One of his little b-school style charts is reproduced here greatly simplified:
The point of this chart is that over time a firm’s product offerings begin to outstrip the ablity of the customers to absorb all the functionality the product offers. He goes on from there to say all kind of interesting things; for example that the firm is drawn to high margin customers as this happens.
But this got me to thinking about a syndrome I’ve watched unfold at more than one company.
Consider the gap between those two lines. On the left, when the company is young, the company is faced with strong demand from it’s users for improvements. The customers are highly aware that they could absorb more functionality if only the vendor would provide it. The vendor is embaressed by the short commings of the product and strives to fill that gap.
On the right the mature firm has succeeded in fufilling a huge range of demands that customers have. Now the customers are embaressed! They are fully aware that they aren’t utilizing the entire power of the product.
This is all bad, bad, bad!
- bad: Your customers are embaressed, so they fall silent.
- bad: So the institutions in your company that design products are running on vapors!
- bad: As they chasing demand your drawn to serve higher and higher end customers
- bad: Higher end, higher margin customer demand longer sales cycles – your value creation shifts into sales rather than product.
- bad: You move up market. You abandon the low end customers. That creates oportunities for competitors.
All in all it reminds me of a classic behaviorist training schedule where you
start by providing clear signals for the desired behavior and then you shift to a more intermitent reward schedule so the behavior becomes more deeply engrained. Thus in this scenario the entire marketing, engineering, design culture of firms is trained at first respond to the strong customer demand for new features. Over time that strong reward loop grows weaker, but the trained behavior just become more deeply engrained as the reward appear fewer and farther apart.
The bizare result is that you think you’ve evolved into an extremely customer oriented firm. You have a very sophisticated sales team. You have a very muscular product design function. So it must be true. But meanwhile you have embaressed your installed base so they can’t even open their mouths to complain. If they could they’d say: “I don’t need all this cruft. I was sufficently satisfied by the previous release. I don’t want to learn how to use all these new features! I’ve got better things to do with my time. Leave me alone! Why aren’t your prices falling, haven’t you learned anything!”
Curiously the only way you can get a good signal out of your users it to
fail to fill all their needs as was the case in the early days. It’s good for the vendor to be embaressed. It’s bad for the buyer to be.