Management & Marketing no. 4/2007

The innovation misstep

Andrew R. THOMAS,
The University of Akron, USA

Abstract. The author makes the case that cause of innovation to battle commoditization is far too often lost even before it starts. The dysfunctional distribution system has been turned on its head as distributors have wrested control of the strategic prerogatives of manufacturers in order to capture a disproportionate share of the value of the supplying company’s products. Mega distributors like Wal-Mart Stores Inc. and Home Depot Inc. end up profiting at the expense of their vendors, and manufacturers earn little or nothing on the sale of their own innovated products. The mega distributors not only control the delivery of their products to consumers but also wield tremendous power over their internal processes, further reducing the value of the innovation. There is some hope: if done right, manufacturers still possess the ability to directly influence what happens to their innovations products once they enter the distribution chain, but, this window is rapidly closing.

Keyword: innovation management; sales and distribution strategy; direct marketing; channel control.

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