Value Proposition(s) and Market Success


Value Proposition(s) and Market Success

Based on the comments to my last post, I need to apologize. Having worked at Microsoft as long as I have, I’ve acquired some verbal habits that have meaning inside these halls, yet fail to adequately convey the full meaning in discussions with people who don’t participate in the same internal discussions on a regular basis. Sorry for the lack of clarity, and, as penitence, I’ll see if I can’t clarify my remarks.

In my last post, I used the term “value proposition” in the singular form. That’s because, here, we almost always use it in the singular form. However, when we do, it’s tacitly understood that we’re really talking about an aggregated concept; that there are really many value propositions. Indeed, given any two users, their respective value propositions are rarely, if ever, going to be precisely identical.

There are both significant and insignificant differences in value propositions, and, when we start talking about “market segments,” we’re really talking about groups of users for whom the differences in their respective value propositions are not significant. And, for the sake of precision, I’ll say that an “insignificant” difference between two value propositions occurs when both value propositions can be satisfied by the same feature implementation.

Moreover, we’re talking about an aggregated quantity, not an objective quantity. There is no such thing as intrinsic value. A number of economists have tried to come up with some notion of “intrinsic” value, but all of these attempts have been based on assumptions that are logically equivalent to giving primacy to one user (or customer)-centered value proposition to the detriment of others. In other words, any attempt to come up with some notion of intrinsic value merely begs the question.

While we’re discussing terminology, it’s worth spending some time on the meaning of the word aggregate in this context. It’s not really a sum in the pure mathematical sense, because we’re not talking about quantities that have equivalent units. It’s rather like adding apples and oranges. The sum is in terms of fruit, and not in terms of any of the individual addends. We use the word aggregate to underscore the idea that we are not simply adding together quantities of identical types.

With this clarification in mind, let’s revisit the issue of market success. One of the comments to my last post suggested that I was equating market success with user satisfaction. That’s not entirely accurate. I claim that market success is presumptive evidence that a product maximizes user satisfaction. That presumption, however, leaves the question of user satisfaction open to contrary evidence. What I hope to do with this discussion of value propositions is to limit the scope of arguments, and the nature of the evidence, that one can invoke to counter the presumption of user satisfaction.

In particular, no argument that involves some form of preferential treatment of one value proposition over other value propositions qualifies. Nonetheless, nearly every argument you’ll see involving product comparisons resolves to some form of preferential treatment of one value proposition over other value propositions.

For example, one of the comments to my last post suggested that Word’s success has a lot to do with “compatibility” both with particular operating system software and with itself in Word’s various incarnations. Economists refer to these kinds of factors as “network effects.” There is, however, no reason to exclude network effects from any particular value proposition. One might be able to design the perfect screw, for example, but if the design calls for a head that’s incompatible with any known screwdriver, then nobody’s going to buy the screw. Such a screw will not satisfy anyone’s value proposition.

The phrase “total cost of ownership” has worked its way into the software industry’s lexicon. Why? Because total cost of ownership has a direct bearing on any given value proposition. TCO includes a number of factors that don’t directly relate to the price, and can well account for an observed fact that the most expensive piece of software, in terms of purchase price, is the most popular in its category. Presuming that the highest-priced piece of software in any given category can’t be the most popular piece of software in that category implicitly excludes a number of other factors that form significant portions of many different value propositions.

Any argument says that product X is better than product Y because product X has a feature that product Y doesn’t have also carries an implicit value preference. The reason we refer to the “vi vs. emacs” debate as a “religious debate” is precisely due to the fact that the entire basis for the debate is conflicting, yet subjective, value propositions.

Now, if all I wanted to do is limit the scope of various product comparison debates, none of this would be all that worth reading. If, however, you’re in the business of creating software for general consumption, and presumably you want to achieve at least a modicum of market success, then you absolutely must understand that your potential customers have a variety of value propositions. It really is worth the effort to segment your market based on those value propositions, because that’s the most effective way to ensure that you’re maximizing aggregate user satisfaction.

