dispatches from the new world of work

Duh (I)

"Made in China: Suspect Imports Raise Questions About the Real Value of Getting Lowest Price"—Headline, USA Today, 0703.07.

I'm delighted, at a personal level, to pay less rather than more than expected for an item—stiffed by lost baggage, I was greatly pleased with the $4 underwear I acquired at midnight in Eugene, OR, at Wal*Mart. But I'm also old enough to believe (hangs in there with the Golden Rule) that "Things that are too good to be true are too good to be true."

I have long argued pigheadedly that low-cost producers will eventually get hammered. (It seems to be happening to Dell and Wal*Mart as we speak—or write.) I believe that business's most likely winning hand, especially in the mid- to long-term, is to live near the top of the price-value heap. In short, as I see it, the low-cost producer has little to fall back on when competitors invariably catch up—that is, a shriveled Culture of Innovation; a high-value producer has only stayed there via constant innovation, big and small. Needless to say, I feel exactly the same way about vendors and every other member of the supply chain.

China will rally, I have no doubt of it. But when they do, they won't offer the same "unbelievable" cost advantage. "If it's unbelievable ... "

(Corollary plea: Please, with a few exceptions related to health, let the market take care of this—not my dear fellow Vermonter, Senator Bernie Sanders, and his pals.)

Tom Peters posted this on 07/06/07.

Comments

Tom, is it really that the operational efficiency model is dead (versus customer intimacy or product leadership using the Treacy/Wiersema model) or just that Dell and Wal-Mart qualify for your other thesis that companies are not built to last for more than 25 to 30 years.

Without Dell, we may be paying HP's cartridge premium expectations (per ounce cost more than Chanel or Moet products) even on on laptops. Without Southwest we would not know how badly run American and Delta were. Without Toyota in 80s how bad GM and Ford were.

I find it remarkable that Southwest has not lost money for 30+ years, that Infosys at its much lower India centric rates has operating margins 20 basis points better than Cap (recent acquisition rumor around those two) etc.

Like you I enjoy a well crafted product or superb customer experience, but am always wary whether the company is also well run. I don't mind paying a 25 to 35% premium but not 100, 200, 300%.

Full disclosure - I help CIOs negotiate technology deals, and always need an operational efficient vendor in the mix of competitors to provide the benchmark on whether the others have a premium of 25% or 300%

Posted by vinnie mirchandani at July 8, 2007 7:11 AM

The entire future is upmarket.

And physical goods and better services are nothing. iPhone is nothing. $1200 jeans are nothing. $50,000 mattresses nothing.

Nothing compared to what we'll luxuriate in once the arbitrary fixed prices for content collapse.

We've been living with socialized culture for years and no one's so much as made a peep.

If we were all still using 1950s phones or dial-up internet, or without penicillin, or drinking Sanka we'd be crying like babies.

So why no uproar about that most precious of preciouses: true intangibles.

Movies, writing, TV, music, magazinesâ€”why do we make then sell t-shirts, advertise Happy Meals and hold day jobs just to make ends meet?

Tom, even you have to tour like The Stonesâ€”what gives?

Why aren't your ideas worth more per page than a Danielle Steele romance?

Or the season's worst Who Cut the Cheese rip-off?

The answer at www.whiteg.com: