Why do products/services/people lose their value?

One of the most significant features of the society in which we live is its constant and rapid evolution; the concept of movement is a key concept to understand companies that make a management model out of innovation. The speed, the rapidity of evolution, increases when the space covered in a given time increases; or what is equivalent, when the time it takes to cover a route decreases. Innovating means moving or developing quickly: covering the maximum space in the minimum time.

Thus, if we are not able to develop the value we have in time to the evolution of our environment, the value ends up disappearing. The capacities and the knowledge provided by a person to his/her environment, or the products and services provided by a company to society, lose their effect and usefulness; and this puts the professional future of the person or the economic feasibility of the company at risk.

The speed, the rapidity of evolution, increases when the space covered in a given time increases; or what is equivalent, when the time it takes to cover a route decreases. Innovating means moving or developing quickly: covering the maximum space in the minimum time.

In general, we can describe the path that companies and professionals usually follow as a function of two variables: Knowledge/intellect and adaptation/intelligence. Knowledge or intellect is what the company or person can do, its activity: manufacture a product, offer a certain service, etc. Adaptation or intelligence refers to the capacity of transforming that knowledge into value for the society, something that strongly depends on the fact of knowing how to use it in order to meet the users’ specific needs in a certain moment.

The value of a company or a professional does not depend exclusively on its knowledge but mostly on the adaptation of that knowledge to an environment undergoing constant change. The loss of value is not necessarily the result of a «decrease» in knowledge but a gap in that knowledge, its failure to adapt to circumstances that are endlessly changing.

The symptoms toward trivialization, toward the loss of value, often undergo a process that consists of the following phases:

1- On specification: I stop having essential value, I give more for the same price; I increase in values that are not the initial objective. (the market of prams is clearly specified)

2- Increase in commercial diversity against technological diversity: at the same value base, I apply different commercial spending; packaging, brand, etc. (The market of the small electrical appliance is dominated by the commercial over-supply against the technological one)

3- ‘Targeting’: I apply the same value adapted to different groups of users. (yoghurt, ice cream, bank products, etc.)

4- Brand gearing: The essential value begins to weaken and it is reinforced by finding support in a strong ‘umbrella’ brand in the market. (drinks, food, mass consumption)

5- I start producing the distributor’s brand.

We can observe this process in the yoghurt market. At the beginning, the intrinsic value of the product and its novelty were powerful enough for its market defence, thus the first products were the glass-bottled natural yoghurt.

As the novelty factor began losing its impact on consumers, they ‘demanded’ new values, thus manufacturing companies started to expand their commercial diversity against the technological one, increasing flavours, textures, etc. Later, target management emerged, yoghurts adapted for children, working people, adults, sportsmen/women, etc. were launched, always supported with brand proposals, packaging, co-branding actions with other brands legitimizing the new sector, etc.

All the effort previously described has not prevented the sector from suffering the strong impact of the distributor’s brands entrance. (The product has lost its value contribution and it has trivialized; therefore peripheral factors have strengthened: price, distribution and shelf position.)

In these processes, only market leaders have room for growth and margin; and more importantly, enough time to analyze the existing value throughout this path toward trivialization and capitalize them in new products adapted to the current circumstances. (e.g.: from yoghurt to drinkable dairy products).

From Loop we have taken part in many projects of re-launching of product and service value; some examples are ‘Cornetto Soft’ for Unilever; the category ‘Play’ for Durex, the redefinition of the business model for Imaginarium, the re-launching of the sewing category for Alfa Hogar,

On the basis of this, we could now state that the role of innovation consists of finding the way to favour repeatedly (and at the appropriate level) the adaptive strategies by means of the incessant search for new applications of our knowledge (not just the new one).

We could also say that each new application, each new link in our evolutionary path, comes in addition to this new knowledge, as well as to renew the value of knowledge we already had. Innovating, launching, developing, attaching value…always involve analyzing the accumulated knowledge in our vital path, in every development stage experienced. This means building, from past knowledge, a future development stage.

Antoni Flores- CEO Loop-CN

 

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Mª Luisa Vives – Jaime Gross

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