Apple, Sony, and the Signal-to-Noise Ratio
For innovative offers to create competitive advantage in mature markets, they must clearly and cleanly separate themselves from the crowd. Otherwise customers and consumers are unmotivated to seek out a specific vendor, and commoditization wins out.
Engineers call this type of problem managing the signal-to-noise ratio. To optimize that ratio one must simultaneously filter out noise and amplify the signal. When it comes to innovation strategies, most corporations focus on the latter solely and fail to attend to the former. The end result is a marketplace that gets noisier and noisier, drowning out everybody's signals. Innovations suck up huge marketing (read: noise-making) budgets but fail to get traction.
Winning innovation programs take a different path. Like their failed counterparts, they too create a strong signal to start with. But unlike them they focus the remainder of their efforts on amplifying that signal and filtering out distracting noise.
Compare Apple to Sony in this regard. Both companies create innovative electronic products for consumers, and both have created branded retail outlets as a “noise filter” to eliminate competing distractions. Why, then, is Apple so much more successful than Sony?
When you go into an Apple store, there are relatively few products on display, and each display station has a strong theme. The goal is to attract, orient, and educate consumers about an activity elegantly performed. The staff is also application oriented in the way it interacts with people making queries.
By contrast, in a Sony store there are many, many more products on display—everything from TVs and sound systems to laptops to PlayStations and robotic dogs, and, yes, even “noise cancellation” headphones! Displays are grouped by product category, not application, and the staff are all product oriented. The net effect is that Sony has reintroduced noise and failed to amplify signal, and their market performance shows it.
If even an iconic brand like Sony can fall prey to this problem, what hope can the rest of us have? Actually, quite a lot. The key is to modify every step in the value chain to amplify signal and reduce noise. This begins with an unambiguous declaration of innovation strategy—identifying the vector of innovation to be accentuated. It then is executed via a series of management reviews which reward programs for amplifying that vector and filtering out competing innovation vectors and which discipline programs that introduce competing noise.
No Cokes at Starbucks.
No coupons at WalMart.
No refills for BIC pens.
Pick a theme and get every department in your enterprise to stick to it.