Member Pat O’Malley Speaks: Strategic Transparency in Technology
The Challenge:
The case at hand involves a CEO who had done rigorous analysis and laid out a solid roadmap for his company. He was considering implementing a Universal Pricing Plan, but was nervous that it would undermine his competitive edge.
If you were in this situation, what would you do?
If I were in your shoes, I’d establish a Universal Pricing Plan and communicate it internally and then to your suppliers and customers. Yes, your competition will catch wind of this. But does it matter if your technology is truly commoditized?
Sure, your technology might be difficult and complex to create. However, if even two other companies are making the same thing, then you are dealing with an economic commodity. If I were you, I’d figure out what pricing keeps the ecosystem functioning – as you have already done – and then communicate it to your customers and suppliers. If you say to the world “this is the price that we’re adopting,” then you are projecting a comfort level with pricing for which you know the economics work. Your customers now know that if you get this price, you’re going to continue an investment. In turn, they can continue to invest in your brand. Don’t worry about competitors. No one is going to get a cost advantage since the cost curve is way down.
Trust your competitors to be smart and see the math you see. If they want to continue to price erode – to take the product to an early grave for 100 percent share – eventually you will win because your customers look at you as a good steward of their interests. It’s bad business to both your customers and suppliers if you say “I’m not making enough money on this,” and you drop the line. Remember, they count on you, too.
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