Don’t overdo innovation

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Manish Shah is the former president of Midwest Law Printing in Chicago. He also worked at Intel, PwC and Motorola. He has an MBA from Kellogg Graduate School of Management, and a MS in Computer Science from Illinois Institute of Technology. He can be reached at manishshahus@yahoo.com.

By Manish Shah
Innovation is a key driver of growth. A company that creates new products or services can add tremendous value to its customers. However, at some point, customers stop paying for product or service enhancements. This is when a company has overshot its customers.

Take the example of Microsoft Word. The new  version of Microsoft Word is substantially better and more feature rich than the current version. However, there are plenty of users, who think  that the current  version is more than adequate for  their needs. These users will not pay extra to upgrade to the new version.

Another example is P&G’s Pantene shampoo. P&G has reintroduced the shampoo in 21 unique formulas. But most customers are reluctant to  pay extra for the so-called improvements in the shampoo.

Overshooting is rampant in all industries. Companies can disrupt these industries by introducing a simpler or cheaper product. Netbook  is a good example of such a product. Before its introduction, consumers were paying premium for high performing PCs, when all they needed  was basic connectivity and word processing ability. Netbook has become so popular among overshot consumers that it has captured 20 percent of the portable PC market.

What should companies do to prevent its products or services from overshooting the customers? They should conduct research to determine whether the customers are willing to pay for addi-tional features. In general, customers are happier with the simpler, less expensive offerings. Therefore, companies should think twice before adding new features to a product or service.

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