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 / Autumn 2008 / Issue 52(originally published by Booz & Company)


The Unique Advantage

5. Product experience. Successful products have an emotional component that builds a bridge to consumers, becoming part of their lives. Expanding on this aspect of a brand can be another way to build difficult-to-copy value into a product. Logistically challenging and often costly, such an effort can nevertheless be effective for the right brand.

Nestlé SA has succeeded in transforming its Nespresso System into a chain of stores that sell appliances and coffee. The Nespresso System centers on high-quality packaged espresso packets that work with a special espresso maker. It carries an emotional claim as the first product to bring true café taste into European homes. Nestlé capitalized on the system’s modularity and the company’s key relationships along the value chain to open 79 retail locations in Geneva, Vienna, Paris, Zurich, Moscow, and other cities.

6. Packaging. Packaging is often viewed as an innovation afterthought. The truth, however, is that new formulation is often easy to copy, whereas packaging innovation can leverage technology, emphasize unique brand characteristics, enhance the product experience, and in fact prove very difficult to duplicate.

Packaging innovation often requires major changes to the manufacturing process, which is a strong defense. An example is Campbell’s Soup at Hand microwave-safe containers, launched in 2002. Although their contents didn’t change, these easily heated, sip-able containers rapidly became one of the most successful new products in Campbell’s history. The package helped the com­pany’s ready-to-serve soup lines grow 8 percent in Soup at Hand’s first year out and gave it a four-year head start on rival Progresso. This success even caused the company’s president, Douglas R. Conant, to redirect his strategy, saying, “We intend to make the C in Campbell synonymous with convenience.” Although the new product’s value proposition was convenience, the fact that it was neither easy nor cheap to copy helped drive its lasting success.

Another game changer was tuna packaged in the Flavor Fresh Pouch, an innovation introduced by Starkist (then a unit of Heinz) in 2000. This vacuum-sealed foil package shook up the tuna fish industry when it appeared because, for the first time, packaged tuna could be sold in groceries without a can. Although competitors have since introduced their own foil packaging, the convenience of this product continues to allow Starkist to charge a premium for it over tuna in cans.

7. Effective vertical integration. With outsourcing and offshoring so common, and the heyday of soup-to-nuts global manufacturing entities decades in the past, it may seem strange to insist that vertical integration can be a source of difficult-to-copy advantage. But for some companies, it is. Think of Swarovski AG, which has maintained its position as the world’s finest crystal manufacturer by keeping a tight rein on its methods and processes. Over a century of innovations, the company has perfected a unique method for transforming sand and lead into some of the most beautiful objects in the world. Fearing a loss of its advantage and closely guarded trade and technology secrets, the Wattens, Austria–based firm refuses to move its core technical operations out of the country, despite high labor costs there.

The Advantage of Scale
All of these strategies should be pursued together. It is possible to gain additional benefits by building scale, amplifying the effects of hard-to-copy innovations by spreading them across multiple products. (See “Design for Frugal Growth,” by Jaya Pandrangi, Steffen Lauster, and Gary L. Neilson, s+b, Autumn 2008.) For instance, a breakthrough technology or process can be applied to a number of products or categories, as Frito-Lay Inc. (a subsid­iary of PepsiCo) did with its “baked” chips innovation. The process allowed the company to produce lower-calorie, less-greasy chips, and it was implemented across the Doritos, Tostitos, Lay’s, and Ruffles brands. Scale can be built up internationally by employing a common platform across geographies, as Nicorette (a brand within Pharmacia AB’s international portfolio at the time) managed to do with its nicotine replacement therapy smoking cessation products. The brand dominates this category in large part because of its coordinated cross-border strategy, encompassing logistics, distribution, regulatory compliance, and consistent messaging that respects local sensitivities.

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  1. Nikhil Bahadur and John Jullens, “New Life for Tired Brands,” s+b, Spring 2008: How to discover the dormant vitality in an old product line.
  2. Kevin Dehoff and John Loehr, “Innovation Agility,” s+b, Summer 2007: Explains how to follow Toyota’s example without copying its specifics, and create your own versatile product development process.
  3. Barry Jaruzelski and Kevin Dehoff, “The Customer Connection: The Global Innovation 1000,” s+b, Winter 2007: Booz & Company’s annual study of the world’s largest corporate R&D spenders, finding two primary success factors: aligning the innovation model to corporate strategy and listening to customers every step of the way.
  4. Alexander Kandybin and Martin Kihn, “The Innovator’s Prescription: Raising Your Return on Innovation Investment,” s+b, Summer 2004: Introduces the innovation effectiveness curve, another tool for raising performance throughout the product life cycle.
  5. For more thought leadership on innovation, sign up for s+b’s RSS feed.
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