In a recent interview, Larry Page shared his view on the secret of Google's success - make your product TEN TIMES better than your rival's.
Last week we sent limited information on one of our forthcoming products to some industry analysts and told them we priced it at "below $50", whilst the nearest (big) competitor's price is "above $600".
Their instant response was: "You are nuts!" Are we indeed?
If we priced our product at 20-50% below our competitor's level, we would still be in the "price war zone" (not exactly true since our product has several compelling functions not available elsewhere). However, with our "below $50" pricing, we initiate tectonic
plates shift. When the ground moves, it's hard to stand, let alone play the catch-up game.
Can you imagine the CEO of a large multinational corporation telling its shareholders that from now on they will be selling $30 devices (were they to compete with us at least on price) instead of $600 ones?.. Those would probably be his last words at that
company. But what options does he have? Very few. I never envied leaders in the Kodak shoes.
One of the viable options, which goes against the self-preservation instinct but is critical for survival, is planned self-destruction. The
longer you keep your head buried in the sand, the harder your exposed butt will be kicked. One has to face the enemy to be able to make tactical and strategic decisions. Winning a fight being blind-folded only works in Tarantino movies.
Back to Larry: "companies fail because they ain't ambitious". Is 50% price reduction an ambitious move? Not if it's a knee-jerk reaction. Is a better mousetrap ambitious? Especially if mice are soon going to be extinct anyway (animal lovers, it's a hypothetical
example). The latest big "ain't ambitious" mistake was iPhone 5. It's not the beginning of the end, but it's not the beginning of anything for sure.
As far as the retail banking is concerned, how many bank CEOs really understand that banking is about something you do, not about some place
you go to. How many mobile operators truly understand that holding customers by their SIMs hurts. And customers can kick back. Hard. In the SIMs too.