Understanding the reasons why we buy and use products is an essential part of being in business. Whether we are entrepreneurs, product managers or executives, understanding what our customers will find valuable is crucial. Unfortunately this is an area that is often overlooked, perhaps due to the fact that it is slightly philosophical in nature. For the sake of avoiding the philosophical rabbit hole, let’s begin with the assumption that demand equals value, and vice versa. Appetite is the real arbitrator in markets, not vision. By this logic, innovation is about finding simpler or more stimulating solutions to serve existing markets.
Efficiency of course is valuable by its very definition. It frees up resources we would otherwise spend and allows us to allocate them elsewhere. This is particularly important to the type of tasks that are a ‘means-to-an-end’. Cars and tools fall under this category. Because gains in efficiency make consumers more productive and make society as a whole better off, they create economic value and constitute progress in its technological form. The amount of value created through efficiency gains depends on the resource they address. For every task there is a critical resource. In some cases it is money, while in others it is time or effort. New solutions that improve efficiency as per the critical resource are sure to attract demand.
For activities that are an ‘end-in-itself’ such as entertainment, the principal measure of value is engagement. We can think of this type of value as hedonic value. Hedonic value is short lived and confined to an individual’s experience. It represents progress from a sociocultural standpoint. Contrary to efficiency, which is a race to the bottom, engagement is only limited by our imagination.
Almost every solution involves both of these dimensions to a certain degree. To the extent that a solution carries a price and demands a level of effort, it can be made more efficient. At the same time, to the extent that experiencing a service or using a product can be made more enjoyable, it will command a corresponding premium.