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Commercial Competence: Are You Hearing The Message?

July 16, 2010

I went for a hearing test today. The audiologist was talking about how uncomfortable he is with the speed of change in technology. He used to confidently prescribe a hearing aid knowing that it would be good for at least 5 years. That is no longer true. And it is disrupting the traditional economics of his business. When prescribing for a 5+year fitment, it was a fixed price, up-front fee that included periodic check-ups and maintenance. But what do you do when people may want to switch to a much better technology in 1 or 2 years?

In fact, his model (and that ot the industry more generally) has been disrupted even further because now there is a hearing aid on the market that is based on annual subscription. That is clearly a much smarter approach when technology life-cycles are so short – but it revolutionizes the commercial model. In addition, these new aids remain permanently in the ear and require specialist technicians if there is a problem. But what if the problem occurs when you are travelling? There has never been any ‘collaborative network’ concept in the industry – now there needs to be one.

The manufacturers of this revolutionary new product have decided to limit the publicity surrounding it until they have worked out how to cope with its implications – and especially its disruptive influence on their established market and distribution network.

This  is a great example – in my mind – of how commercial and contracts experts must be contributing to the innovation debate at the time of product inception. It seems that the company behind this new product is only now recognizing the commercial challenges that accompany its release into the market … and  cannot really work out how to deal with its consequences.

Thi is just one more example of an industry sector that is having to transition from the old product sales model, to a service-based and higher value offering. It is always interesting how every business seems to need to learn these lessons afresh, rather than looking at other industries that have already gone through the transition. In part, I suggest that this is because of the absence of any professional network of commercial and contracts staff. They are the people who should be engaging with product planning and marketing to ensure they have the commercial intelligence to enable its success.

One Comment
  1. Tim, great insight into how contract pros can add more value beyond the transaction. We all need to look beyond the transactions we do and provide greater proactive insight into business strategy versus retroactive fixes to dying business models.

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