Creative Destruction - Why are razor blades so expensive?

Creative destruction suggests that if someone comes up with an idea that is a better solution it will "destroy" the existing solution in the market.

The market leader Gillette is owned by Procter and Gamble, and is currently being investigated by the Office of Fair Trading as their blades can be produced for 5p and are sold for up to £2.43 each. http://www.dailymail.co.uk/news/article-1191456/Sharp-practice-The-razor-heads-cost-just-5p-make-sell-2-43-each.html Gillette have a reputed 72% of the world market (2003) worth

Whilst in Sainsbury's the other day I noticed this and also noticed the cheaper alternative made for Sainsbury's and gave them a try. Whilst cheaper the result was both painful and ineffective.

This is the sort of situation that spawns "men in sheds" inventing a better solution. Gillette allegedly spent £680m developing the Mach3 blade. Surely it is possible to develop for cheaper in your shed.

http://www.prdpartnership.com/giraffeinmyshed/ explores the idea that many inventors or would be entrepreneurs get locked into a particular idea. In this situation we would call this an elephant. Why? Well there were a few books written about large companies and elephants a while ago (e.g. Teaching elephants to dance - Rosabeth Kanter), where the elephant was a large lumbering giant. Simply put - if you invent an "elephant" type product or service you should think very carefully before doing battle with the likes of Gillette and Procter and Gamble.

Our simple advice is to think more about Giraffes! Think a little bit differently, and possibly not to go for the centre stage wide part of the market, but for a little bit, possibly that others are not interested in, or cannot make work. Why? Simple risk reduction. Yes your profits and revenue get reigned in - but unless you are that "special" person that Schumpeter said was necessary to harness all the resources necessary to make Creative Destruction happen - then your chances of success may be small.

Consider the razor blades. Why is it that Sainsbury's have a blade that doesn't work very well?

• Their R+D team don't shave
• They don't want to have repeat customers
• A very lazy buying team
• They cannot get round the Gillette patent
• Proctor and Gamble are bigger than Sainsbury's

Possibly the last 2 have more to do with reality than the first 3.

The first problem therefore is one of protection. The razor blade market is one of the most heavily patented, with over 1000 patents existing. Gillette filled over 100 patents for the Mach3 system. Procter and Gamble also have lawyers. They will protect their territory be it patent, trademark, or even slogan "shave yourself" or "the best a man can get".

Creative destruction challenge: Can you produce something that not only doesn't infringe on an existing patent, but one that is not going to attract attention from the likes of Proctor and Gamble's lawyers. Can you afford to fight them?

The second problem is one of market power. The market was valued at $7.5b in 2003 and 72% of that is worth having. Even if you get round the lawyers - where are going to sell your product?

Creative Destruction challenge - Can you get it on the shelves at Sainsbury's? It would be nice if it was in an obvious place with attention drawn to your branding.

The third problem lies with the consumer. Gillette advertise heavily. when they introduced the Mach3 they spent between $100m and $300m on the launch. In addition there is the business model that Gillette invented back in the very early 20th century of giving the razors away, but making profit on the blades. The razors are propriety, and so will only work with the right blades, protected by patent. This combination gives rise to strong consumer loyalty, and Gillette have had a 10 year head start on the Mach3 and over 100 years head start since they started.

Creative Destruction challenge - how do you get the consumer to change their habits and buy into your system? What resources will you need?

Whilst in a fit of frustration in Sainsbury's the market is in desperate need of competition, there isn't a good cost effective shaving solution out there at the moment, solving the problem is not simply coming up with a new razor. There are many other challenges, each of which requires resources and possibly experience. Whilst there might be a James Dyson out there somewhere who can take on the likes of Hoover and win, it is a daunting and expensive challenge.

Why are razor blades so expensive?

Gillette would say that they have spent a lot of money on advertising and on R+D. In addition they do have a few lawyers. The key fact is that the market is uncompetitive and sewn up by Gillette. We all want to make a little profit, hats off to them for achieving it over such a long time period.

In terms of Creative Destruction, Schumpeter was doing his research in the 1930's and would have been studying companies like Gillette. Born in 1855, King Camp Gillette was standing before his mirror, ready to shave, when he realized that the Star razor in his hand was useless. "It was not only dull," Gillette would write later, according to his biographer Tim Dowling, "but it was beyond the point of successful stropping and it needed honing. As I stood there with the razor in my hand, my eyes resting on it as lightly as a bird settling down on its nest, the Gillette razor was born."

