I heard this thesis in a podcast lately, and it resonated so much that I thought I should write about this. I don’t claim this thesis to be my own, but I think that I will adopt this mantra.
Efosa Ojomo repeated the mantra in the HBR podcast: “In order to have a good product it must be simple, and affordable.” Then he added, to corner the market, you must target a non-consumption group. I’ve never gotten an MBA from a business school, but I think that Efosa has given us the essence of an MBA in a few sentences. You must have all three of these concepts in place to succeed. Having only one or two of these aspects in place means that you still may fail. Let’s break it down:
Your product or service must be easy to understand from a customer perspective. They must be able to see how it solves a problem in their life quickly. If the customer can understand it without extra explanation, it is both easy for them to adopt and easy for them to tell their friends about.
A simple product or service is also more natural to deliver and scale. The more complex the product (think jet engine), the more expertise it will take to deliver the service. Simple offerings or offerings that already have a good template for how it is produced (for example grocery stores) will be easier to start and maintain as a business.
Affordable does not mean cheap. Affordable means that the target customer can pay for it if they feel that it solves a problem for them. A vehicle is not affordable to many people in North America, but they are willing to borrow money to purchase one. Customers are eager to put themselves in debt to solve a transportation problem. Companies will spend a million dollars on a new information system because it will solve an invoicing problem for them. People will balk at paying a few extra dollars for gravy at a restaurant because they don’t want the additional charge. All of these items are affordable to the customer. To be affordable, an offering only has to be within an amount of money that the customer would be able to pay if they wanted to solve the problem badly enough. In some places, school uniforms are not affordable because even though families would be willing to spend a lot on the uniform, they have to eat, which takes priority.
If you have a simple and affordable offering, the winning strategy will be to target non-consumption. You can have the most successful pizzeria ever if you focus non-consumption in a country where pizza hasn’t been popular. If you can get a group of people who never ate pizza before to love pizza, you will win. If you open the same pizzeria in New York, you won’t be anyone special. Find the groups of people who are trying to solve a problem that has been addressed somewhere else, and then give them the solution in a way that they can be consumers of the offering. They are ready for the problem to be solved; they are waiting for you to offer.
Simple, affordable, target a non-consumption group. Solve someone’s problem with an offering that meets all three of these criteria, and you will have a successful business. The hard part is finding the perfect offering that fits all of these criteria.