Commoditization of Offerings

Key Insight

The second major driver for innovation of meaning is the commoditization of an industry. When competition focuses for too long on the same meaning, firms endlessly improve performance or cut costs, leading to natural saturation and marginal differentiation. This convergence creates a 'red ocean' where offerings become increasingly similar and profit margins shrink, necessitating a shift to identify new 'delighting dimensions' and move into an 'uncontested blue ocean.'

Deloitte Australia exemplifies this by transforming its risk management services, which had become commoditized around compliance and technology. Instead of competing on cost, Deloitte reframed risk from a negative to a positive source of value, launching advisory services for top-level executives under the slogan 'Know the worth of risk.' This strategic redefinition led to a 30% rise in revenues and an 80% increase in profitability within three years, in a market where competitors were downsizing.

Similarly, Polish furniture manufacturer Vox escaped commoditization in the stagnant bedroom sector by envisioning 'living bedrooms.' Recognizing the aging population's increased time spent in bedrooms, Vox proposed a new meaning of the bedroom as a central, social space, similar to a living room. This led to innovative products like a bed incorporating a bookshelf and a folding screen, appealing to multiple generations, expanding Vox's European business, and overturning low profitability in the category.