It was about quarter to midnight, James looked at his watch as the waiter approached a couple of imported beers to the table. I ordered a cream jar, the place was far from having the right atmosphere. James turned on his place and trouble to comment, "I worry a little about the competition in town because even If my product is quite relevant is not as if I've invented the wheel of financial factoring industry, it will not be long before competitors just copy my service and so any competitive advantage achieved is likely to vanish within months, "-Santiago settled without hiding the frustration on his face.
"I think the idea that a single successful product will make you a millionaire and therefore you can feed your children and grandchildren for the rest of their lives is a naïve idea" -I said, "The world has changed a lot since then," I repeated it a couple of times.
"It's a very contested business strategy in technology companies. As discussed a few minutes ago, some market leaders dusrupt with their products and become the platform within its industry, virtually forcing (lock-in) customers to use their products, " I said. -"A bit like the case of Microsoft or SAP," confirmed Santiago. Just nodded my head.
"The key here would be to design products for you clients that eventually will require the services of your staff. That is, you become an expert in the field of financial factoring to the extent that eventually as your products may not fulfill certain types of clients`needs so there it opens your chance of developing the area of services within your company " -I said without stopping a second. -"I do not think there is a correlation between two things" - James said with an air of presumption while the waiter helped light a new cigar, the fourth of the night.
"I think the relationship´s more than clear: it is one way you can kill two birds with one stone: creating a competitive advantage by offering an extra service to your customers that your competitors do not offer and provide a source of extra income which profit margin is huge and not run the risk of becoming a commodity "- I responded candidly while I realized my beer glass was empty.
Santiago chided me quickly and without hesitation: "Commodity? , How could my product become a commodity? if we are not talking about barrels of oil here! "- I say excruciating :"Think more on the concept of the commodity when you think about your product: the moment you add a sale price that will leave a very generous profit margin, the problem comes when the competition begins to generate and flood the market with relatively similar products, some will be offered at lower prices so that you run the risk of your customers fall into the game if you have several suppliers with the same type of product and THERE IS NO DIFFERENCE BETWEEN THEM OR ANY OF THESE PRODUCTS AND IF YOUR PRODUCT DOES NOT OFFER A VALUE- ADDED, then simply customers will choose the cheapest one "- I ended abruptly and without breathing.
Santiago is left wondering a few seconds, he tapped his cigar, expired and continued: "At this point you may have a point, the demand of the market that I run is highly elastic, as products are cheaper and offer the same features without doubt clientes will go with the lower price. "- "Certainly," I said. "The only way to differentiate at this point is to create a way to give another type of service to your customers through your product, you could offer consulting, engineering, financial product development etc. ..., All of which adds value to your product and avoid your client sees you as a commodity. "
"Ever heard of the economic terms of scope? "-I asked with some impatience. James smiled and answered me with another question: "Are you hungry?, I think it's time for dinner."
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