Even Cement Can Be Special
Companies in commoditizing industries tend to follow one of two strategies: either they try to find new services to offer around the product or they compete on price. The one certain outcome of these two strategies, of course, is to accelerate the commoditization process itself.
But, as an HBR article on this topic once pointed out, even commodities have customers. And where there are customers there can be differentiation. And where there is differentiation, there can be innovation.
Lets look at a company in an industry whose product is almost synonymous with the word commodity: cement. The Italcementi Group, an Italian headquartered company is one of the world's largest cement producers worldwide. Perhaps drawing on a national affinity for design, Italcementi has rediscovered cement as the raw material of architectural beauty, transforming a drab, gray powder into a technologically advanced and aesthetically sophisticated building material.
Italcementi has achieved this through a co-innovation process with great contemporary architects. Taking a lead from the fashion industry where celebrities like Giorgio Armani are influential trend-setters, Italcementi targets "archistars", rock-star architects whose ideas influence the behaviors and choices of the mass of architects.
Behind each partnership with an archistar, there is always a commissioned landmark project. Take for instance, the case of the pioneering Dives in Misericordia church in Rome. Commissioned by the Vatican in 1998 and inaugurated in 2003, this project sealed Italcementi's partnership with the American architect Richard Meier. Meier's design for this symbolic structure called for the use of extraordinary concrete, offering not only durability, but also a long-lasting brilliant white color. In order to satisfy this need, the Italcementi perfected TX Active, a photocatalytic white cement with self-cleaning properties based a technology that had been investigated years before but never before developed.
Another example is the Italian Pavilion for the Shanghai World Expo in 2012, designed by Giampaolo Imbrighi. This project called for cement walls able to filter light. Italcementi took on the challenge and for the first time developed a transparent, light-transmitting material called i.light. A great success with over six million visitors in five months, the building became a permanent fixture.
Through the co-innovation process, architects get an essential raw material tailored to the needs of their projects. From Italcementi's perspective, the payoff is reduced risk. First, the work is associated with an actual revenue-generating project, which offsets development costs. Second, the product gets introduced with all the splash and hoopla associated with landmark project, increasing public awareness. Finally, the association of the product with an archistar increases the likelihood that other architects will incorporate the product into future mainstream, commercial projects down the line.
To support these innovation projects, Italcementi has created the i.lab, a research and innovation center designed by Meier and located in the Kilometro Rosso Science Park (Bergamo, Italy). At the i.lab, both renowned and emerging architects can count on a research facility where they can co-ideate with Italcementi R&D personnel. Italcementi has taken great care in the selection of R&D staff (about 20 people plus the R&D Director), who learn how to speak the "language" of architects. Meanwhile, for Italcementi's senior executives nurturing the relationships with archistars is a top priority.
The new approach is starting to pay dividends. In 2013, profit margins are projected to increase for the first time in many years and new patented products like TX Active and i.light are expected to account for 30% of total turnover by 2018.
Italcementi shows us that commoditization is not destiny; in any industry there is scope to differentiate and innovate.