If I am not mistaken, Gillette razor blades just increased in price again. A pack of 6 blades now costs around 14 euros. Aside from the obvious implication (switched to supermarket brands long ago) I now believe that Gillette razor blades are now one of the most obvious case of disruptive innovation waiting to happen.
Anyone looking at a pack of Gillette razor blades reaches a quick conclusion: 6 blades are not worth that price. There is the patent and the R&D that went into the design. Mach 3 blades are better than the competition – but that does not mean that people will be willing to pay the premium.
Gillette was acquired by Procter & Gamble for $57 billion about 7 years ago. Their marketing budgets must be substantial and feature football and tennis stars. Meanwhile, DollarShaveClub.com in the US will post blades to your door for as low as $1 per month. How can they achieve such low prices? Blades are manufactured in Asia and sold online.
Supermarkets (at least here in Portugal) have launched their own brands, including LIDL, the German discount chain. I use the LIDL system (as well as other “white brand” alternatives) and my conclusion is that, while not offering the same quality, the result is acceptable (at least to my standards!)
Here is my forecast: supermarkets will continue to push lower-priced blades as they have in the past and will gradually improve their systems to match Gillette’s quality. While the marketing budgets will allow P&G to defend Gillette’s market share for some time, the position will become unsustainable. Razor blades are another product where the combination of economic crisis and disruptive innovation will dislodge the incumbent. I am curious to find out how long P&G can hold their ground.
More generally, every management team should consider whether their product is, in fact, the next Gillette.
[Updated Apr ’12 by Hugo Mendes Domingos]
Innovation Models 