A Tale of Two Watches

There are two types of thinking essential for any company. The first continually takes advantage of short-term opportunities and ensures long-term success. Incrementalism is the thinking that goes into making tomorrow more productive than today. Companies look to expand while minimizing risk and maximizing return on their investment. Over time, companies typically get very good at constantly improving those things they already do.

Imagine we manufacture and sell a successful $500 watch. If a competitor announces a similar $450 watch, let’s apply the above thinking. Perhaps we start with going back to ask our suppliers for a better price. We might be able to streamline our manufacturing process. This would not be simple because if those savings were obvious, we would have already done that work. However, it is not impossible to think that we could tighten our belts and drive 10% efficiencies across the board.

Now, another competitor has came out with the same feature set in a watch costing just $200. There is no amount of incremental improvement would enable us to compete at this price. This kind of challenge requires a different perspective in thinking.

It is counter intuitive to build a drastically cheaper product with the knowledge it has taken to build the current model. First, if we could build at a cheaper price, it is likely we would have already done so! Second, we are attempting to build two different things, while applying the same logic, which is always going to create organizational, process, and technology challenges.

This particular area is where start-ups excel. They don’t have the long-held perspective that more mature companies have. Not having this view is what enables them to look at things objectively. That view might entail different materials, ways of manufacturing, locations, or otherwise.

Mature companies can still enable groups to think like a start-up, but it has to be a conscious decision to do so. If someone is able to make a product at a certain price, its likely true that others could too. However, it can be the very thinking that has made you successful today that inhibits you from creating a new tomorrow.

Do you have a path for both getting better at what you do today, while leaving the door open for a different path in the future?