It took him five years to find someone who could provide a machine that would automatically hone thin sheets of steel to the required sharpness, and at first the blades sold for less than they cost to make. Undaunted, Gillette forged ahead and eventually had a second epiphany: He would give away a razor and sell the blades. By 1910 Gillette dominated the razor business, and its founder was a millionaire.

Honest, ethics and marketing

Honesty and ethics are important! One of the issues around creative destruction is the ability of a company to be able to educate the customer to a new offering. If you are an inventor starting off - how would you interpret this? On one hand it is a mistake to love your product too much, and better to focus on benefits to the consumer. In doing that how important is it for your business to behave in an honest and ethical way?

I am sure you cannot forget former directors of the Daily Telegraph taking $32m in unauthorised payments. Alternatively Conrad Black, the then CEO spending $20,000 of shareholders money on a surprise party for his wife. Whislt Black is in jail the Daily Telegraph flourishes on a diet of MP's expenses, ethics and transparency.

The tiny island of Sark had 150 years of feudal rule. The now owners of the Daily Telegraph had been investing £5m a year into the island, they live in a neighbouring castle. In Sark's first democratic elections the people of Sark failed to the Barclay Brother's estate manager and immediately all the investment stopped. I am sure this would not have been a return to feudal rule with the Lord's of the castle employing a sheriff to carry out their duties.......

Links between the Barclays Brother's and UKIP - and an underlying agenda to the MP expenses agenda has been made. Interestingly their response was to get lawyers to make the hosts of the blog where the allegation had been made simply to take it down. (and they did) – So much for transparency and open public debate.

Seemingly the debate is more about power – and this is a lesson for marketing and those businesses that think that honesty and ethics are the way forward.

“Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight.” Keynes 1930

The above quote is still apt. Translated into more palatable business language – give the customer what they want without ignoring your need for income (avarice or greed) – make sure you get in a good position to do this (yes, well run systems count, but so does influence) – and don't take unnecessary risks.


As with other successful business men the Barclay Brothers have amassed a fortune and may well have worked out that influence matters as well as giving the customer the stories that they want to hear. Taking down an annoying blog is about risk management.

On a much small note it is my birthday today and I received a “handmade wooden clock” in the shape of a guitar – and very nice it is too. It reminded me of pork sausages. Pork sausages must contain 42% pork meat, of which 30% can be fat and 25% connective tissue. The clock was made out of plywood. Would an ethical marketeer say “handmade plywood clock”? If they did would it result in more or less sales? As I stated earlier – the clock is very nice and fit for purpose.

Creative Destruction - getting elected

"Free bananas for school children" is a very different election strategy - and is it came from H'Angus the Monkey - it was an obvious strategy.

3 elections later Stuart Drummond AKA H'Angus the Monkey has been elected for a third term as mayor of Hartlepool.

In the european elections in the UK Labour lost 5 seats - in itself not loads - but they seem to be in a bit of a mess. Unfortunately their votes seem to have been distributed more to the BNP than to a mainstream party. This suggests that there was no real alternative.

With respect to Europe whether we should be a member or not is a national debate - but I am assuming that as members we should get our value for money. The UK did get £5.9bn in funding from the EU last year - and organisations need some help in knowing how to access and use this effectively.

We have just elected 25 Conservative MEP's who Hague and Cameron may direct towards leaving the EPP and finding a more skeptic set of friends. In so doing they are not part of any majority or even significant faction within the EU. How can they represent our best interests as members? We have also elected 13 UKIP members - who do not want to be members. OK its a protest vote - but they cannot disolve the agreement of the EU membership - so what are they going to do?

We have also elected 2 BNP members. Are they going to seek to represent the interests of the people they have elected - other than to say they want to leave the EU (and stop immigration).

This leaves the UK in a funny situation - being a member of a political Union of 736 MEP's - with 30 out of 69 elected representatives being elected to withdraw or reduce the way in which the UK is a member - and not to make the most of the membership whilst we are members.

If there was something that the EU did that was positive - is it likely that any of these people would publicise it within their constituancies or help gain the best use from the funds.

In the short term there aeems to be a democratic problem. We have elected 30 out 69 MEP's who cannot influence what goes in within the "club" - they are effectively 1 of 736. It is not their decision as to whether we stay or leave. They do not believe in the benefits - so what are they doing?

