Subscribe to feed
Beautiful Evidence
The Art of the Start
The Bootstrapper's Bible (eBook)
The Business of Software
Guerrilla Marketing
Plus-One Economics
In his book, Inside the Tornado, Geoffrey Moore argues that in the post-tornado phase of a technology, development should focus on “plus-one” opportunities - features that add value on the margin, to maintain market share and profitability.
There are two keys to “plus-one” that are not intuitive for technologist entrepreneurs, he says:
- Marketing must lead - “plus-one” opportunities are by definition non-disruptive, and so are in the visible range of customers. They’re usually responding to “I wish I could…” statements that would drive the customer to part with cash for additional profitability. Engineering, though it might see opportunities for improvement, does not drive development decisions at this point, save in reference to the second point.
- Marginal cost must be low- The reason we call them “plus-one” is because the change or addition is marginal, intended to fill a niche at the intersection of a customer segment and a specific need.
As I look around at a lot of the “mashup” propositions around, I wonder how many are really “plus-one” plays in terms of their value proposition, but are positioning their businesses as if they are early market, or headed for the tornado. Technologists are leading a re-engineering to solve a problem on the margin. That’s a lot of bucks for a small amount of problem. And even if filling the niche is “gotta have,” for the customer-need segment in question, the economics of a disruptive approach to solving the problem seem out of whack.
We need to ask if we are providing the simplest solution to a given problem. If not, is the marginal benefit of our “better than simple” solution in excess of the sum of:
- The disruption and attendant cost to the customer and ourselves (which will eat into profit); and
- The net value of the simple solution
Often the answer is no, and we should accept that. Indeed, we should embrace it, and run with non-disruptive solutions whenever possible.
[There is a long-tail angle to this as well, which is worth thinking about, but I am short on time. ]
May 12th, 2006 at 8:31 pm
[…] This last situation is the most disastrous strategically but is the one encouraged by this ”plus one” feature creep. Making things worse is the walled garden effect, where you build everything, eating a large amount of expense in development (and increasing the user’s barrier to extracting value) and compete on the basis of the marginal feature. Difficult, and to my mind insane. […]
May 18th, 2006 at 11:48 am
[…] On the heels of my prior post with a funny title, I confess to inspiration from the ineffable Mr. Arrington. In his report AOL to Release YouTube Clone he discusses what I see as a huge problem with the currently fashionable plus-one strategies: I am seeing an increasing trend of the big guys simply copying what successful startups are doing. AOL with this product and AIM Spaces. Google with Google Notepad and a flurry of other projects, etc. The only large company that is even experimenting with unproven concepts at this point is Microsoft with its various Live.com ideas. I’d like to see more experimenting at the big company level. […]