Imagine back 18 months ago, imagine you were the Brand Manager of the wildly popular “i-Widget” that had been enjoying differentiated success in the marketplace, it flew off the shelf, and any marketing effort was really just to sustain the buzz. The i-Widget commanded a premium price was a major driver of growth for the company that Wall Street just loved to talk about it . Sure, it may not be exportable to the developing world (too expensive, market was too small) but for the moment, the developed world was paying your bonus.
Flash forward to today. Imagine the world in a recession so deep that double digit unemployment has plagued the developed world. Middle class status-brands (like the i-Widget) have become such a pariah; people use it discreetly to avoid ridicule for such an abstentious luxury when colleagues are out of work.
Remember, you are the Brand Manager of the I-widget. Your brand is taking a beating and you are up late every night working the right “value equation” that will slow the hemorrhaging without diluting the prestige of the brand too much. You recognize your bonus is gone (so much for Europe this summer) but the design folks now say a fighter brand (half the features, 20% the cost) might be just 6 months off. Ah.. hope, and to make it even better Corp Intelligence suggests we just need to get it out before our competition launches theirs.
And then it happens.
Out of nowhere, from some strange and far-off land, some new company launches a competitive product with 90% of your features, at 30% the cost. Tata-who? For a moment you are bewildered, where did these people come from, why hadn’t we heard of them and how can they afford these prices?
Engineering confirms it, there is no way even your fighter brand can touch the price. Design has no idea how to even start designing based on the constraints and the target cost people come up with only negative profitability models. Is this a massive loss leader? A sense of dread has set in.
You visualize your most loyal customers defecting overnight and imagine the inevitable free fall as market share evaporates. Nothing comparable in the pipeline, no back up brand, this will mean your job. And a lot of other peoples job. How will you pay for your daughter’s college next year? How many people will be laid off?
This scenario flashed before my eyes when I read Vijay Govindarajans latest blog post titled “What is Reverse Innovation”. For those of you who have not seen it, it’s related to his latest article (along with Jeffrey Immelt) in the HBR titled “How GE is disrupting itself”. Vijay’s post was essentially about the stages of innovation and the relationship the developing world has with the developed world however, I see this scenario playing out something like the story above. As the developing world continues to mature and the investments in higher education begin to pay off (China graduated twice as many university students as the US in 2008), the developed world will lose ground in the innovation market place, and those caught unaware are in for a frightful nightmare.
Shawn Grubb
