To an insurer CEO: “On the two investments IT is seeking, here are our perspectives:
- Investment #1 is in Hygiene Factor zone; it would not advance the Basis of Competition of this firm. There is no leverageable value, derivable from spending this $xx money. While the Value to Customers seems high, it offers no clear Differentiation in the market. Sir, the current offering in the market is in Standardized domain and is widely acceptable in the sector.
- Investment #2, it has high Differentiation but Value to Customers is not evident – this is an over investment.
Our construct is that we need to move the Basis of Competition, through investments that deliver High Differentiation and Value to Customers simultaneously. An IT that transforms, not just run this firm would be desirable. Such an IT will make us a tech company that offers insurance services; these proposed investments keep us as an insurer that uses technology.”
Join me for Tekedia Mini-MBA (REGISTER here) as we examine how companies build INNOVATIVE products and services that shift the basis of competition through highly differentiated services that deliver great value to customers.
Innovation happens when the basis of competition moves: it is not when you have spent more money on R&D, created high differentiation but minimal value to customers, or created high value for customers with no differentiation.
The “Basis of competition” describes the collection of benefits that are the most important determinants of a customer’s choice between different competing products or services. It is the competitive battlefield where preference is determined. The basis of competition is not static. It will change over time as competitors match each other in an area, making it a commodity or because customer needs change.