The reduction and price war is a symptom of the loss of competitiveness, to remedy it, most companies choose to reduce their costs through Efficiency and Quality techniques, not realizing that they are entering a downward spiral leading their companies towards the "commoditization" taking a lot of effort to reduce the pennies, this situation requires a 180 degree turn in the Strategy towards Innovation where the objective is Expansion, Sustainability and Profitability.
The Price Reduction is a resource widely used by Companies and Businesses to attract customers and sales in highly competitive environments, the current globalized world pushes companies to enter into price wars with competitors to survive in the market, which It forces them to look for ways to reduce their costs and make their processes more efficient in order to be able to grant a better price, with better quality, trying to maintain positive profit margins. Sound familiar?
In the last decades since the 80's, a strong influence of Japanese techniques has come to improve the competitiveness of Companies, which have become very important in Mexico. Who has not heard of ISO 9000? From Control circles Quality ?, from «Lean Manufacturing», «Kan-Ban», etc…
Observing carefully, all these techniques and many more, are aimed at: Lowering non-quality costs, Lowering inventory costs, Lowering product costs, Lowering personnel costs, etc…, To offer less and less and less price before the railroad competition that offers the same as us. This is the so-called "Downward Spiral" that leads us to the business headed to the Hell of "commodities", losing profitability over time. The Price Reduction is only the first symptom.
The following data should be highlighted: Japan is the last place in Profitability of the OECD, (source: "Simon Kucher and Partners"), what does this mean? Let us remember that after the Second World War Japan became what is now "China today", that is, a great maquiladora, the strategy of a maquiladora is to provide very low costs with very low profit margins to sell volume in markets already competitive with the SAME product offering.
Recently, the Ministry of Economy has released a program called Pyme-Jica Consultants, based on a Japanese methodology, however, taking the previous data, I do not personally believe that it is by far the best option.
So what is the way? Business strategy in Mexico must change from the concepts of "Quality", "Efficiency", and "Low Prices" to "Sustainability", "Expansion" and "Profitability".
Some recent studies mention that the fastest growing companies obtain more than half of their sales from Innovative New Products developed in the last 5 years !!, see the recent case of Apple with the Ipod, Iphone and Ipad, which today represent much more 60% of its sales, which were previously computers.
The business bet in this new era must be a different Management Model:
1.- Strategic vision oriented to Business Expansion through Innovation.
2.- Business Model based on Innovation.
3.- Processes for the Development of New Products and / or Innovative Services.
4.- Duly selected Intellectual Capital.
Unfortunately in Mexico there are very few consulting companies with the necessary experience to carry out these processes, because, obviously, Mexico's experience in Innovation is very low, and this can be observed in the Investment in Technological Development of our country relative to other economies.
However, there is a basic key to be able to properly select the consultant of your choice:
1.- They must have experience developing Innovation in products and services in companies, preferably American or European, and must be able to tell you examples of products or services in the market they have developed themselves.
2.- It is important that your experience has been in Research areas or Product Technological Development Centers.
3.- This experience is preferable to be oriented to Business Research and Development departments, I clarify, not researchers from Universities or Government Research Centers since their experience is more academic.
4.- It is important that the methodologies of the consultant or consulting firm are innovative.
