Something too prevalent in the marketplace today is the complete lack of innovation which seems to plague some companies. On the one hand, you have companies like Apple and Nintendo which truly bring something new to the table; from product packaging to human-electronic interfaces. On the other hand, you have companies like Dell and Sony who just keep pushing out more of the same. Yet, the latter seem more likely to hold big press events and tout their “next big thing.” It seems as if they don’t even know that their products are “me too’s” instead of market leaders.

Keep in mind that there are some items for which a large number of similar products is okay. A perfect example is in USB flash storage. There are dozens of products available, and they’re all basically the same — about the same size, the same range of storage, roughly the same speed, and even the same price, give or take. Just about the only thing you can really choose with a USB flash drive today is the color. This sort of market is generally known as a “commodity.” If you think about it, you can buy [and sell] USB flash storage about as easily as you can buy and sell just about anything. The individual products are completely interchangeable (and undifferentiated).

Then there are near-commodity products. These are items which are commodities, but don’t necessarily have to be. The only thing preventing one product from “breaking out” of the pack is a lack of innovation. Look at USB hard drives. They’re nearly identical, except for capacity. One brand is as good as another. But what if one company decided to put a headphone jack on theirs, and let you listen to any MP3’s you had stored without needing a computer? What if one came with bluetooth support, or wi-fi? For an extra $30 or so, that would be a pretty cool product, and I’d be likely to buy it instead of a “plain” one. Sadly, there doesn’t seem to be many companies who make USB hard drives with any imagination. I’m not sure what their executive management meetings are like — probably something along the lines of “Hey, these things seem to sell well, let’s sell some.”

There will always be commodity items, and near-commodity items, and that’s a good thing. Its what drives prices down. But let’s talk about the breakaway hits. Like, say, the Apple iPod. The iPod is really good for a bunch of reasons. It plays your existing music and movies. It provides a store where you can buy movies, music, and tv shows easily. You don’t feel like the iTunes store is trying to trick you or deceive you in any way — if you buy something there, you can watch/listen to it on your devices. The iPod itself is nice — good quality, small, and light.

There are certainly a lot of other personal music players out there, but the iPod sells better than its competitors because it is a better product — it was the definition of innovation when it was first released, and it continued to add new features as it went along (like video). Now, along comes Microsoft looking to compete with the iPod. So, they decide to develop a product now known as the Zune. Up until its launch, Steve Balmer has touted the Zune as an iPod-killer. In other words, “better than an iPod.” In fact, Matt Jubelirer , the Microsoft project lead for Zune development, talked at length about how innovative the Zune was. Microsoft spend millions upon millions of dollars in advertizing, got retail stores to feature it, and raved about their online store, and how the face of personal music players will be changed forever.

Then the Zune was released. Without making any judgments on how good the Zune is or whether you should get one, it only had one feature that was new: wi-fi support. OK, that sounds innovative. I can imagine lots of cool things I might be able to do with my music player over wifi! Yet, the only thing you can actually do is share a “preview” of your music files to people in the area, which expires after 3 days or 3 plays. And, even though the Zune sports this single, although crippled innovation, there are a multitude of things which it doesn’t do, many of which even “me too” music players can: It won’t play your existing music, even if you bought it from Microsoft (!). It won’t let you subscribe to podcasts. It attaches DRM to your existing music. It’s bigger and heavier than most compareable music players. They have an online store which is difficult and confusing to use, with DRM rules which are not straightforward, and leave the user with the clear impression that they do not control the items they buy.

The strange part? After the Zune was released, Microsoft’s tune suddenly changed. Instead of touting how revolutionary and outstanding their new product was, Bill Gates was calling it a “modest competitor” to the iPod. So, did management really have no idea that their product wasn’t really anything special? Most probably, of course they did, but they were hoping that if they pushed it hard enough, they would be able to sell anyway. And probably, it did sell better than it would have if they didn’t push it so hard. However, the thing that really starts hurting the manufacturer is that the next time they release a product (like, Zune 2.0), no one is going to pay attention to their marketing, even if it really can do what it advertises.

Even though Microsoft seems to be aware of the problem, at least in theory, it hasn’t stopped them from releasing a long line of unremarkable products (any version of office or Windows, or the MSN search site, for example). So, why do things like this happen? Why do companies release “me too” products, when they themselves want to bring innovation as much (or probably more) than consumers want them to?

The real answer, of course, is complicated. Internal politics (Manager A wants Wi-Fi, but Manager B doesn’t. The compromise — Wi-fi goes in, but is limitted in scope). Counter-intuitive interests from business partners (Warner Music/RIAA, anyone?). Adversity to taking risks (”what if they don’t like it?”). Senior management who doesn’t understand the product or the target audience (cough, Steve Balmer).

The reality is that there are all some of the ungainly aspects of how big companies work — including at the “innovative” companies like Apple and Nintendo. The successful ones, however, are able to move past these issues, and focus on the one thing that differentiates them from their competition: What is it that the consumers want?