Productivity Trilemma, What are you trying to produce

Chris Berry responded to a post that another collegue, Maciek made regarding productivity and cheapening of their product or lowering their labour costs versus niche markets.

I think the point that both are trying to make, without actually saying it is that is always about profit.  The catch is in ensuring you are in a niche where no one will low-ball each other.  For example, you can buy raw coffee beans in bulk for a couple cents a pound.  That is pretty much as low as it can go.  This is selling a commodity.

If you take those beans and roast them, grind them and package them you can sell them for much more.  The additional costs of production not withstanding.  The beans were purchased for a nickel, a dime was spent in processing and the resulting product was sold for fifty cents.  This is selling a product.   The problem is someone can come along and sell it cheaper.

Brew that coffee and sell it in a diner and maybe you can make a couple dollars for a pot of coffee.  Here they are selling a service. but there is lots of competition, so again you end up lowballing each other.

However, if you look at Starbucks, they are not selling the coffee, they are selling the experience.  There are lots of places that serve coffee. I know of several that have better tasting coffee, but none that provide the same experience.

I got to thinking about this because of a TED talk I watched by Joseph Pine.

When looking at companies such as Apple, I would argue they are selling the same thing.  Ever walk into an Apple store?   They are all about the experience, from the white clean environment to the bubbly helpful staff (and there are lots of them).  Even using their products are about the experience.

As a result, Rogers the only carrier of the iPhone here in Canada can charge whatever they want.  The Aesthetes, as Maciek calls them will pay.  But I would argue they are paying for the experience.  There is nothing special about the iphone.  There are several phones out with the same overall functionality, however they don’t provide nearly the same experience.  There are several MP3 players that have more functionality, better quality than the iPod, but the experience…

My partner Zuimei has his own business called Shiatsu One.  There are several similar shiatsu and massage places in the neighbourhood and if you walked up the street to Chinatown you could get a massage for half of what he charges.  But I guarantee the experience would not be the same.  Zuimei takes great care and pride in providing what he feels is the best shiatsu experience he can.  From the way he greets you to the heated towels to the soft music everything is about providing that experience.  He does very little in advertising because he knows if that experience is pleasurable and unique it’ll be remarkable.

The problem arises when a company or product has no differentiating feature.  If your product is producing websites, then you’re screwed.  Sorry but you’re totally hosed because there are lots of places that produce websites.  There is a library of software that can produce websites.  There is an army of developers in India who will create exactly what they are told.

Many digital marketing agencies are just that, website producers.  They may talk about being innovative, and cutting edge but they’re not.  Innovation takes risk and “cutting edge” cuts both ways.  They have a profit margin to meet or angry share-holders to deal with.

Chris Berry is correct that much of what is produced is what the customer ordered, but that is because these agencies are selling a product not an experience.