THREE

From Selling Products to Providing Solutions

Customers buy holes, not drills.

IN MANY INDUSTRIES, especially in business-to-business (B2B) markets, suppliers of “products” struggle to withstand commoditization. Competitors rapidly copy new features, effectively destroying product differentiation, and sophisticated buyers refuse to pay any brand premium—at least not a premium that would cover the required additional marketing costs to build and maintain it.

Companies confronting commoditization have few strategic options. They can become a low-cost provider in their industries, but that requires relentless cost-cutting, generally by moving production overseas to low-cost locations, trading low margins for (hopefully) higher volume, revealing ...

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