‘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.
- 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’.
- 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.