Sunday, April 21, 2013

Why Improving Performance Doesn't Always Create More Value

In a recent post at the SiriusDecisions blog, Jeff Lash wrote about seeing an advertisement for a cell phone that boasted about the phone's 215 hours of battery life between charges. Mr. Lash noted that on a heavy usage day, he spends at most two to three hours on his phone and at that rate, 215 hours of battery life would last about ten weeks. He thought it was pretty likely that he'd be able to find a convenient power outlet more frequently than once every two and a half months.

Mr. Lash's point was that 215 hours of battery life far exceeded his requirements, and therefore much of that long battery life would provide little value to him.

I've written frequently in this blog about the importance of understanding how your solutions create value for customers. Clear and compelling value propositions are, in fact, the foundation of all effective marketing.

Unfortunately, it's easy for marketers and other business leaders to overestimate the value of their solutions. The problem stems from an implicit belief that improving the performance of a solution automatically increases the value of the solution.

Clayton Christensen addressed this issue in The Innovator's Dilemma. In Christensen's view most established companies in any industry improve their products or services along dimensions of performance that their major customers have historically wanted and valued. What often happens, however, is that the pace of performance improvement exceeds the ability of customers to take advantage of the increased performance. Eventually, a company "overshoots" its market. Prospective customers are happy to accept the higher performance, but they aren't willing to pay more to get it because they can't translate the increased performance into benefits that produce better business results.

This circumstance has several important implications for marketers. Most importantly, it means that marketers should always seek to understand whether and to what extent new features or capabilities will enhance the value of a solution in the eyes of potential buyers.

So, before deciding how to market a "new and improved" version of your solution, answer these questions from a prospective buyer's perspective:
  • What performance criteria are most important for my business?
  • What levels of performance must a solution provide in order to meet these criteria?
  • Are some of the performance criteria more vital or important than others?
  • Once "acceptable" levels of performance are met, do higher levels of performance and/or new capabilities create meaningful new value and, if so, how?


  1. I am very happy that I finally came across a post like this.
    It is very important to understand that improving the performance does not necessarily mean an increase in the value.
    Thanks for sharing this.

  2. Something I thought I knew, actually clicked by reading your post. Thanks!