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Decommoditize Yourself! – Coating Products in Meaning

Posted on June 4, 2013 by David

Last week I travelled to Phoenix, Arizona to attend the annual meeting of Electro-Federation Canada and to deliver the opening keynote address. The association works with the electrical, consumer electronics and telecommunications industries and its membership consists of manufacturers and their agents and distributors throughout Canada. The issues that they face are common to many such groups – relentless change and the progressive commoditization of their products and services as a result of globalization and technological advances.

I set out to give them a different perspective on their industry, looking at it as an ecosystem and at the firms within it as ecological processes, rather than just as economic structures. After doing that, I gave an ecological approach to answering the questions, “So what?” and “Now what?”.

The Product Life Cycle Revisited

The forces of commoditization are powerful; the principal ones are technological progress and innovation in a context of capitalism. An idealized product life cycle captures this market dynamic well, showing how functionality is critical in the early stages of a product’s life, when it does a job that can’t be performed easily by others. This is the time when the brand names are established and a great brand can develop a functionality all of its own. The greatest of these, the so-called “cult brands” attract a clientele who see the brand as the essence of the community to which they belong and an expression of their own identity. No one buys a Ferrari for basic transportation or drinks Dom Perignon champagne to slake their thirst! Such consumption is part of a personal narrative, an expression of who they are.

An Idealized Product Life Cycle

Some brands remain a niche cult, especially when their availability is inherently limited. But if they grow they will encounter competition with others trying to emulate their functionality: reliability become important, and then, when a so-called “dominant design” emerges, convenience of purchase and consumption will loom large. Eventually the product is likely to become a commodity, where price is critical and competing brands are barely distinguishable from each other. The industry enters “commodity hell”.

The foregoing description is an idealized product life cycle and one has to understand its limitations. A.G. Lafely, the former CEO of P&G, who has recently returned to take the helm, is widely reported to believe that the product life cycle “does not exist”. As far as P&G is concerned, he is right. As I pointed out in The New Ecology of Leadership, scale matters. One can only “see” a product life cycle if one is distant from it in space and time. When one is close to the product, like P&G, one is in a position to continually reinvent it – the life cycle does not apply for practical purposes. Indeed this was the basis of my advice to the Electro-Federation. To counteract the forces of commoditization they have to move their products and services continually to the “left” of the life cycle. To do that, they have to focus very tightly on the job that the customer is trying to do (as opposed to the product that the customer may have asked for). Once they understand “the job to be done”, they can bring knowledge and empathy to the transaction and sell systems and solutions rather than products. Of course to do that they first have to engage their people, which demands a compelling narrative, a story to which everyone can contribute. As I put it to the meeting, “We don’t get up early in the morning to follow a strategic plan and to maximize shareholder value. We get up early in the morning to live our story and to be part of other compelling stories bigger than ourselves.” We follow stories that speak to our communities and our identities – that is, we follow stories for much the same reasons that people buy cult brands!

Coat Your Products in Meaning

The “top line” to all this is that we are continually searching for meaning and our default vehicle for doing this is the compelling story or narrative. This search for meaning permeates everything that we do, even – or especially – our consumption choices. In his column in The New York Times last Friday, David Brooks wrote that a brand “coats meaning round a product”, that it is “essentially about the expression and manipulation of daydreams”. Often the best inventors of brands are those who are ambivalent about commerce and indeed capitalism itself; their search for something beyond a mere transaction leads to the design of products with more pleasing aesthetic, even spiritual connections. Brooks goes on to say that the biggest threat to American retail may be that it has run out of countercultures to co-opt. From an ecological perspective perhaps that’s a good thing…