"A vote for UKIP is a vote to say ‘No’ loudly and clearly." OK - this has been done - twice - in 2004 and 2009. There are now 13 MEP's who are being paid £64,000 per year and then their expenses on top (Nigel Farage has estimated that a cost of each MEP is about £1m over their elected term - so much for moats and duck houses)

What has this got to do with creative destruction?

Everyone in the UK employs an MP, a Councilor (at least 1), and an MEP as consultants to help decide how best to spend a decent chunk of our income. (Official sources suggest 36.9 - 39 percent, whereas government spending may be as much as 47 percent of our incomes). This is not an inconsiderable sum of money. The choice seems to be - vote Tory - and we may cut taxes for some - or vote Labour - and we will increase taxes for everyone.

We seem to need some ideas - and I mean big ideas - and someone to carry them through. Politics like any other market has relied on selling ideas to consumers - and supporting with a credible list of people. In the past this has been around economics, social justice, or even law and order. It is rarely about the political system itself - there have been moves to reform the lords, or how we integrate with Europe - but it is a while since Guy Fawkes had a go.

Wood pellets in Swindon

The Energy to Work Ecademy has just taken over premesis in Cheney Manor in Swindon. They will provide a number of services where there has been an identified need from the local community. These will include:

Practical work based training for disabled people:

Training for installing wood pellet stoves and boilers

Offering disability aids

Offering temporary care based work in Swindon

Selling wood pellets

All services are offered as there are clear market gaps. Further information can be supplied as needed.

