Tide Basic Detergent. Is this Innovation?
August 8, 2009 8 Comments
Photo credit: Wall Street Journal
Adam Hartung, Managing Partner of Spark Partners, a strategy and transformation consultancy, asked this question on LinkedIn:
Do you think “Tide Basic,” a less-good formulation, is an innovation? Isn’t innovation about making things better and cheaper, not just cheaper?
The genesis of the question is a story in the Wall Street Journal describing why P&G recently rolled out Tide Basic. Tide Basic “lacks some of the cleaning capabilities of the iconic brand — and costs about 20% less.” As the article notes, Tide’s historic posture is to improve the laundry detergent continuously. It gets better every year. And the price does go up as well. The decision to go down-market didn’t come easily.
Much of this is reminiscent of Clayton Christensen’s analysis of the steel industry. In that story, low-cost mini mills ultimately led to the demise of the big, integrated steel mills.
Reflecting on that, here’s how I answered Adam’s question on LinkedIn:
Conceptually, going simpler on something *could* be an innovation. Clayton Christensen’s mini steel mills were the catalyst for disrupting the steel industry in the 1970s and 80s. The innovation was decoupling the low cost, simple steel from the integrated high end. It enabled quality customers wanted at much lower prices.
A lower cost, less featured Tide sounds similar, doesn’t it? A difference here is that there’s nothing new in the manufacturing process for Tide Basic. Remove the more expensive ingredients, change packaging, sell for less. Nothing wrong with that either. It addresses the needs of a segment of the market. I consider it smart business.
A key difference between Tide Basic and the mini steel mills is that the mini mills recast the economics of the industry. At the low-end initially, then upmarket as well. Tide Basic doesn’t recast the economics of the industry. There’s still a linear relationship between the ingredients put in the detergent, and the price and performance of the detergent. The mini mills caused a fundamental shift in the pricing of steel.
That was their innovation.
How about you? What do you think?
Conceptually, going simpler on something *could* be an innovation. Clayton Christensen’s mini steel mills were the catalyst for disrupting the steel industry in the 1970s and 80s. The innovation was decoupling the low cost, simple steel from the integrated high end. It enabled quality customers wanted at much lower prices.
A lower cost, less featured Tide sounds similar, doesn’t it? A difference here is that there’s nothing new in the manufacturing process for Tide Basic. Remove the more expensive ingredients, change packaging, sell for less. Nothing wrong with that either. It addresses the needs of a segment of the market. I consider it smart business.
A key difference between Tide Basic and the mini steel mills is that the mini mills recast the economics of the industry. At the low-end initially, then upmarket as well. Tide Basic doesn’t recast the economics of the industry. There’s still a linear relationship between the ingredients put in the detergent, and the price and performance of the detergent. The mini mills caused a fundamental shift in the pricing of steel.
That was their innovation.
About Hutch Carpenter
I'm Not Actually a Geek 
Interesting question Hutch. I agree that is an innovation.
I think another corollary is the electronics industry. Each year they continue to add components and complexity. Not all consumers can even tell the difference, as evidenced by the Megahertz and then Megapixel wars. Just because you can make something “better” doesn’t mean consumers will deem it better.
The Flip camera is an often cited example of this very thing. Big Wig electronics execs laughed at the idea of such a puny camcorder, but consumers voted with their dollars to make it immensely successful.
For P&G specifically, I can’t think of the last time I was actually dissatisfied with the cleansing power of my detergent, so I would be very interested to save some money there and get “the last generation” cleaning power. My clothes were just as clean to me last year as they seem this year. No perceived change in quality at a lower price is innovation in my book.
I like that Caleb. I’m noodling on writing a more detailed post about what innovation is. Product evolution is a form of innovation. Your point about the megapixel wars is well-taken. How to think about that sort of improvement? Is it innovation? I think it is, if only in terms of successively better engineering of existing functionality.
I think innovation is anytime you make something measurably better than it existed before a particular group of people. For the megapixel war, it certainly was innovation in terms of the technology and for technologists and geeks, but I would say it didn’t necessarily make it much better for regular people.
This is not a form of innovation, rather, simply opportunistic marketing. Tide’s brand management smartly recognized that a consumer segment emerged that was very price conscious, yet still desired the safety/trust of the Tide brand. I suspect that Tide Basic was an emerging market product for BRIC nations that was simply (smartly) repurposed. Good job by P&G, but not innovative. let me know what you think at http://www.developnewproducts.wordpress.com
Hutch,
I read the article too – and it also caused me to draft a post (which I never finished). What caught my eye was that they actually quoted the CTO (if I remember correctly, it was their CTO, not CIO) who said “innovation was going to come from cost efficiency” – presumably of their manufacturing technology and IT.
I agree with the other commentors that it is innovative, and it reminds me a lot of IT, where you get to the point where the features don’t matter anymore to the bulk of consumers. In fact, many people aren’t hardly ready for previous versions of features… What’s a company to do? Do we release more stable, easy to use, easy to implement less-feature-full software? I think so.
David
I agree with Caleb, both posts. “New” doesn’t mean better, it just means “different”. If consumers can’t see the difference between the old and new versions, they certainly aren’t going to pay for it (unless forced to).
Another great example, to follow David’s point, is XP/Vista, and Office 2003/2007. Most consumers were happy with their functioning computer running XP, and weren’t interested in buying a new box with Vista just to do the same mundane tasks as before. Heck, I work at a major financial services firm, and we run XP and Office 2003, because the financials just aren’t there to switch. We spend our money on tools that accomplish new things, not refreshing the old ones willy-nilly.
Bringing it back around, I think it is a brilliant move on Tide’s part. No R&D to make the “old” formula, just a new package. Achieve price discrimination naturally, and increase your customer base. Can’t see any downside.
I think if the 20% efficiency which is reduced was good to have ones and users were paying just coz there was no other alternative then this is an innovation.
Interesting post, thanks. The comment re: “repurposing” a launch intended for developing/BRIC markets may be spot on. Thus, more of an innovative position to take rather than creative NPD…