Lastly, at the end of my previous post, I’d suggested that there is another topic that relates to value propositions, and it’s particularly relevant to mature products. I hope to make this topic the subject of my next post.

 

Rick

Comments (6)

  1. David says:

    It strikes me, however, that the compatability value of Office has a negative effect on its other abilities. If Office is the standard, then people with a range of needs (academics, secretaries, businesspeople, etc) need it to work for them. The incentive for Microsoft is to get the features that each particular group up to minimum adequacy as quickly as possible and then move on to the next group’s needs, rather than taking the time to perfect each set of functions. The result is applications with enormously large feature sets, few of which work completely to their target group’s complete satisfaction.

  2. Rick:

    I think that you guys at Microsoft and the MacBU should quit thinking about these bogus terms like "value proposition" and "opportunity cost" and start thinking about how to make your products work correctly. You should quit thinking about optimizing your profitability and start thinking about eliminating things that do not work correctly from your apps. Just as one example, although you have added a semi-functional unicode capability to Word 2004, this has caused a large number of things to quit working, including screen artifacts, uncommanded font changes with postscript Type I fonts with non-breaking spaces, etc. Overall, Word 2004 is pretty much unusable in comparison to Word v.X.

    The fact is that you guys have an effective stranglehold on the market for word processors on both the Windows and Mac markets, so you have no competitive incentive to make your products work correctly. The incentive is only to add features so that people (like me) will purchase the upgrades to the next version. I keep hoping that you guys will fix the things that keep the apps from being really usable, but each upgrade adds new problems. You guys have no excuse for the state that your apps are in at present, and you’ve made it clear in your blog that MS and the MacBU have no intention of trying to fix the problems unless such an effort improves your profitability. The stranglehold you have on the market, however, should come with the responsibility to make the apps as good as possible because of the integrated deleterious effect that not fixing the apps will have on your users (and that means the whole planet is held back by your lack of attention to quality).

  3. Sanford says:

    If we can agree that Word is a mature product, instead of adding more features which some users are already complaining about as overkill, why not unbundle the exising feature set as user installable options not unlike Apple’s installers.

    A user could choose "easy install" the whole package of features; or, a "custom install" in which a user could select for example, a secretarial feature set, a smaller bundle of features most likely to be used by a general secretary; or, a specialized, say legal or medical secretary sets.

    Similar feature bundles could be pre-assembled for academics – with subsets for those who use equations heavily and/or disciplines with specialized vocabularies or unique character sets.

    Business users could be provided the option for number entry with number formats preset to XXX,XXX or $XX,YYY.XX, etc.

    Regardless of the criticism of Word some are unhesitatingly willing to voice, it is a universal de facto standard – in English anyway. Now that the product is mature, at the very least, consider unbundling all the features, if not pre-configured sub-sets, and let the end user build his/her own bundle of most convenient features.

  4. Anon says:

    Sanford,

    <quote>

    Now that the product is mature, at the very least, consider unbundling all the features, if not pre-configured sub-sets, and let the end user build his/her own bundle of most convenient features.

    </quote>

    I am sure Tech Support would love the possibility of customised installs. Would make their life so much easier.

    Oh wait, no it wouldn’t.

  5. I use Office solely because everyone else does. For a long time I used Lotus SmartSuite on Windows, and in particular Lotus WordPro, because it was a much better, more efficient program than Word, particularly in regards to style management, which is a nightmare on Word when one tries to create nested numbers. The kind of work I do often involves complex styles like this:

    3.b.iii Organization’s Previous Experience

    Trying to set up proper incrementing and keeping every style straight and resetting styles when necessary is enormously hard in Word — certainly much, much harder than in WordPro. But these days require more and more file exchange and submission online, and people demand Word files. That means that, even though Word is less efficient for what I do, I have to use it. The reasons for Word’s dominance can be argued to eternity (I fall more toward the "monopoly" camp), but these days the fact remains that it’s Word or the highway.

    I have no idea if you’re interested in hearing more, but if so send an e-mail to seliger [at] editingandwriting [dot] com.