‘Simplify’ — Richard Koch

Lessons learned from Richard Koch’s book, ‘Simplify’.

Simplifying, both in terms of product and price, offers incredible value for money and can make a market grow exponentially.

Two main methods of simplifying: Price-simplifying and Proposition-simplifying.

Price simplifying:

  • Companies using this method: Ikea, Ford, McDonalds
  • Disproportionate relationship between lowering of price-point and demand for product/service. Non-linear demand curve.
  • If the price of a product is halved, demand does not double — it explodes. Market ‘tips’ and product/service becomes mass market.
  • Radical re-design of product, re-engineering of process, restricting variety, universal product, cheaper materials, new technology, scale, re-organising industry around innovators model, co-opting customers to do heavy lifting.
  • Remove expensive utility. Replaced by increased utility.
  • Lower production and supply costs — better ‘unit economics’.

Proposition-simplifying

  • Companies using this method: Apple, über, Google
  • Easier to use, more useful, more beautiful
  • Hiding complexity through clever product design
  • Order of magnitude better — ‘10x’
  • “I wouldn’t give a fig for the simplicity on this side of complexity; I would give my right arm for the simplicity on the far side of complexity”.
  • Products typically sell at a premium
  • High growth and high margins — excellent unit economics.
  • Superior value provided to customers — willing to pay higher price-point
  • Greatest challenge is to stay ahead of imitators.
  • Duration of competitive advantage due to product superiority is decreasing; constant innovation, branding, scale, speed, distribution excellence are needed for sustained success.
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