By Len Monheit
As I look through some of the more recent product introductions and prepare for several Nutracon/SupplyExpo discussions on “Innovation”, I find myself thinking about the struggle for identity in a crowded marketplace, a struggle won by those companies most able to use brand and other strategies to differentiate themselves from the competition.
As consumers, what causes us to make a purchasing decision and choose one product over another? As customers, what causes us to choose one ingredient supplier or contract services provider?
The first and most obvious answer is price, and in this industry it is now being pointed out that there can be as much as a factor of 30 times difference in price for products in the same category. With that type of difference, it is certainly no wonder that the average consumer is confused and often chooses less efficacious (and much less costly) products.
A second factor is brand, reputation or messaging, highly intangible perceptions that your customer (trade or consumer) will have about your product based on messages you offer and beliefs you have constructed through various communication programs. In many cases, there is little product differentiation; it is the perception that creates the distinction. Other approaches to differentiation certainly include product format, packaging and delivery systems, some of which fall under the category of or require a commitment to innovation.
True, sustainable differentiation requires an investment in time and money. Communicating and applying value to differentiation is more difficult still. And once you’ve made the investment and attempted to provide value, it’s even more frustrating to watch competition knock off the differentiation or attempt to commoditize it.
In the past, I have used this column to discuss innovation, and without regurgitating old ideas, here are a couple of observations that keep on striking a chord:
- Smaller companies tend to innovate easier
- Real leaps are often possible at the juncture point between two disciplines (ie. Nutrition and genomics)
- It is easier to do better, more and faster, rather than new
- True innovation is a culture, rather than a discipline
- A focus on operationally getting by is an obstacle to innovation
- Best practices that can create true innovation often lie outside the organization – and an outward focused approach, rather than a ‘not invented here’ mentality is imperative
Just what is the relationship between innovation and differentiation?
First of all, it is not really necessary to innovate in order to be successful, but it certainly is critical to differentiate. Category creators typically do both. Secondly, while both require patience and an investment, differentiation can occur through a series of smaller steps such as price alteration, color, size, packaging, messaging, delivery format, and doesn’t necessarily require vision or a strategic plan. Those most successful in differentiation I would suggest though, have huge resources (and can afford a massive ad or PR campaign) or if smaller, have applied their strategic skills on the practice of differentiation, to ultimately create the potential for higher margins or stronger category growth. Strategies to develop and promote product and category education typically fall here. The most successful seem to use, in parallel, education, PR and community building to create their unique and dominant positions.
In our industry, competition and product proliferation drive tactics for differentiation, with globalization and relationships (with customers, suppliers, trade associations, etc) also having an impact. Observation of current behavior manifests as differentiation (ie. low-carb or product launches based on current studies such as GAIT), while the anticipation of trends induces innovation (ie. nanotechnology and delivery system development).
Unfortunately, the state of science has less of an impact than it ought to. And herein lies one of the challenges – effectively communicating to those with very short attention span, the innovating or differentiating aspects of your product or service. This becomes an even more serious problem with an education gap or the lack of a platform or strategy to bridge the gap.
When we talk about qualifying and putting science in context, when we talk about improved bioavailability, or stability producing a more efficacious product, much, if not all of the message is lost. In trade communication, when we speak about improved ease of formulation, this means something, but when confirmed enhanced bioavailability is not a valuable property in a finished product, then as an industry, we’ve got a real problem.
It’s obvious that tying innovation to value is not an obvious or simple process. The price point might not support the innovation or the message might be too complex. Those innovations that do tie to price are inherently easier to justify – the risk in adoption is minimal and the bottom line impact is compelling. If you can offer a higher yield or a smaller effective dose, chances are you’ll sell that innovation. If you can develop a product which eliminates unfavorable characteristics (like taste or smell), then you’ve achieved successful differentiation over competitive materials, and under the right circumstances can track that innovation through enhanced finished product launch.
Some innovations though, don’t impact production costs or don’t treat so obviously with unfavorable characteristics. They might involve synergies, substantiated mechanism of action, improved uptake, in vivo versus in vivo study or improved efficacy (with a higher cost) or enhanced stability.
Until we can sell other types of innovation as effectively as we can sell those that are price-impacting, growth of the industry will not be optimized.