Introducing contradictions in businesses - Is that a conscious strategy?

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Permalink Reply by Valeri Souchkov on September 25, 2009 at 12:45am

Hi Prakash,

Probably you read my last comment in your discussion about the flexible pen? Then my question is – what is a supersystem’s niche for such a car? Can we identify it? And does it exist? If yes, then such a car might be ideally fitting this niche, and we can say that development and production of such a car has a ground businesswise. Some points:

1. Such cars which are outside of Gaussian market distribution (including its horizontal segments) and which are produced in little volumes are treated not as costs but as investment by buyers. Over the time they will be treated as classic cars and their commercial value might be even higher than now. So there is a supersystem’s niche: rich people who buy luxury cars to demonstrate their status and invest at the same time. Possessing and driving a unique car can bring a lot of emotional value. There are also people who buy very expensive cars not to drive but keep them in their collections.

2. There are also successful competitive cars with a price tag over 1 million USD (like Maybach, or Bugatti Veyron).

3. There are public roads where you can drive such a car – as you rightly said, in Germany, for example. I remember pretty well as once driving at 250 km/h we were easily taken over by Ferrari which speed was around 300 km/h.

4. Creating such a car and making it successful (commercially) is a great advertisement for a manufacturer, its brand and image, as well as for its related businesses. Today yearly marketing and advertisement costs might be considerably higher than costs of development of such a car. So development of a such a car can be even considered as an advertisement effort.

5. Investing to top technologies makes sense if one can afford it: even while being expensive today, if tomorrow produced en masse, these advanced technologies will become cheap enough to be used in ordinary family cars. Race for power and speed very often results in developing robust and inexpensive solutions for mass market. Which would also guarantee a solid income for a manufacturer and patents owner.

Of course such investments are always connected with certain risks, but there is business sense. And, as you can see, this car is designed with a purpose outside the contradiction you mentioned.

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Permalink Reply by Prakasan K on October 1, 2009 at 3:35pm

Valeri, as usual another great insight from you. I'm intrigued to think the "other way around" of the concepts you talked about. What if the companies consciously introducing the contradictions for branding, pride, and many other things, but also thinking at the super-system and provide opportunity for someone else to innovate? For e.g, I could create a "race course" for all these high speed car and charge the millionaires/billionaires ready to spend money for using them?

Valeri Souchkov said:

Hi Prakash,

Probably you read my last comment in your discussion about the flexible pen? Then my question is – what is a supersystem’s niche for such a car? Can we identify it? And does it exist? If yes, then such a car might be ideally fitting this niche, and we can say that development and production of such a car has a ground businesswise. Some points:

1. Such cars which are outside of Gaussian market distribution (including its horizontal segments) and which are produced in little volumes are treated not as costs but as investment by buyers. Over the time they will be treated as classic cars and their commercial value might be even higher than now. So there is a supersystem’s niche: rich people who buy luxury cars to demonstrate their status and invest at the same time. Possessing and driving a unique car can bring a lot of emotional value. There are also people who buy very expensive cars not to drive but keep them in their collections.

2. There are also successful competitive cars with a price tag over 1 million USD (like Maybach, or Bugatti Veyron).

3. There are public roads where you can drive such a car – as you rightly said, in Germany, for example. I remember pretty well as once driving at 250 km/h we were easily taken over by Ferrari which speed was around 300 km/h.

4. Creating such a car and making it successful (commercially) is a great advertisement for a manufacturer, its brand and image, as well as for its related businesses. Today yearly marketing and advertisement costs might be considerably higher than costs of development of such a car. So development of a such a car can be even considered as an advertisement effort.

5. Investing to top technologies makes sense if one can afford it: even while being expensive today, if tomorrow produced en masse, these advanced technologies will become cheap enough to be used in ordinary family cars. Race for power and speed very often results in developing robust and inexpensive solutions for mass market. Which would also guarantee a solid income for a manufacturer and patents owner.

Of course such investments are always connected with certain risks, but there is business sense. And, as you can see, this car is designed with a purpose outside the contradiction you mentioned.

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Permalink Reply by Valeri Souchkov on October 7, 2009 at 2:27pm

I do not think that these companies are intentionally introduce contradictions - that would be a dangerous game unless we talk about non-technical areas. In fact, these companies fill in the existing market niches, which might be small but still exist. And due to specifics of these small niches they achieve extra benefits: branding, image, and especially - media attention. The wealth market can be very small but it can't be ignored: yes, it might be very small in percentage of population but it is money-rich. On this market, only margins can reach millions euros or US dollars. Sometimes profit in cash from just a single sale can outperfrom a yearly result of an average middle-sized company in Holland or France.

However the spending drivers behind the wealth market are different from those at mass markets. Most of wealthy people enjoy exclusivity and ready to pay a lot for uniqueness. Otherwise what can be a motive to spend USD 20 million to spend a few days on Earth's orbit experiencing nausea and other side effects in the wightless environment? Just for fun or adventure? I don't think so. It makes a little sense to ordinary, middle-class people whose primary target is to pay all bills in time. Make a space flight available to everyone for free - how many billionaries will sign in?

But definitely your idea is very nice: what you propose is to create new businesses which will expand applicability of these narrow-niche products. So speaking in TRIZ terms, we have to find "problems" which can be solved by these high-end expensive products and which will attract owners of these products. Often, over the time, such products can become mass products - like it happened with air flight, car, telephone which were also unique and exclusive in the past.

Prakasan K said:

Valeri, as usual another great insight from you. I'm intrigued to think the "other way around" of the concepts you talked about. What if the companies consciously introducing the contradictions for branding, pride, and many other things, but also thinking at the super-system and provide opportunity for someone else to innovate? For e.g, I could create a "race course" for all these high speed car and charge the millionaires/billionaires ready to spend money for using them?

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