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Product innovation has accelerated

Symptom: Product innovation has accelerated.

Implications for the market:

  • Accelerated product innovation is a common indication that an industry is becoming hostile. Most innovations are aimed at improving the product's functional attributes by adding features, a tactic we call bundling.
  • Product innovation is unlikely to produce an industry winner. Functional innovations fail to move much share because they can be quickly copied by competitors. Soon everyone is offering that innovation.
  • However, innovation will hasten the demise of the losers. Innovations raise costs for everyone in the industry, but it is the weakest competitors who experience the greatest pressure on their margins. As a result, many weaker companies will choose not to further innovate or will do so with half-hearted efforts. This decision further weakens these companies and hastens their market withdrawal or takeover by other firms.

Recommended Reading

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Analyses:

Perspectives: Conclusions we have reached as a result of our long-term study and observations.

  • "How Customers Buy"Customers are often faced with a large number of possible suppliers. How does the customer screen these suppliers to find the one best choice for his need?
  • "The Danger of Competing on Features"While feature benefits may be the customers first consideration, function leadership may not be the best investment choice for a supplier.
  • "The Tallest Dwarf"A suppliers' goal is to take advantage of any market volatility, to take share wherever possible. Doing that requires understanding of what customers need. What are buyers buying?
  • "When to Compete on Features" Often function leadership is not worth the investment. Yet there are markets and conditions that make feature innovation worthwhile.