Harvard Business Review

What do you do when the very breakthrough strategy that once made your business uniquely powerful now threatens to turn you into a commodity? That's the question stationery supplier Staples is facing.

I still remember when Staples changed my life. Before its 1986 opening, buying stationery and office supplies was a time-consuming, inconvenient, and expensive chore. The drill was that you went off to the local mom and pop shop (when they were open), and prayed that they had what you needed in stock. If not, the proprietor would turn to the dreaded "catalog" - a behemoth with photos, stock numbers and completely obscure pricing. Weeks later, it could be, your items would arrive.

In this mess, Staples' founder Thomas Stemberg saw an opportunity. Just as Toys R Us had revolutionized the world of buying kids' toys by "stacking it high and watching it fly" as one of its senior execs told me, why not do the same thing with stationery? The goal would be to have mostly everything in stock, using volume buying and efficient supply chain management to offer extremely reasonable prices. Hours would be a lot more like a supermarket. And ancillary services - like copying and faxing - could be offered as well.

The concept was a smash hit. It turns out that in addition to offering good prices, great selection and convenient hours, Staples had something of a magnetic appeal: Many people who toiled away in offices, classrooms, and small businesses just liked getting out and going down to the local Staples to browse their enormous aisles. I was so hooked that in the early days I would drive about 40 minutes from my house to stock up on things academics use.

But one thing we know about strategies is that they always have a shelf life. Fast-forward twenty years, and what's happened to Staples? Well, as with any successful strategy, theirs begat competition. With the easy-to-beat local competition largely gone, new competitors copied Staples' business model. OfficeMax and Office Depot are tough, well-managed rivals who narrowed the perceived advantage of going to Staples in the minds of customers. Further, customers have changed. Today, they take low prices, convenient hours, and lots of in-stock items for granted. The result? Staples and its rivals are engaged in vicious competition in which margins are narrow, customer loyalty hard to maintain, and pricing power is nearly nonexistent.

It's the ultimate irony, of course, that Staples helped to unleash the very forces that are now pushing it into what one CEO famously called "commodity hell." The fact that Staples was first on the scene matters little to us.

So what's a company to do? In the case of Staples, innovation has been one response. Among the interesting new ways the company has expanded its appeal to customers is a sophisticated web site (offering free delivery, just like mom & pop way back when, only next-day), customer-driven innovation of some key products, a strong rewards loyalty program, and now, investment in a more upscale line of products called the "M Line."

With the M Line, Staples is designing items with more style and cachet as a means of both strategic differentiation and of increasing its tightening margins. BusinessWeek featured the line in a recent story. It's of course too early to say yet if the new line will have the desired effect, but I wouldn't be surprised if they do well -- particularly among customers who would enjoy a little more pizzazz in their workaday surroundings.

What lessons can we draw about strategic thinking from the Staples story? First, all strategies have a sell-by date. Just because you were a successfully disruptive business doesn't mean you can't fall victim to the same forces. Competitors will come, and absent entry barriers, they can simply copy what you've successfully done (without all that time-wasting analysis and experimentation to figure out the model, too). Customers will -- most irritatingly -- take what used to excite them in the past for granted. To cope, you're going to have to figure out new ways to renew and develop the core business through innovation.

So stop thinking of innovation as something that guys in white lab coats do. Start thinking of it as a core business activity that everyone needs to drive. Your distinctiveness will only last so long.

Rita Gunther McGrath is an associate professor at Columbia Business School and a popular speaker and facilitator, well known for her expertise in the areas of strategy, innovation and growth. She co-authored six Harvard Business Review articles and two books: The Entrepreneurial Mindset (2000) and MarketBusters: 40 Strategic Moves That Drive Exceptional Business Growth (2005) .

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