONG]. So, the reality is that for the market of consumers who fly, or those who buy a musical device, innovation really means a distinct value. Distinct and separate from the rest of the pack. Southwest maintains their distinction, partly because others have failed to duplicate or exceed it – even 20 years later.
Starbucks has myriad imitators, from Seattle's Best to Saxby’s to Dunkin Donuts and so on. Starbucks’ own recent growth issues have more to do with pushing growth beyond the saturation point in the marketplace. I mean, even in the middle of a recession they still maintain their first-place position – no one has done better or better enough that they stand out as superior to Starbucks in a way worth switching too. (See Consumerist Post)
So here we have it, if you are a true innovator, you help to develop or refine, or define, how a category functions in a new way to your consumers. If your competitors can only come up with a ‘matching you’ perspective, you can maintain your first ‘ I ‘ of the I3 Value Proposition. Still, you need to innovate a strong defining point about why your value to your target market still stands out and is still worthy of their continued consideration and patronage. So, another way of saying this is that the innovative portion of I3 is directly supported by the Indespensible nature or your offering. That is, the persistent “goodness” that your value proposition delivers over time to your target market.
The inspirational component may actually wain before the newness or the distinct fact that you stand alone wears off. In that, it is a shorter-term, an ’emotional hit.'
Perhaps, inspiration is the weakest of the I3 dimensions for creating a persistent offering. However, one could say that (referring to the previous example) that Apple competes against itself and continues to innovate. So you go from iPod to iPhone and from iPhone to iPad with raving fans more and more excited for each subsequent deliverable from the company.
With Southwest, they responded to competitors charging for luggage and specifically that they do not charge for luggage. But they do charge for priority queuing. I happily pay for priority queuing because it is reasonably priced and adds value. Although it means a lot to me, it may not mean anything to anyone else. However everybody has to bring luggage, so you can’t help but feel ripped off for that expense. Not everybody needs to board the plane first, and ten dollars is a small price to pay for that [Southwest Priority Boarding].
So the message here is to really understand if your offering -or the offering you are thinking about or working on- really does have freshness in the market, long term value, and if you are doing it in any way with grace and “style notes” that make it stand out just on the elegance of how you put it together. This is true, whatever the value chain you’ve strung together to service the needs that you are meeting in your market.
A recent letter from a long time client of mine (in the chemical distribution business) opined that many of his competitors have actually disappeared. For them, this means that they have been disintermediated by the manufacturers selling directly through the internet. However, his firm remains stronger than ever because, in his terms, “they want what we got, which is a level of customer service that was new to the market when it was introduced 25 years ago and remains fresh to this day.”
Is your value proposition delivering Persistent Value?