Rob Walker's "Consumed" Column in the Sunday NYT is worth a read today, if only for the examination of innovation and toasters. Two schools of thought are exposed: relentless innovation is profitable, and there is a constant race to commoditization. On one hand, Michael Schrage argues for the former, using a combination toaster/egg poacher as proof point. On the other, Bruce Greenwald, who makes the point that even true toaster innovation leads quickly to price pressure and commoditization. Luckily for us consumers, both are true -- innovation at the high end rapidly drops to the commodity level, and thus we are able to poach and toast at the same time.
While this may seem a bit of a silly example, it's relevant especially in the tech world, where innovation happens in multiple ways -- in the garage, in startups, at established companies. One form of innovation is not intrinsically better than the other, there is more than enough room for both the breakthrough idea and the relentless improvement of a product or service.
In the heyday of Dell, their chief competitive advantage was their ability to see the design or product innovation of their competitors and apply staggeringly efficient supply chain to it, rapidly coming out with similar products at better price points. This was good for Dell and for consumers in general, but the cost to the PC industry was high -- there was such a short delta between the innovation and the commoditization that it was hard to realize a profit in that very small gap. Today, other companies have improved their supply chain expertise and that gap is now profitable -- and Dell is responding.
Still, in the area of toasters, I'm a purist. All I really want is toast. So in this category, put me down for commodity, well made, in stainless steel if you please.