Creating Competitive Advantage in Supply Chains - Real Differentiation

In a previous post on Creating sustainable competitive advantage in your supply chain, I ended it thinking that the true source of competitive advantage that is available for firms is differentiation. Here is an article by James Conley that describes the competitive advantage created by Apple with its iPod series of MP3 players.

Frog Design's Luke Williams suggests that the "clean" look of this product is an intentional consequence of references to the white ceramic and polished chrome tropes of the humble bathroom design experience—we keep calling the iPod such a "clean design" expressly because it references these materials and finishes

I have always been attracted to the iPod series (especially the Nano) even though I ended up getting the Sansa MP3 player player from SanDisk and I surmise that it is because of the "clean" look - it inspires.
Here is one key takeaway from the article about how Apple might have intentionally created a success from the iPod series:

These reflections on design strategy are interesting, and speculating on future target markets is always provocative. But I suspect that something more clever is afoot; that Apple's design strategy is in line with something we call value transference—a dynamic strategy that can be quite successful in technology markets.

So what is value transference?

Value transference, in a nutshell, is the premeditated use of multiple intellectual property regimes at specific points across the product lifecycle, in order to realize sustainable differentiation.

The article sites that rather than patents, trademarks are a source of sustained competitive advantage because when trademarks are successfully used, they can last a very long time. The authors claim (and I think rightly) that using value transference successfully results in the following:

When done correctly, value transference helps to mitigate the enormous cost reduction pressures inherent in markets with short product life cycles such as electronics.

It is a way of saying - that which created and sustains the object, is beyond the object and there in lies the sources of competitive advantage at least from the differentiation aspect.
Other examples of successful value transference are:

Classic examples of value transference that contribute to enduring brand advantages include the Dolby name in consumer electronics, the NutraSweet red swirl in food ingredients, the Purple Pill (Prilosec and Nexium) in pharmaceuticals, Legos and Barbie in the toy market, and the shape of the Nintendo game boy or the original game controller. All of these now famous brands began as patented products—the Barbie doll included. Achieving this level of brand strength is the result of integrated product innovation and marketing.

So what is the result of this process with the Apple iPod series - it might be right in front of you but until it is put in the form as it is on the site, it just doesn't click. Well, that probably isn't true for everyone but then again.
And thus an icon is born.
Now, the proper question to be asked is how such a thing can be analogized to the supply chain space.
That will be next.

posted by AJ @ 10:35 AM