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two factors that are typical of proposition-simplifiers:
its margins, which were already high, increased slightly over time.
BCG could expand rapidly without the need to raise much capital.
created its own market — the “fast-hamburger meal” market — which expanded exponentially
He was able to scale up McDonald’s so effectively and quickly because the heart of the system was so simple. It could be multiplied profitably because its economics were so good.
The answer lies in the company’s efficient use of its customer base to expand into other products,
we can discern two main patterns:
developing a new, simpler product that is so much cheaper — or so much better to use — than its predecessors that it inflates the market to such an extent that this becomes the platform for an exponential increase in company value.
Simpler product with significant market pull
the company designs something — an engine, an electronic device,
new way of doing business
based on simplifying the customer...
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— that can be replicated in several different markets, on...
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all of which have displayed significant innovation over recent years, but not simplifying innovation:
compared these increases with the growth in five “simplifying” industries: consumer electronics, media, internet, retail, and software.
trend towards greater product and service simplicity — lower prices
greater convenience and ease of use, and smaller yet more...
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The mean increases were 6.8 times for the non-simplifying industries and 38.6 times for the simplifying industries
The median increases were 5 times for the non-simplifying industries and 11 times for the simplifying industries.
The increases in value for all twelve of these simplifiers have persisted for decades, even once the major period of simplifying innovation has ended.
several of the underlying economic reasons for these long-term high returns throughout this book:
the increase in market size that results from either a 50 percent-plus
price cut or making a product or service that ...
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In both cases delivering either equivalent or superior product or service that is simpler to use, understand, and/or produce
the brand and reputational advantages that accrue to a company that succeeds with a radic...
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the lower costs that come from high scale, experience, and/...
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all that remains is for the simplifying firm to decide whether to claim its superior returns in further expansion of market share or higher margins.
observe how these returns have been generated.
We find two distinct patterns:
the market explosio...
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the transformation of customer experi...
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the simplifying company creates such a superior new product or service
superior in either its remarkably low price or in the fact that it is a joy to use
that the product itself multiplies e...
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expands the market hundreds or even thous...
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It seems that only simple “universal” products are able to do this.
Universal here meaning that the product is not market specific? Not region specific? Unclear the use of this term here
This list includes one clear price-simplifier (Honda),
the transformation–invasion pattern can work for both types of simplifier.
it would therefore seem to be advisable for companies to pursue either the market explosion pattern or the transformation–invasion pattern.
whichever type of simplifying your company pursues,
rapid expansion in the domestic market and then around the world is vital.
The essence of strategy is that you must set limits on what you’re trying to accomplish.
to figure out what simplifying is and what it is not.
What are some of the alternative — and at least temporarily sustainable — competitive strategies?
There are three principal ones: elaborating, invention and discovery strategies.
Elaborating is the opposite of simplifying:
it involves making a product or service more complex.
True luxury markets, by contrast, are always niche and deliberately exclusive;
bespoke products and services:
The requirement to tie together a diverse set of information from numerous sources,
results in incredibly complex products that have to be intimately tailored for each installation.
elaborating strategy involves the development of bigger-is-better products.
