A Product Value Hypothesis04 Feb 2015
Look around and choose any product around you: a cellphone, a chair, toothpaste, whatever. Now recall the price at which you had purchased the product, and try to compare it against the value (satisfaction) that you have extracted out of the product so far. Now imagine that the product irrepairably breaks right now. How much value have you just lost out of the product?
Last year, I had purchased a neat spectacle. Recently, I managed to misplace it. I had almost convinced myself that since I had used the specs for over an year, I had extracted out much of the value from the purchase and the loss was not great at all. Correct?
Here is a theory. Every product has some inherent value in it. You can visualize the product as a water tank with a tap. You turn the tap on, and with the passage of time, water drips out. The amount of water dripped out is analogous to the value extracted out of the product. Multiple products may have the same value content in them (tantamount to having the same water content), but these products may have different characteristics for extracting this inherent value.
Category 1: These are products whose value is extracted in a very short amount of time. From a consumer's perspective, an example would be something like an amusement park ride, chocolates, books. Once you eat a chocolate, you pretty much extract all the value from the chocolate.
Category 2: As long as the the products in this category perform the way the consumer expects them to perform, the products keep generating value for the consumer. Products such as a car, mobile phone, laptop fall into this category.
Category 3: Products whose value is extracted post investing a lot of time fall into this category. Take a look at Twitter: for users of twitter, the product falls in Category 2, but for the company itself, the product falls in Category 3. The data collected from all the several tweets become commercially useful only when the data has been collected for a long time.
I can't help but relate this theory to the way products are developed in startups. A startup should try to build products which commensurate the engineering skillset available within the organization. Building products in category 3 is tough; and engineers building such products should have the confidence to trust themselves to build products which generate value latter in their lives.
Aah, and my spectacles belonged to the 2nd category!Tweet
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