Paths to Advantage no.1

Technology and patents. New technologies are unbeatable in giving mature industry players a meaningful advantage in the marketplace. Their power comes from providing companies with a way to meet new consumer needs, including those that consumers don’t yet know they have. These innovations can have the greatest value. In consumer health care, for instance, new products that match a new technology with a new market need deliver median brand growth of 11 percent, more than double the 5 percent growth of products addressing only an existing need. (See Exhibit 2.)



Technology can provide a way to solve a significant consumer problem, as Ore-Ida (a subsidiary of H.J. Heinz Company) proved with its Extra Crispy Easy Fries in 2004. A persistent complaint about frozen french fries was that they emerged soggy from the microwave. Ore-Ida solved this problem with its “X-Crisp” flash-freeze processing technology. The result was genuinely crispy microwaved fries cooked in four minutes, a successful new product.
Even if new technology doesn’t prevent competitors from copying, it can significantly delay their launching of a copycat product. An example is Kellogg’s Special K Red Berries cereal, which introduced a freeze-dried berry process and captured more than $100 million in its first year — and it got a two-year jump on archrival General Mills’s version.
Alongside advantaged technologies comes the responsibility to defend them. This point is not lost on Procter & Gamble Company, which has a policy of zero tolerance on patent and other infringements. P&G has taken legal action, for example, against Whitehall Laboratories to defend innovations in a hair conditioner formulation and against Perrigo Company to protect its core Olay skin-care brand.