Management consultant and entrepreneur Richard Koch and venture capitalist Greg Lockwood have written a book entitled Simplify on the advantages of simplifying business strategy. In it they propose simplifying both your business and the market it operates in.
The key question is: how do you do this? As the authors explain, simplifying your business may sound easy, yet it’s anything but. It requires a truly radical idea – a product or service that is dramatically simpler than what is already on the market: something that is much simpler to make (and therefore much cheaper) or a joy to use.
Simplifying also means going global with your new product or service and building a new business ecosystem around it. It involves both being creative and being extremely practical. And those two skills are hard to combine. Yet, economics and customer psychology clearly favour the simplifier. So maybe you should consider simplifying your business.
The main benefit here is a radical price reduction. Successful simplifiers such as Henry Ford, Ingvar Kamprad (founder of IKEA) and the McDonald brothers also tried, where possible, to improve user friendliness, usefulness, and aesthetic appeal – but only if this did not conflict with their primary aim of achieving a very low price.
With proposition simplifiers, most products and services sell at a premium to those of their rivals. You have to make your offer not just a little better, but a whole order of magnitude better, regardless of cost, so that it’s no longer the same proposition. With the Macintosh, the iPod and the iPad, with the internet, and with many other examples, the proposition was either a great improvement on what went before or a totally new creation.