It is interesting to look at the generational changes in products.
This will tell you something.
Quite often a company well established in the market will not want to introduce new technology or will not appreciate the potential through change compared to the risk of change.
The next generation technology will often come from a new company who will them displace the original manufacturer and take over that market.
This happens.
I have been responsible myself for the development of a product that took over the market from the original manufacturer who had over 40 years of market dominance, with up to 90-95% of the market for some of that time.
In my case the original manufacturer produced a product that had a selling price of around £2500 - £3000.
The end users wanted something more accurate and less expensive and which didn't require maintenance or recalibration.
Not unreasonable considering how technological advances have made such wish lists realistic.
Now look it from the original manufacturer's point of view.
They have to invest a lot of money on a new product.
It will use far fewer components, cost less to make, need fewer workers and fewer skills.
Note the "fewer workers" bit. This is something workers don't like.
It will reduce their turnover because it won't increase market share (it won't. They already make the best product and yet competitors have a stake in the market. Producing an even better product may not improve market share, it may just lose some share as those who like the original product shift to other manufacturers. That means they now have carry on making the original product but will, because of reduce sales volumes, either take a lower margin or have to put the price up).
So they are going to take a 20-30% drop in turnover for no real gain.
There is nothing in it for them.
It might make some slight change to profitability. But possibly not.
They think they are the only company with the necessary skills for that market and when they look outside they see high spec product all costing £10-12,000 per unit.
They see no external threats and their competition within the market doesn't have the clout, the money, the capability or the incentive to do anything. The competition live on their share of the market with no great ambition (and still do).
They tell themselves they have nothing to fear and that they are in a seller's market.
They do make a start on a new product to give the appearance of co-operation but (not deliberately) choose a technology ill-suited to meeting the demands of the new market - they only think they understand their own market but like so many manufacturers, late in the product life cycle, all they have been doing for the last 10-20 years is filling orders.
They have lost touch with the key market drivers. They misread their own market, it happens a lot. (Product life cycles are interesting.)
So they show they are doing something but progress is abysmally slow. It sometimes seems little more than a PR exercise. They have been doing this for five years or more (it took us one year, including the necessary trials).
A key end user goes outside the market and find a new supplier (the company I worked for).
They present a very simple but very clever target specification.
We take it seriously.
We have to learn the market very quickly and very thoroughly. We really need to understand the key drivers in this market and in this application.
We do, We do it very well.
This is a product that will sell in other markets.
It represents a huge increase in manufacturing and turnover and profits because we have no stake in his market. It would be a success for us if we won just this one OEM contract.
We develop a product with unique "must have" features.
We can meet their price targets but our must have features give us a lock on the market and we win the market with a product at around £2600-2800.
There is no price war. This is a product with unbeatable cost/benefit.
The original manufacturer now races to complete their product. They bring it to the market but they chose the wrong technology. They cannot deliver any of the must have features.
They now suffer a very serious drop in turnover.
They keep trying to massage the technology they chose to make it work.
They now have so much money invested in it they can't let go and start again with a different technology.
They should.
They won't.
(I know one company alleged to have invested US$millions in a new product that scrapped it just before they launched it. They finally realised they would be throwing good money after bad. Old Poker adage, once the money is in the pot, it isn't yours any more.)
That this happens time and again should tell you something.
This may be something you will encounter, if not now and in this company, in some other company.
The root cause is the "Ye Olde Feare of Crosse Capture" syndrome.
This is where a new product will impact on sales of an existing product.
I have have had many project ideas go nowhere because of this or I have had to accept some imposed product limitations so that the new product will not impact on an old product.
Another example.
As the market leading manufacturer of an industry standard sensor where the industry (oil and gas) preferred Explosion proof electronics, the product used Intrinsic safety requiring zenner barriers.
This is the Henry Ford approach of "any colour you like so long as it is black". This is what we make, like it or leave it.
Finding suitable earths on an oil platform for zenner barriers is a pain.
It took me a lot of effort to get the product changed to allow galvanic isolation and I only succeeded when I discovered it required only new drawings and a new set of certs.
I never did get explosion-proof past the bean counters. It would have required a lot of investment and work.
There are always lots of strong reasons why new ideas are not well received. Some good, some bad, most short-sighted.
Most due to management having a completely different set of objectives.
Some actually good.
If there really is no threat to the market, no increase in market share, no increase in profitability (lower costs invariably lead to lower sales prices so margins usually remain pretty much the same) and so the net effect might only be that a whole bunch of people get laid off, it won't fly.
Stock markets look at turnover and profit. The directors have a responsibility to the shareholders. The stock market is largely about short term position not long term, especially if you trade at below £200M. Above this level the pension funds buy in and they look for something else, long term sustainable profitability.
These affect management decisions more than saving some dollars on how you make something.
If your widget company is a market leader or if the market is pretty resistant to innovation (there is a lot of brand and product loyalty out there) change can be bad.
Just being able to do something doesn't always mean you should do it and as often as not the fear of change has some well founded basis that may not be properly understood or articulated by the people you talk to.
"If it ain't broke, don't fix it."
This is another of the mantras that remind the rank and file of certain truisms without their needing to understand the reasons why.
The "serenity prayer" is a good one:
"God Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference."
It misses out on:
Just because we can change something doesn't mean we should change something.
Yes, some things are better left alone.
It is always about more than the product and more than just the more obvious profit and loss argument.
JMW
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