wood pelleting plant tender

wood pelleting plant tender as advertised on OJEC

UK-Swindon: machine tools for working wood
Publication date: 18/03/2009
OJEU Ref: (09/S 53-76466/EN)
CONTRACT NOTICE
Supplies
SECTION I: CONTRACTING AUTHORITY
I.1) NAME, ADDRESSES AND CONTACT POINT(S): Swindon Borough Council, Enterprise Works, Units 1A & 1B, Gipsy Lane, Attn: Dave Rowland, UK-Swindon SN2 8DT. Tel. +44 1793616288. E-mail: enterpriseworks@swindon.gov.uk. Fax +44 1793542235.
Further information can be obtained at: As in above-mentioned contact point(s).
Specifications and additional documents (including documents for competitive dialogue and a dynamic purchasing system) can be obtained at: As in above-mentioned contact point(s).
Tenders or requests to participate must be sent to: As in above-mentioned contact point(s).
I.2) TYPE OF THE CONTRACTING AUTHORITY AND MAIN ACTIVITY OR ACTIVITIES: Regional or local authority.
General public services.
The contracting authority is purchasing on behalf of other contracting authorities: no.
SECTION II: OBJECT OF THE CONTRACT
II.1) DESCRIPTION
II.1.1) Title attributed to the contract by the contracting authority: UK-Swindon: Energy2work.
II.1.2) Type of contract and location of works, place of delivery or of performance: Supplies.
Purchase.
Main place of delivery: Swindon.
NUTS code: UKK14.
II.1.5) Short description of the contract or purchase(s): Enterprise Works, which is part of Swindon Borough Council are looking for an organisation to supply a wood pelleting plant utilising new / used equipment. This procurement is limited to a maximum spend of 211 000 GBP for the purchase of the equipment, the delivery, installation, commissioning, operator training, technical advice and 1 years warranty and maintenance of the plant.
II.1.6) Common procurement vocabulary (CPV): 42642100, 50530000, 43810000.
II.1.8) Division into lots: No.
II.1.9) Variants will be accepted: Yes.
II.2) QUANTITY OR SCOPE OF THE CONTRACT
II.2.1) Total quantity or scope: Estimated value excluding VAT: 211 000 GBP.
II.2.2) Options: Yes.
Description of these options: There is a provision in the contract for the option to extend the maintenance agreement for 2 periods of 1 year each (1 + 1 for a maximum of 2 years).
II.3) DURATION OF THE CONTRACT OR TIME-LIMIT FOR COMPLETION: Duration in months: 12 (from the award of the contract).
SECTION III: LEGAL, ECONOMIC, FINANCIAL AND TECHNICAL INFORMATION
III.1) CONDITIONS RELATING TO THE CONTRACT
III.1.4) Other particular conditions to which the performance of the contract is subject: Yes.
Please refer to the Request (tender) for further information.
III.2) CONDITIONS FOR PARTICIPATION
III.2.1) Personal situation of economic operators, including requirements relating to enrolment on professional or trade registers: Information and formalities necessary for evaluating if requirements are met: (a) is bankrupt or is being wound up, where his affairs are being administered by the court, where he has entered into an arrangement with creditors, where he has suspended business activities or is in any analogous situation arising from a similar procedure under national laws and regulations;
(b) is the subject of proceedings for a declaration of bankruptcy, for an order for compulsory winding up or administration by the court or of an arrangement with creditors or of any other similar proceedings under national laws and regulations;
(c) has been convicted by a judgment which has the force of res judicata in accordance with the legal provisions of the country of any offence concerning his professional conduct;
(d) has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate;
(e) has not fulfilled obligations relating to the payment of social security contributions in accordance with the legal provisions of the country in which he is established or with those of the country of the contracting authority;
(f) has not fulfilled obligations relating to the payment of taxes in accordance with the legal provisions of the country in which he is established or with those of the country of the contracting authority;
(g) is guilty of serious misrepresentation in supplying the information required under this Section or has not supplied such information;
(h) has been the subject of a conviction for participation in a criminal organisation, as defined in Article 2(1) of Council Joint Action 98/733/JHA;
(i) has been the subject of a conviction for corruption, as defined in Article 3 of the Council Act of 26.5.1972 and Article 3(1) of Council Joint Action 98/742/JHA3 respectively;
(j) has been the subject of a conviction for fraud within the meaning of Article 1 of the Convention relating to the protection of the financial interests of the European Communities;
(k) has been the subject of a conviction for money laundering, as defined in Article 1 of Council Directive 91/308/EEC of 10.6.1991 on prevention of the use of the financial system for the purpose of money laundering.
Please refer to the tender documents for further information.
III.2.2) Economic and financial capacity: Information and formalities necessary for evaluating if requirements are met: (a) appropriate statements from banks or, where appropriate, evidence of relevant professional risk indemnity insurance;
(b) the presentation of balance-sheets or extracts from the balance-sheets, where publication of the balance-sheet is required under the law of the country in which the economic operator is established;
(c) a statement of the undertaking's overall turnover and, where appropriate, of turnover in the area covered by the contract for a maximum of the last three financial years available, depending on the date on which the undertaking was set up or the economic operator started trading, as far as the information on these turnovers is available.
Please refer to the tender documents for further information.
Minimum level(s) of standards possibly required: Please refer to the tender documents for further information.
III.2.3) Technical capacity: Information and formalities necessary for evaluating if requirements are met: (c) an indication of the technicians or technical bodies involved, whether or not belonging directly to the economic operator's undertaking, especially those responsible for quality control and, in the case of public works contracts, those upon whom the contractor can call in order to carry out the work;
(d) a description of the technical facilities and measures used by the supplier or service provider for ensuring quality and the undertaking's study and research facilities;
(h) a statement of the average annual manpower of the service provider or contractor and the number of managerial staff for the last 3 years;
(i) a statement of the tools, plant or technical equipment available to the service provider or contractor for carrying out the contract;
(j) an indication of the proportion of the contract which the services provider intends possibly to subcontract;
Please refer to the tender documents for further information.
Please refer to the tender documents for further information.
Minimum level(s) of standards possibly required: Please refer to the tender documents for further information.
III.2.4) Reserved contracts: No.
III.3) CONDITIONS SPECIFIC TO SERVICES CONTRACTS
III.3.1) Execution of the service is reserved to a particular profession: No.
SECTION IV: PROCEDURE
IV.1) TYPE OF PROCEDURE
IV.1.1) Type of procedure: Open.
IV.2) AWARD CRITERIA
IV.2.1) Award criteria: The most economically advantageous tender in terms of the criteria stated below:
Price. Weighting: 60 %.
Method Statements for Maintenance cover. Weighting: 25 %.
Method Statements Machinery Training / Support. Weighting: 10 %.
Area utilised (Floor Sq.Mtr). Weighting: 5 %.
IV.2.2) An electronic auction will be used: No.
IV.3) ADMINISTRATIVE INFORMATION
IV.3.1) File reference number attributed by the contracting authority: energy2work 0109.
IV.3.3) Conditions for obtaining specifications and additional documents or descriptive document: Time limit for receipt of requests for documents or for accessing documents: 8.5.2009 - 12:00.
Payable documents: no.
IV.3.4) Time-limit for receipt of tenders or requests to participate: 11.5.2009 - 12:00.
IV.3.6) Language(s) in which tenders or requests to participate may be drawn up: English.
SECTION VI: COMPLEMENTARY INFORMATION
VI.3) ADDITIONAL INFORMATION: GO reference: GO 09031629/01.
VI.4) PROCEDURES FOR APPEAL
VI.4.1) Body responsible for appeal procedures: Body responsible for mediation procedures:
URL: www.swindon.gov.uk

Creative Destruction - Mobile Marketing part 2

Mobile marketing to some may be just text or short codes.

