book.chapter History's greatest innovators .

The essence of commercial triumph lies in simplification, a strategy employed by giants like Ford, Google, and Amazon. By streamlining operations, these companies reduce costs and enhance customer experiences, transforming complex processes into intuitive ones, leading to increased satisfaction, efficiency, and success. Markets can grow exponentially when prices are dramatically cut. Halving the price may increase demand five fold or more rather than just doubling it. To make this work, the product must be simplified to cut costs by at least 50%. Another approach is creating a useful, appealing product without unnecessary features. This can establish a new, premium market. Making the product a joy to use means people will pay more for perceived added value. As Tom Peters said, long-term survival requires simultaneously pursuing perfection and destruction of what you created. Many companies succeeded through price simplification, including: Henry Ford's 1908 car company was much like competitors, selling to rich gentlemen. With an epiphany, Ford decided to build "a motor car for the great multitude. It will be large enough for the family but small enough for the individual to run and care for. It will be constructed of the best materials, by the best men...after the simplest designs that modern engineering can devise. But it will be so low in price that no man making a good salary would be unable to own one." In 1907, Ford began selling only the standardized Model T, slashing the price from $2,000 to $600. For the next decade, he relentlessly cut costs through the world's biggest factory, new steel alloys, production lines, etc. By 1920, the Model T cost just $360 and Ford sold 1.25 million cars, up from 1,599 in 1907. Simplified manufacturing and ease of use grew Ford's market share. As Ford said, "The ordinary way of doing business is not the best way. I am coming to the point of my entire departure from the ordinary methods. From this point dates the extraordinary success of the company." At 17, Ingvar Kamprad bought a table that wouldn't fit in his car. A friend suggested removing the legs, sparking the idea of flat-pack furniture to reduce transport costs. Mail-order sales let customers handle final assembly. Kamprad realized retail stores could offer complete home furnishing. Testing designs in stores revealed profitable products, avoiding sunk costs on failures. IKEA grew by offering low prices (half competitors'), one-stop shopping, and incredible ease - all simplification strategies. As Kamprad said, "Reach good results with small means." Ray Kroc bought McDonald's in 1961 for $2.7 million and kept hamburger prices at 15 cents for years, riding fast food's growth. Meeting that price led to assembly-line food prep still used today. Kroc stressed cleanliness, quality, service, and value. By his 1984 death, McDonald's had 8,000 restaurants and over $1 billion in revenue. In 2014, McDonald's had $28.1 billion revenue and $8.8 billion net income. Besides price simplification, product or strategy simplification also works, including: Steve Jobs insisted on an "insanely great" Macintosh over compromise for costs, pricing it 25% above IBM PCs. He constantly simplified Apple products. In 2010, Apple had 7% PC market share but 35% profits, exceeding all competitors. In the 1970s, McKinsey & Co. sent veteran consultants to advise CEOs. Upstart Boston Consulting Group sent 25-year-old MBAs with the simple, universal "Boston Box" model categorizing every business as Cash Cows, Dogs, Question Marks or Stars. Followers should become low-cost leaders. BCG's model intuitively focused companies on increasing market share and cutting costs. BCG simplified consulting with positioning and niche focus. Uber's simple smartphone app for ordering, tracking and rating taxis is obvious in retrospect. By 2013, Uber generated $10 billion revenue and $2 billion profit. But ease of replication forced rapid global growth to shut out rivals, who still intensely compete. Spotify's simple value proposition of streaming any music anytime avoided downloads or physical media. Though requiring large upfront investment, Spotify now has 60 million users, a quarter paying $10 per month and the rest using free, ad-supported service. Airbnb enables homeowners to become micro-hotels through its online tools. 20 million guests have booked 30 million nights since 2008. Valued over $20 billion, Airbnb owns no property. It simplifies the entire process from booking to reviews. Accessibility means anyone can market extra space. Price simplifiers dramatically cut costs to mass market products with stripped features and thin margins. Proposition simplifiers create premium markets with products simplified into a joy to use, for which some users will pay more. To succeed, both approaches make virtuous trade-offs, redesigning products to deliver value and profits. Choices benefit customers, the company, and absolutely disrupt competitors. As Einstein said, "The difference between stupidity and genius is that genius has its limits."