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Global consumerism end and organic products more readily segment of people, who are willing to available in smaller cities nationwide. pay a lot for it, is far more likely to be And in retail, neiman Marcus (an Smaller oferings successful in today’s global, digitally- American luxury specialty department are now more connected business environment. store) is doing quite well compared to economically As a result, aiming for the ‘middle the retailers that have been a bastion of the market’ is no longer necessary of the middle for a long time. viable to drive business success. for large Premium products, in most companies, the advantage of scale categories, have simply moved to the will no longer come from applying it next upward sloping part of the curve. price curves is that benefts can be just to the supply side of the business, this framework for explaining the rise more readily increased by exploring but also the demand side. with scale of premium and value challenges the new beneft territories. The iPhone comes the ability to generate superior innovation process of most established is a wonderful device, but it is not consumer understanding, something brands. Incremental innovation is no necessarily a superior telephone (or most companies spend relatively little longer suffcient, given how value is email device). what our experience with to understand. being perceived by consumers in most the iPhone demonstrates is that new large companies must also learn to categories. there’s no more room for beneft areas for the phone (apps and a fail quickly; to create larger successes, improvement when offerings are already sleek design) were far more important they must embrace bigger failures. over-improved, creating a need for an than the phone makers of 14 years ago when you are part of a large enterprise, ‘innovation reset’. gave them credit for being. this lesson you are expected to leverage your scale is vital in all major categories. Breakout when you think about innovation. But it The innovation reset may be more easily found by creating would be far better for large companies the most important strategic question new beneft territories than continuing to free themselves consciously of these for your company is how the benefts to innovate incrementally on historical constraints, as they get in the way of you are offering compare to the beneft territories – a profound change innovating to grow the company. next alternative, as well as the cost from the way many companies spend the over the last several decades, a differential involved. If the cost majority of their innovation dollars today. quiet revolution has occurred. the differential is larger than the value combination of changing business differential, you are in great danger of Think diferently about scale economics toward lower scale, being attacked from below. historically, we have thought about the increased availability of consumer One of the implications of the beneft/ benefts of scale as being cost or supply insight and the after-effects of the Great based – with more scale comes the recession have created an environment ability to offer the same set of benefts like nothing we have experienced in at lower cost. But this is no longer the our lifetimes. Businesses have been case. Indeed, in category after category, created – and will continue to be technology and the globalisation of created –at the top and the bottom of production has made smaller offerings most categories. the critical question is more economically viable. An offering whether established players will fgure that is tailored to appeal to a small out how to adequately respond to this new environment. While the Steve Carlotti is CEO of The Cambridge iPhone is not Group, a Chicago-based growth strategy necessarily a consulting frm that is part of the global superior phone, it achieved Nielsen research group. Article frst enormous published 2014. Reproduced with popularity permission from Knowledge@Wharton by exploring new ‘beneft (http://knowledge.wharton.upenn.edu). PHOTOS: IstoCK, suPPlIeD territories’ such © 2014. The Trustees of the University as apps and a of Pennsylvania. All rights reserved. sleek design 54 strategicmarketing August–September 2014 AMC_ad_A4_4OCT2013 C.indd 1 10/4/13 9:02 AM