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Trade Routes: Where What Isn’t Will be Found

Michael Wynne
Back to the February 2007 Issue

To be an innovator, you have to take risks. The problem is that business, in general, is risk averse; it prefers the tried and true. Managers are not fools—they know that taking risks puts their jobs in peril. If, on the other hand, they follow in the footsteps of others in their business, they know that they will be safer.

But following in the footsteps of others only leads you to where they are—and they got there first. So, yes, those managers will be safer, but only until their company goes out of business because it was an uninspiring “me too” in the marketplace.

Traditionally, the best advice for a company hoping to develop a competitive advantage was to do what the best do—only better. That theory was called benchmarking. But, if you matched what the best cosmetic companies did, or even surpassed it, you were still only doing what they did.

Doing what others do, even if they are the best, isn’t enough in today’s fast-paced global market. Look at it this way—the top 10 companies in the cosmetics business generate 70% of the global market sales. If you just copy what they do, do you really think you will achieve true competitive advantage?

It used to be that incremental improvements sufficed to increase sales. In a different industry, Toyota has become a success by steadily introducing small improvements into every aspect of its business. Those improvements have, for the most part, been in manufacturing. The automobile is a high ticket item, therefore, continued small improvements do increase productivity and lower costs, which allows Toyota to compete efficiently and earn higher margins. But the cosmetics industry is not like the automotive industry. While lower costs are always important, they don’t guarantee a major competitive edge in the cosmetics market.

After a while, small steps no longer provide market leadership—if ever they did. Today, you need quantum leaps to generate the kind of attention that generates better than organic growth, and this is achieved by creating new categories, products and markets.

So what has changed?

Microsoft and the entire computer and software industries have taught all of us to expect the upgrades. A new version of Windows comes out, and people feel obsolete if they don’t get it. Intel develops a new and better chip, and makes everyone’s hardware so “yesterday” and so on. But, upgrades better be major ones or they won’t make a difference.

Invention Industry
This is an invention industry. Companies, laboratories, institutions and governments around the world are investing billions in developing and introducing new products. Scientists and technicians are constantly working on developing the next new thing.
L’Oréal has 2,500 researchers in its labs around the world. In 2001 alone, the company registered 420 patents for innovative ingredients. Procter & Gamble has 7,000 (not all dedicated to cosmetics). Bayer has 2,500 focused on health and cosmetics. So the stream of innovations and new products is likely to continue growing.

Global Communications
Global communications instantly introduce new ideas, products, trends and fads everywhere. As a result, the demand for “in” products surges around the world in days rather than years. Global competition quickly turns new products into commodities. In little time, everyone has one, which increases the interest in newer offerings. It also increases the numbers of companies producing and offering them.

Disposable Income
Global disposable income is growing. Today’s consumers can afford to buy new products. In fact, even those who can’t really afford the expense seem to find the way to buy them anyway. If you don’t believe it, just take a look at the kinds of people who are walking around talking into their cellular phones. People with money to spend look for new products.

The Internet
The Internet enables people everywhere to access and buy new products, and credit cards have become the universal currency. This allows people to buy products in other countries without the complication of currency exchange rates and transfers. Global access and easy financing encourage impulse buying.

Transient Competitive Advantages
Competitive advantages are transient at best. Nowadays, the competition catches up and jumps ahead very quickly. Small improvements can’t hold onto their advantage for long. Keep looking for the next big thing.

Well, if benchmarking and incremental improvements are not enough, what is?

The Future: Find What Isn’t

Exploring the new frontiers of your market is not easy, but today’s markets offer no alternative. To survive, companies must constantly patrol the world for new markets, ideas, concepts, products and services.

“That’s fine,” you may say, “but our competitors are almost certainly looking in all the same places.”

Yes, they are, but there’s one place where they are not looking, and, in fact, it’s wide open. Where is that place? The future …

The future is the place where what isn’t will be found. You and your competitors are doing a good job of taking care of customers’ present needs, but what about their future needs?

A look at the evolution of cosmetics throughout the past 50 years should give us some hints of future changes. For example, the number and variety of cosmetic products and services has grown exponentially. Yesteryear’s cosmetics were pretty basic: face powders, lipstick, rouge, eyebrow pencil and a few skin creams. Eventually, all suppliers ended up offering pretty much the same products. After a while though, subcategories within each of the main categories began to appear and grow in number.

The makeup challenges of movies and television programs led to the invention and discovery of new approaches and products. Scientific discoveries brought new and often revolutionary ingredients to the industry, stimulating the development of even more new products. Technological advances created new applications for previously unsatisfied needs.

Are you beginning to see a pattern here? There is room for even more innovation in every area as suppliers focus on narrower groups of customers with special needs. Genetic science will open yet unimagined doors for new products and services. Laser technology still has a lot to offer. Nanotechnology will make it possible to explore the inner surfaces of skin and travel through the circulatory system to any one point in the body and deliver concentrated chemicals and drugs in very limited areas.

Most companies are overfocused on the present and the past, and give the future only fleeting consideration. Yet the past and the present cannot be changed, but the future is wide open and filled with opportunities waiting to be developed.

Be aware, however, that high-tech is increasingly becoming the road to innovation.

Neil Macglip, director of research at Procter & Gamble’s U.K. facility, states, “Being high-tech is the only way to satisfy customer needs while simultaneously meeting the demands of human and environmental safety, price performance, novelty and noninfringement of competitors’ patents.”

I don’t think that high-tech is the only way, but I agree that these are the challenges facing innovation in today’s cosmetic markets.

Hiring highly creative, open-minded people is one of the most successful ways of creating new ideas, concepts, products and services. Unilever recruits people to fit its 11 competencies, among which are personal qualities such as passion for growth, breakthrough thinking and organizational awareness. Procter & Gamble looks for leadership, collaboration, problem-solving and ability to take risks. Today, all companies are looking for team players who are able to delegate and develop ideas in common.

Exploring Frontiers
Today, the frontiers where science and customer satisfaction meet must be explored. For example, at what point do cosmetics become drugs and drugs become cosmetics? Cosmetics originally started out just highlighting features and qualities, but many of today’s products are increasingly therapeutic as well as beauty aids.

To increase innovation awareness, find out what laboratories around the world are working on. Google keywords “Cosmetics Research” and a whole panorama of research will open up for you. Visit to explore an area that offers unlimited potential in a myriad of fields, including cosmetics. Not everything will be obvious at first glance—life is not that easy—but, with time and as you go up the learning curve, you will begin to generate questions that lead to the search for answers that might become revolutionary new products and services.

This is a time that demands innovation; without it, businesses will not survive. Creativity demands intellectual and emotional stimulus. Adventuring into the unknown has its risks, but it is where the greatest rewards will be found.
Back to the February 2007 Issue

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