When Gillette introduced its Mach3 razor in 1998, with an investment of more than $1 billion in development and advertising, it was attempting to redefine the rules of competition. The move forces competitors to play catch-up against a powerful new en-hancement of the value proposition. It means Gillette continues to dictate the rules in an industry in which it has created the world’s number one shaving system.1 It also suggests that Gillette’s intention is to disrupt the market periodically, implying that Gillette will eventually replace the Mach3 standard with another breakthrough product.
Through a series of major new product launches, driven by technology and branding innovations, Gillette has sustained leadership in defining the shaving game. In the 1970s, however, Bic’s disposable razors threatened to shift the dominant value proposition to low-cost convenience. Bic grew a small niche into a mass, worldwide market, cannibalizing Gillette’s cartridge approach by continually lowering the cost and increasing the value of its razors to attract customers from cartridges and stimulate new demand. The new rules were so foreign to Gillette that one executive commented, “We’d get samples and I would try them and wonder why anybody would compromise their shave to save a little money.”2 But consumers were willing to make this compromise.
For Bic, the move transformed the game to one that it knew how to play well, with its low-cost plastic manufacturing and efficient distribution for pens, lighters, and other products. At the same time, the shift threatened to transform Gillette’s heavy R&D investments from an advantage to a burden.
At first, Gillette was forced to play by Bic’s rules. Although Bic beat Gillette in the European market, Gillette quickly pushed a disposable in the United States before Bic could launch its own razor there. Gillette’s Good News razor captured 60 percent of the market by 1982. But margins were thin, and the company’s sagging profits forced it to fight off four takeover attempts in the mid-1980s.
Instead of complying with Bic’s rules, Gillette redefined the rules. With the introduction of the Sensor in 1989, Gillette shifted the rules of winning to brand image and shaving quality. Here, the muscular R&D that had slowed its profits in disposables became an asset. Bic could not compete in this environment. (Although disposables didn’t go away completely, they no longer defined the market, with cartridge usage growing at the expense of disposables.)