The cornerstones of competitiveness

Hello everyone,

This second ‘historical’ article about Loop was published in the business supplement of ABC newspaper on Sunday, January 19th, 2003.
If the previous article A link takes control of the chain’ meant the digital integration of our development services, this second article ‘The cornerstones of competitiveness’ acts as the starting point of our path toward strategic consultancy, which was initially based on innovation and product optimization services.

Since 1998, our team has suffered the impact of product development service trivialization as a result of the over supply of services and their displacement to Asia; at that moment we started doing research on new service paths with added value, for which we could be legitimized from our position of experts in developing and managing products.
The cornerstones of competitiveness define the service focuses on which a team with the CDN format it had then can increase the added value to its clients.
At that moment we decided to focus on applied innovation services by developing our own methodologies that could allow a new supply of services and the management of commercial diversity against technological diversity as a focus of product optimization by means of the takeover of the French consultancy company, Alain Chauvet Consultants, an expert in this type of services. The third focus of research was the global management of projects by creating a digital platform to manage them.
These steps have modified our professional format and our supply of services forever; the combination of innovation and product optimization was broadly accepted by the market; in 2004 we also began our innovation activities in services; the development of these activities is currently represented by the brand Loop Business Innovation.
The takeover of a French consultancy company employing 15 people meant to us the ‘accelerated attainment of legal age’ as a business model in services, changing from being a company made up of a ‘group of friends’ to becoming a structure of professional and financial partners.
From our current detached position, the combination of ‘A link takes control of the chain’ and ‘The cornerstones of competitiveness’ turned out to be a magnificent strategy to overcome trivialization and to be able to face the 2000’s successfully.

Nowadays, the industrial world is -as far as consumption products are concerned- threatened by several evils that as a result of going into action together can become lethal: product trivialization, margin reduction, market globalization and damaging industrial inheritance.

The trivialization of products refers to the loss of the physical product as a purchase reason. That is, products become more and more trivial every day: most of them are similar; there is no structured and deep differentiation among them. It is necessary to go down to a strictly precise level in order to begin appreciating some little distinction.

Furthermore, some brands have lost some differential qualities, the quality attribute and even the attribute of their specific functions since all similar products perform virtually the same functions. Therefore, 90 per cent of the products that can be found in the market have the same functions, the same shape and basically the same technology. The only differential element of their identity is aesthetic.

Globalization and labour cheapening

Manufacturers have fallen into the trap of «design by design itself», turning their products into a frivolous good with a high dose of fashion and therefore, with an expiration date. This is the way to reach a trivial concept.

The second problem arises as a result of this scene: the reduction of margins that unfortunately becomes obvious: once their identity and corporate adjectives are lost, why shall we spend more money on a product than the amount we spend on another product manufactured in Asia, for example?

If a product is displayed on a shop shelf and there is no differentiation, its manufacturer does not have tools to compete. Facing this situation, it reduces costs in order to make it cheaper at least. And to do this, it reduces margins.

Market globalization, which has become so fashionable lately, is the third obstacle that companies must confront. It does not only affect multinational companies selling in several countries but it equally affects those which operate in home markets and have global competitors as well as those companies which need supplies or components purchased in a market that is also of a global type.

To sum up, all companies buy components in the same place, margins are increasingly thinner and differentiation among products is increasingly subtler.

Furthermore and as a consequence of margin reduction, European manufacturers are heading toward competing in a global market with the same tools as Asian manufacturers, whose products are cheaper as they are always very repetitive copies. So they are playing in their own field and also with their fiercest competitors’ weapons. And in this competitive game, they left the starting line with a clear disadvantage.

To product trivialization, margin reduction and globalization, other negative elements can be added; for example, unfavourable industrial heritage, seen as those prejudices or acquired structures that prevent a manufacturer from taking 100 per cent advantage of the possibilities offered by knowledge and technology.

Specific solutions

What are the cornerstones of competitiveness?

To face product trivialization, we could set applied innovation; to face margin reduction, we could establish cost reduction strategies in product and commercial diversity planning; and to face market globalization and unfavourable industrial heritage, we shall apply appropriate and novel strategies of product development and logistics.

A strategy that maximizes the four cornerstones of competitiveness makes it possible to obtain:

– a considerable increase in quality (real and perceived);

– a correct relation between price and provisions (I just pay for what I actually use);

– a technological platform planning which makes it possible to follow a strong policy of commercial diversity, without causing a financial chaos as a result of stock increase or bearing references without margin;

– some strategies of product development using fair and adequate internal and external resources, in the shortest time span and with a network of strategic and qualitative suppliers.

Therefore, organizations become competitive in their product again without giving up their original company philosophy.

 

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Mª Luisa Vives – Jaime Gross

Welcome! from Loop want to share our projects, our vision, our way of doing things, the success of our customers, our news and those who might be of your interest. In this blog you will find notes on methodology, step by step procedures, tools, techniques, news, case studies, lessons learned, thoughts on creating new business models and above all our enthusiasm for contributing to the success of our customers, which is our success.

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