Tuesday, December 3, 2013

Controlling Information: How To Create Longevity

There is a trend when it comes to innovating.  First, entrepreneurs generate a unique idea.  Second, they develop a business plan and third, they implement their idea.  Once that idea has been transformed into a product or service, the market decides if it will be successful. As "Lessons in Longevity" highlights, some of these products achieve great market success and become industry leaders.  But these leaders must inevitably re-invent themselves if they want to achieve longevity.  As Steve Lohr points out, successful companies attract imitators and innovators, which crowd the market, or worse, change the market.  This is highlighted within the technology sector, where innovation occurs at lightening speeds.  Once the market changes, as it did for IBM in the 1990s, the former leaders must innovate again.

The most interesting part of this article was how these companies chose to innovate.  The companies mentioned in this article include IBM, Microsoft, Google and Apple.  All of these companies have chosen to innovate through adopting innovative approaches to information and creating more 'abstract' products that are information based. 

IBM moved from mainframes to software, storage and services.  Microsoft is moving into server operating systems, which manage data serving computers.  Even Apple is moving into iCloud services, which manage information.  These trends show an interesting strategy employed by these companies which indicate a direction towards controlling information.

This strategic direction, employed by these industry leaders, is less concerned with products, manufacturing and hardware.  Rather, software, services and intelligence seem to be the broad categories of innovation that these companies desire.  These abstract 'products' are more difficult to manufacture, but also present higher barriers to entry for other companies.  These informational 'products' also reflect a higher potential margin than hard products and hardware.  Traditional products and hardware always become commoditized, and as a result, their prices tend towards the lowest values.  These abstract products and information services, in contrast, trend towards higher margins and profits.

This strategy seems to serve Google the best.  They are built on analytics, generating more information, and making information more useful. This is a very abstract product to try and sell. But, it represents a huge growth opportunity and potential for longevity because the market will always demand methods to manage information.  It also seems as if it will be a hard market to penetrate by competitors.

It is important for other other traditional product manufacturers like Hewlitt Packard, Sony, Samsung and even Mercedes to figure out how they can strategically move into the direction of producing information and methods to manage information.  Already, Mercedes is viewing its cars, not as manufactured products, but information creators.  Mercedes is looking at its cars as a great generator of user information.  This will ensure even longer longevity. 

It is important for these traditional companies to ask, "How can our products create information?"  and "Can we strategically use our products to take advantage of higher level uses so that we can become more information-focused and use that generated information to create value in the market?"     

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