It seems like it isn’t good enough to just build an automobile. Now it has to be an automobile plus something else. Some cars are both automobiles and entertainment centers. Some cars are both automobiles and communication/computer centers.
How about a combination car and kitchen? After all, a high percentage of meals are
already eaten in a car. Why not cook the
meals in the car as well?
I can see it now…When you try to start up the car, the
dashboard has dozens of cooking icons all over it. It takes forever to find the icon for
driving. And if you want to heat the
car, you have to be careful, because if you turn the heating dial the wrong way
it will turn on the oven or the stovetop coils above the dash. And the legroom is cut in half to make room
for the refrigerator. And every time you
press on the brakes, the dishes fall out of the cupboards and the saucepan
falls off the stovetop, spilling hot liquid on your lap. And if you want to cook at home, you have to
do it in the garage, because all the appliances are in the car.
On second thought, the combination kitchen and car is not
such a good idea after all. Maybe the
“More Features” approach doesn’t work so well afterall.
In the business world, there is a strategic approach which I refer to as “More Better.” The idea is that if you take the status quo and either a) add more features, or b) make the current features perform better, then you have something superior to what you had before. And this superiority will drive great market share gains and great profit improvements.
Sometimes, the More Better approach works. However, in a large percentage of cases, More
Better fails miserably. You often end up
with something like my kitchen car.
Sure, the kitchen car can do more than just a kitchen or more than just
a car. But is it really a superior
offering when you put them together?
The combination kitchen car makes both driving and cooking a
disaster. Instead of making everything
better, it has made everything worse. It
is now an inferior option.
But what about the “Better” approach? What if we made the engine a lot better, so
that the car could go 700 miles per hour (or about 1,125 km per hour, or roughly
3 times the average speed of the drivers of the Indianapolis 500)? Does that really make the car better? First, there is virtually nowhere where you
could safely or legally drive at that speed, so the feature is pretty useless. Second, the engine would weigh so much and be
so inefficient that it would waste a lot of expensive fuel even at normal
speeds. And to fit such an engine in the
car would require eliminating half of the car interior space. And you probably couldn’t afford a car like
that or its insurance. So, in this case
the “better” approach isn’t really better.
Yes, these may be ridiculous examples, but as we will see,
even more seemingly rational attempts at More Better can create a disaster.
The principle here is that true superiority must be defined from the perspective of the consumer, not the product. More Better is focused on WHAT THE OFFERING CAN DO (more features, better performance). This does not necessarily lead to higher share or higher profits. No, true superiority comes from convincing a customer that his/her problem is solved better. It focuses on WHAT THE CUSTOMER EXPERIENCES. And this includes the whole experience of purchasing, price paid, usage, maintenance, upgrades, feeling of status, and so on. And in many cases, the customer experience is improved when the offering is less and not as advanced.
There are three
main reasons why More Better frequently does not lead to increased share and
increased profits.
1) Diminishing Returns on Investment
Back in the 1980s
and 1990s, each new advance in the Intel chip and the Microsoft operating
system were quantum leaps of improvement for the computer. The usefulness and productivity enhancements
with each stage were so large that people would rapidly abandon the old and
adopt the new.
But after the
Windows XP era, things started to change.
Many businesses found out that the hardware and software associated with
XP did pretty much everything most people needed to do in the office in a
pretty efficient way. As a result, when
the next generation Vista came out (Windows Vista), a lot of companies did not
automatically upgrade everything as they would have in the past. They decided the XP was good enough for their
needs and stayed with the old.
That’s part of
the problem with focusing on improving features. Eventually, the features get pretty good…good
enough that additional improvements to the features have very little impact on
consumer experience.
Since XP, most of
the Microsoft improvements have either been cosmetic or have involved tweaks on
the fringes for features the majority of people do not regularly use. It’s hard to justify purchases when the
additional benefits have such little impact on an experience which was already
good enough.
This is also happening
all over the place with CPG (consumer packaged goods). How much better can you make canned
vegetables or peanut butter? Will anyone
even notice the difference in a taste test?
In a lot of
mature categories, needs are already met.
Spending tons of money on R&D to create small improvements may not
be a good return on investment. There’s
a reason why P&G has sold off a lot of its mature categories—they no longer
reacted well to the More Better mindset.
And the situation
can be even worse when you try to add more features, because the new features
can cancel out the old features. There’s
an old saying that you cannot excel at all three features of cheap, quality,
and fast to market at the same time. The
reason is because becoming superior in any two of them makes it impossible to
also excel at the third, because the very structural requirements needed to
meet the two work against being able to attain the third.
In other words,
the more features you add, the more your offering gravitates towards average
across the board. You no longer excel at
anything, because the added features cancel out the consumer experiences. You have actually made things worse.
2) Increasing Hurdles to Switch
Not only are
there diminishing returns to improvements, there are increasing hurdles preventing
consumers from wanting to adopt those improvements. These hurdles include:
a) Pricing – The improved products usually
cost more. When you factor in the price,
the total value experience may be worse than before. Private labels are exploding in growth
because consumers see a superior value.
The name brands cannot create enough superiority to justify the higher
price. P&G discovered that recently
when they tried to raise prices and saw volume drop.
b) Switching Costs – Switching to the new
item may require consumers to create new vendor relationships, learn a new way
to operate, have difficulties in getting rid of old products and a warehouse of
obsolete replacement parts, experience near-term cash flow issues, a loss in
productivity as they learn the new product, and so on. A product has to be more than a little bit
better to overcome all of the negatives associated with switching. Just ask the people competing against John
Deere farm machinery. The users love
their relationship with the local John Deere dealer so much that even modest
improvement by a competing brand leads to little market share movement, since
the customers do not want to switch away from the dealers they love. That is a key to total experience.
c) Added Complexity – “More” often means
“more complexity.” Complexity rarely
improves consumer experience. The
complexity of a kitchen car makes cooking and driving worse. Ford’s reliability ratings have recently gone
down. Is it because the cars don’t drive
as well? Actually, most of the decline
is due to problems with all the added computerized communication features being
added to the car. The complexity is
weighing them down. Branding genius Al
Reis says that convergence products rarely excel in the marketplace when
compared to narrowly focused products.
The focused brands are the ones that win the war.
3) Consolidating Markets
Increasing market
share requires lots of market share available to take. In mature markets, that is not usually the
case. First, you already have a sizable
share of the market (less available to incrementally gain). Second, the weaker players are already gone. The remaining share is mostly in the hands equally
strong players who are doing More Better about as well you are. Large, lasting, sustainable superiority is
almost impossible to come by. As a
result, large sustainable gains in share are hard to come by. So all that work and money on More Better
doesn’t lead to corresponding gains in share or profits.
During the great
recession, Walmart tried a massive price rollback to gain share. The problem was that they already owned most
of the customers most susceptible to low prices. So very few new customers were added by the
move. And since the current customers
also benefitted from the lower prices, the total sales per store went down.
So when you add up these three factors—decreasing returns, increasing hurdles, and consolidating markets—you can see how the More Better strategy by itself can destroy value. It leads to products that may have more features and better specs, but often diminishes the value to consumers while increasing your costs of business. Rather than trying More Better with status quo offerings, you may be better off moving to totally new approaches which use a wholly different business model to solve customer problems.
Digital downloads of music are replacing sales of music CDs, even though the music on a CD is of a measurably superior audio quality. Even though New Coke had superior specs when it came to taste, it lost out to the supposedly inferior tasting Classic Coke. In both cases, the superior quality product lost out because it did not create a superior total consumer experience. Never forget that.
