Is Innovation potentially as destructive as planned obsolescence?

Brand obsolescence was a bogeyman word to describe the alleged strategy adopted by manufacturers of consumer durables who built a failure feature into the design of their product. That way, products with new features would be bought earlier than needed, keeping the factories busy and the retailer’s tills ringing.

In reality manufacturers were not that clever or consumers that stupid. David Ogilvy over forty years ago said it best:”The consumer is not a moron. She is your wife.”

Now competition and market saturation has spawned a new type of innovation that is destroying markets and brands. Take the digital camera business for instance.

The market is large, worth about £800 million and still growing. The problems however are quite serious. The technology allows new companies not previously in the field of cameras to enter. Companies like Hewlett Packard, Sony, Fuji and Kodak are all major players. These new players have been very innovative, but as far as the customer is concerned, no manufacturer appears to have a competitive edge in terms of technological features, pixel capacity, ease of use or price.

And as pixel capacity, anti shake and red eye features are introduced, prices are falling. In 2003, the average digital camera offered 2 million pixels and cost £160. Now 4 million pixels with newer features will cost £120.

So, why would you buy a camera which will be outdated very quickly and when the newer models with greater capacity and more features will be cheaper tomorrow?

Any why then will the manufacturer invest in large runs of specific models when a high number of unsold cameras will fill up depot space? Small runs generate low promotional budgets, further exacerbating the long term health of the brand.

Part of the pressure on prices is also accounted for by the increase in distribution points. Sales in specialist shops like Jessops have declined, while Boots, Tesco and Asda now are significant in terms of sales. These generalist retailers are not interested in offering a range of products or indeed of brands. The internet however can provide both.

Grey importers now offer products at prices cheaper than the official ones given to the managers of the very brands in the UK.

Convergence of technologies mean that quality digital cameras can also offer ipod music, downloaded TV and video, and mobile phone services too.

More likely it will be the other way around with mobile phones taking the lead. Will Ericsson and Nokia become the new leaders in the converged market?

Analysts have warned that falling prices have affected the profitability of all brands. This year will be a test of resolve. For some famous brands it’s already too late as Minolta’s exit from the digital market indicates.