I met with Vizio’s General Manager a few months ago. For those of you who don’t know, Vizio has been the value price leader in flat-screen TVs. With the help of the government’s mandate to have all TV signals switch to digital by 06/12/2009, the government created a market, and a strong demand for these TVs. While SONY and Panasonic entered the market on the high-end, Vizio took the low-price route by relying on Chinese suppliers and low overhead to gain significant market share.
The present looks pretty good, but what about the future?
What struck me as suboptimal, though, is that Vizio relies on its suppliers for innovation. It has no R&D team, no R&D budget per se. That is a recipe for disaster. Although its suppliers have an incentive to innovate to stay competitive, they may decide to go on their own and launch their own product line (cut out the middle man – Vizio). Or they may sell their innovative technology to the highest bidder. After all, they may be able to get a higher price by going to a SONY or Panasonic than with Vizio. Another issue is that suppliers may just want to squeeze as much production with their existing contracts and forego any innovation investments.
Eventually, SONY and Panasonic will be able to introduce a lower-priced flat screen TV that outperforms Vizio’s line-up. At that point, with little innovative products and little intellectual property of its own, Vizio may be in a serious bind.
Vizio has started to diversify into accessories for its flat-screen TVS – sound bars, speakers, etc. – which is smart in the short-term but it will not be an antidote for a lack of innovation.
What are innovation sources? Here are 6 good ones:
Suppliers can still be a good sources, but by no means should they be the main one.
Employees are probably some of your heaviest users and understand the benefits of your products (and sometimes the limitations of your production capability) to provide some really good ideas. Create a lunch roundtable every quarter or so to bounce off ideas based on a specific innovation strategy.
Consumers are the obvious choice. That is why “open innovation” and “co-creation” are a big initiative these days. Get consumers involved in the process and you will get much better results. Beware of intellectual property legal troubles, though.
Retailers that sell your category of products. They are always being pitched new products and want to have unique offerings on their shelves so scope out their stores!
Tradeshows are a treasure trove for new product ideas. They don’t have to do with your product per se, even if it is a tradeshow with your target audience, you could learn a lot from them. Set up free lunches to chat about issues they face. You could learn something really useful.
Social media and the opportunities that monitoring offers. You may not get deep insights but you will definitely see trends – and by the way, people in the space that influence that conversation – always good for future marketing!