Corporate Wal-Mart shoppers forsake operational innovation

What’s their secret for saving company money? Well, it’s hardly a secret; it’s the equivalent of shopping at Wal-Mart. They buy (relatively) cheap products and services from big box business vendors – the same as all their competitors. The vendors they buy from keep their costs down by assuming all business customers are pretty much the same and so they produce one-size-fits-all (OSFA) products. For example, they produce business systems that they sell to business customers telling them “This product will do the job for your back office so you can concentrate on your core business.”

What is forgotten (or dismissed) in buying OSFA systems is the promise of disruptive operational innovation. Wal-Mart itself is a wildly successful example of this kind of innovation. The company created a customized operational model that overwhelmed its competitors and made it a household name today. You can bet that Wal-Mart was not hamstrung because it was over-invested in OFSA legacy systems.

The lack of diversity amongst many business systems today makes disruptive operational innovation more difficult. It means the way companies operate must conform to the OSFA standard. Locked into a system that demands they work in a certain way – the same way as all their competitors – companies are frustrated if they try to do something that might give them an advantage. Sure, they can tweak here and there but any advantage is lost because their competitors can copy them right away. They have the same system.

Some business thinkers today suggest that the production system itself should be regarded as an internal product to be developed in the same manner as the products the companies produce and market. This makes a lot of sense in the new world of social marketing, especially if you’re delivering a service that could benefit from such transparency. Customers like being associated with unique and clever suppliers aka winners.

For most companies, customized systems and processes are simply unthinkable. But that’s only because they’re not thinking.