Most phones today work with Java, and therefore it is possible and becoming more possible to read and send more complex information easily to a broad set of people.

For instance completing surveys on phones and sending results to a csv or data file has been possible for a while, but now has more uses as more people can use java on their phones.

Mobile tagging has been introduced to a wide scale audience and is being used on billboards and could be accepted on a wider scale as a way of grabbing information quickly. (Perhaps if you have a shopping account you could scan and shop with your phone) As with any technology there seem to be more than one standard. 

The above image is in qr code and the one below is microsoft's effort! 

So in theory you could go to an exhibition and take home all your information on the phone. The only problem as ever seems to be standards. How many people will try and read a code with the wrong reader? 

You will be able to go straight from a tag to a survey - this could mean no filling out forms at the end of training sessions - just do it quickly on the phone via a tag. All results can be automatically calculated and deposited for the F-Controller to read at their leisure.

If this could be an end to filling in feedback forms - or not leaving them on the floor to be recycled - then that has to be a good thing! (Example of creative destruction? - would it be a meaningful impact on our lives?)

Grants and Subsidy for Small Businesses in Wiltshire

You might find this information useful.

www.survivaltoolkit.co.uk

Gives even the smallest business (employing 1-50) in Wiltshire access to group workshops and support. For £135 you can attend 4 workshops (worth £1000) and claim an NVQ 3 or 4 Unit or an ILM unit at level 3. More importantly you can focus on an improvement that you think will help survival or growth in 2009. The project is funded by the European Social fund and being run by GWE Business West, Train to Gain and delivered by the University fo Bath in Chippenham, Salisbury and Swindon.

LMAS

This is for Leadership and Management development. This could include developing strategies in marketing or operations, a business plan, mainly something useful that offers some new tools to use, and a plan that may help in 2009. The grant is £500 for free, then a further £500 that has matched funding. It is available for businesses with 5 to 250 Full time employees or equivalent. PRD Partnership are on the register to deliver this. We would be happy to help you claim this award and develop what would suit you best.

Creative Destruction - Mobile Marketing

The mobile phone provides a communication channel for business to business and business to consumer marketing.

There are many different phones available, and so overcoming the different standards provided, so that you can reach any phone often limits the activity to either:

A phone call
A text
A simple wap site
A call to action from a short code

More complex activities such as customer relationship management (CRM), surveys, competitions, authentication of delivery, or payment can be done with Java, but the systems that do this have been “new” or emerging.

We worked with Bluetrail to identify opportunities in the field marketing market for standard mobile phones to undertake surveys and CRM activities a couple of years ago. Results show that using a mobile phone is cheaper than a bespoke solution, and more effective than using paper or IVR solutions. Data is captured easily and accurately and doesn't have to be typed in twice. Error rates are therefore very low. Because the Java application is “on the phone”, only small amounts of data need to be transferred, and therefore the user experience is a good one as they can freely enter in information without worrying about their signal on the move.

CRM solutions are still with your employees, even if many may be temporary. There is therefore the opportunity for training to overcome any difficulties. Solutions for consumers to receive a survey on their phone has been possible, but only recently seen as reliable, and therefore effective.

PRD Partnership is working with Alien Minds to identify groups of people that would most benefit from mobile content, whether it is a survey, competition, or even selecting what you want to purchase.

Most people have a mobile phone, and they very rarely let it get more than a few feet from them. Unlike e-mail, it is a less abused medium at the moment, and therefore a higher response rate is possible if the recipient is given a good experience.

During a recession some companies may be considering cutting their marketing budgets. Others may be considering how to be more targeted, to give a better customer experience, and therefore to be more effective with their budgets. We think that mobile marketing may replace a lot of paper and electronic marketing as it gets right to the customer.

For more information or a demonstration get in touch through the PRD enquiry page, or mail me.