Simplifying
The message is simple. Nearly all of the great success stories of the twentieth century – right up to the present day – are stories of simplifying. The essence of strategy is that you must set limits on what you’re trying to accomplish. Simplifying helps. The authors use IKEA, Ford, MacDonalds, Boston Consulting Group, Rocket Internet and the inevitable Apple and Uber as the examples. If you are in consultancy, the pages that describe the Bain business model is very worthwhile. Bain only worked with the CEO with some rules that reinforced common interest. The lessons are simple:
Price elasticity
The impact of a really chunky price reduction on sales is always grossly underestimated. The relationship between price reduction and demand expansion is asymmetrical. If you cut the price by half or more, demand rises exponentially – by tens or hundreds or thousands of times. This is one of our most important findings. Radical cost reduction is one of the most powerful economic forces in the universe
Cut cost
The way to cut prices by 50–90% is usually not to provide an inferior product, but rather to organise the delivery of the product in a different way that allows much higher volume and greater efficiency and often to co-opt the customers into doing some of the work.
Mission
The most effective and successful price-simplifiers think of what they do as a mission, a crusade to bring at least some of the good life to people who have not been able to afford it before
Weight
Expense always rises with weight. It is largely through the reduction of weight that living standards rose so markedly during the last century
Design
Apply design. Make the product or service not just a little better, but a whole order of magnitude better, so that it is recognisably different from anything else on the market. They make the point that good design costs no more than bad design. The primary objective is to use simplicity to make something a joy to use. Designers know they have achieved perfection not when there is nothing left to add, but when there is nothing left to take away. Adding value by subtraction. Make the product or service so simple that it has the potential to become universal.
Stick to your knitting
Oliver, Alexander and Marc Samwer – founders of Rocket Internet in Germany – have practically turned cloning good ideas into an art form, scouring the United States for proof of concept, then rolling the idea out in dozens of countries simultaneously. They specialise in just one skill – building and rolling out the business system as rapidly and efficiently as possible in any attractive open market they identify. Oliver Samwer says: ‘In the internet business there are Einsteins and Bob the Builders. I’m a Bob the Builder.
Do you have a choice?
New enabling technologies are often leading indicators of where the next great wave of innovation can be created. Where it is relatively easy to imitate a product or service, constructing a business system around it which builds barriers against your opponents becomes vital for your long-term success. Which means you need to create the network effects, economies of scale and other volume-based economics. Or become the platform for your niche.
Simplifying and technology
It is the simplifying strategies that can deliver the benefits of technology – via highly useful and/or affordable products and services – in ways that are relatively human-friendly. Without them, and the relief they bring, we would be in danger of drowning in the torrential waves of technological progress. Climate change is a business transformation opportunity. How will the fifty-dollar smartphone change the lives of African villagers? How will artificial intelligence change all of our lives and especially those of our children? How will quantum computing or the next big leap of the internet, deliver advances that we never thought possible? No matter how the future plays out, you can bet that it will be simplifiers who deliver benevolent change in acceptable, affordable and exciting ways.
