The Commoditization of Quality
As we said earlier, competitive advantages used to be the hallmarks of successful businesses. They were tangible, predictable and measurable. Most important, they were sustainable. They would last for decades.
This was the traditional situation, as we know it since Warren Buffet coined the term economic moat. Yet, something has been happening in the recent past. Something that profoundly affects the sustainability of such competitive advantages.
To better understand what’s going on, let’s - once more - take a step back:
A competitive advantage is only sustainable as long as it’s hard to replicate. In other words, it is not about being able to manufacture better products today. It is about keeping that advantage tomorrow. It’s about having a sustainable edge.
To get a clearer view of whether and how quality is still a sustainable competitive advantage these days let’s switch perspectives: we are thinking as consumers now.
Assumed we buy a product as consumers. How hard is it to find a good product that fulfils our quality requirements? Tell me about a product category, where you don’t have the option of a variety of choices that all meet these requirements.
And then, even if you have quality differences within a product category how big are these differences really? What is the difference between a BMW and a Mercedes in terms of performance and functionality? Which new TV set is the best one to buy? It’s not without a reason that the market for product reviews and comparisons is booming. Differences in quality are not easy to spot.
Let’s assume for a second that we take away all brand labels. Can we still tell the quality differences between offerings? We will be able to spot the difference between a Ferrari and a Vauxhall, but can we tell the difference between a Volkswagen and an Audi? Between a Samsonite and a Delsey? Between GAP and Banana Republic? The race has become tight.
And even if we can tell the quality difference, do we need this extra premium quality? Or does the Samsonite, Delsey or Wenger type quality fulfill our needs? How does the handmade clockwork mechanism of a Rolex improve our ability to tell the time? Would folks still buy it if it was packed inside the case of a much cheaper Swatch?
But then what are our criteria for making purchase decisions?
In how many situations is it still quality? Or is it the brand or something else?
Let’s face it, if we are looking to purchase a trolley, a car or a tv, then we take quality for granted.
If we look at 80’s and 90’s car commercials, we see advanced performance and technology features taking center stage.
If we look for the true innovations in durable consumer products, we sometimes see that they have moved from the core product to auxiliary services, such as the connected car and autonomous driving. But more on that later.