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Corporate Wal-Mart shoppers forsake operational innovation

April 14, 2011 Leave a comment

Wal-Mart shoppers and other big-box store customers don’t seem to recognize that buying the same products from the same low-cost vendor tends to make them the same as everyone else. Sure, big box stores save their customers money but in the long run I’m not sure it is a good thing – especially if it means we simply buy more. The environment certainly doesn’t need us producing and ultimately trashing more cheap stuff. The selfish lack of reflection on the part of consumers like me is criminal but the real problem is with corporate leadership.

With them, the lack of diversity in their buying habits is only partly an environmental challenge. The big issue is that companies are forsaking opportunities to radically improve the way they operate – for the benefit of the environment, their customers and their shareholders. Sadly, all because they have been drinking the Kool Aid of lowest price is everything.

What’s their secret for saving company money? Well, it’s hardly a secret; it’s the equivalent of shopping at Wal-Mart. They buy (relatively) cheap products and services from big box business vendors – the same as all their competitors. The vendors they buy from keep their costs down by assuming all business customers are pretty much the same and so they produce one-size-fits-all (OSFA) products. For example, they produce business systems that they sell to business customers telling them “This product will do the job for your back office so you can concentrate on your core business.”

What is forgotten (or dismissed) in buying OSFA systems is the promise of disruptive operational innovation. Wal-Mart itself is a wildly successful example of this kind of innovation. The company created a customized operational model that overwhelmed its competitors and made it a household name today. You can bet that Wal-Mart was not hamstrung because it was over-invested in OFSA legacy systems.

The lack of diversity amongst many business systems today makes disruptive operational innovation more difficult. It means the way companies operate must conform to the OSFA standard. Locked into a system that demands they work in a certain way – the same way as all their competitors – companies are frustrated if they try to do something that might give them an advantage. Sure, they can tweak here and there but any advantage is lost because their competitors can copy them right away. They have the same system.

Some business thinkers today suggest that the production system itself should be regarded as an internal product to be developed in the same manner as the products the companies produce and market. This makes a lot of sense in the new world of social marketing, especially if you’re delivering a service that could benefit from such transparency. Customers like being associated with unique and clever suppliers aka winners.

For most companies, customized systems and processes are simply unthinkable. But that’s only because they’re not thinking.

Recommended reading: Deep Change: How Operational Innovation Can Transform Your Company by Michael Hammer