“Creating Value” Means Eliminating A Problem Completely, Not Making It 5% Better

If your goal is to create value in the world with your product or offering, then you need to make sure your product either:

We all get these credit card offers in the mail every week. The people sending those direct mail offers are doing their best to send fewer and fewer, and have more and more of the recipients actually take the offers. But the numbers are pathetic. A great response to one of those come-ons is that 2% turn into customers after three impressions. That means that for every customer I get, I had to send out 150 of those mailers. And the 49 people who got three different offers are pissed off at me. And a giant pile of paper needs to go into the landfill. And that’s for an offer that performs well – if an offer performs badly it might be ten times as many mailings for the same result – one customer.

If you are sending out credit card offers, you can get marketing software today that might help you increase that 2% response rate slightly. Say to 2.1%. That’s a big enough increase that if you send the offers to enough people you’ll make a measurable amount more money. But I have to ask – is that marketing software helping you create value? Or is it just extracting value?

What if you had marketing software that could ensure your ad will only appear for people who will buy your thing. If a person won’t buy it, they won’t see the ad. That would be a gamechanger in the marketing world. It changes marketing software from a tool for extracting value to a tool for creating value, by ensuring the people who need your product hear about it, while those who don’t care aren’t bothered.

I don’t want to pick on marketing software – it’s just an easy target. But there are a lot of enterprise software companies out there whose value proposition is “we will make you 20% more effective” (or 5%, as in my example). Most consumer software companies have the same message. But I’m interested in products and processes that will make a problem go away completely.

That might be a fantasy for marketing software, given human nature, but there are examples where it’s happened. That’s what the Toyota Production System did in the 70’s and 80’s for example. Toyotas went from having a slightly-worse than industry standard level of defects in their car to essentially zero defects. That changed the company, the industry, and consumers’ expectations. And as a result, it created a huge amount of value in the world.

The iPod, in its own way, made a problem go away completely. In the days of the Walkman it was always a challenge – “Which tapes should I take with me so I will always have music I want?” When the iPod came out you could put all your music on it. Problem gone.

Generally, a new product is not worth the cost of changing if it doesn’t improve the process (at least some part of it) by an order of magnitude, or completely eliminate a problem. That’s where you really start to create value in the world, instead of just extracting it. 

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