- November 22, 2018
- Posted by: Rajiv Narang
- Category: Breakthrough Innovation
Breakthrough Problem #4 : Truly differentiate a commodity
You may read the introducing context for these cases here —
Most industries reach a point where everything looks the same. Products look the same, processes look the same, business models look the same and even people start looking the same. Differentiating in a commoditized industry needs ‘Breakthrough Innovation’.
Differentiating the sales agent
In the world of life insurance where it is tough to differentiate among products, Max New York Life successfully applied Orbit-Shifting Innovation to make their Agents the differentiator.
In MNYL, insurance agents formed the backbone of the company. But once the agents were hired, they would quickly exhaust their leads. This occurred when they exhausted their personal network. Thereafter, they became dead weight in the system. New agents had to be hired.
When they were trying to solve this problem of huge churn, they noticed that one agent, constantly managed to generate new leads. They tried to mine information about this exceptional agent on what he was doing differently.
They understood that this agent would never come back from a sales meeting without 10 leads. He used to mine every customer for potential leads and this became a multiplier for leads. Having studied this, MNYL adopted this as a principle, trained the other sales agents on this and managed to 5X the productivity of their sale agents.
In Mexico, a team from Cemex has created a Breakthrough in one of the most commoditized industries in the world. The Breakthrough was an innovative service model called Patrimonio Hoy (Property Now) for low-income groups.
This was essentially a model that converted the product into a solution.
Partimonio Hoy was a membership model for families that had collateral-free financing and provision of engineering — architecture expertise, PLUS storage space for materials other than cement for distributors.
This model has enabled Cemex to substantially increase sales, market share, share of wallet and customer retention, while reaching millions of families across countries in the region.
Differentiating in the small cargo transporter segment and in the process, creating a brand new market
In India, the vehicle market for transporting cargo weighing less than a ton was dominated by 3-wheelers. Most of the players in the industry were trapped into defining the market as the three-wheeler category that is commoditized and very price sensitive.
Everyone was obsessed with ‘providing basic utility at lowest cost’. When Tata Motors entered this category, they took on the challenge to not just compete, but to redefine the market.
The TATA ACE Breakthrough happened, when they reframed this category to a 4-wheeled car with the functionality of a three-wheeler.
It met all the functionality of a three-wheeler like overload capacity, fuel efficiency, and speed, and at the same time, provided the feel of a car in terms of driving experience, and the absence of noise and vibration.
The Tata Ace disrupted a so-called commoditized category, and the same customers who had been called ‘price sensitive’ were now willing to pay as much as 12.5% extra.