Simplify. Richard Koch
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conclusion that simplifying should lead to extraordinary success. But there was a big surprise in store for us. We decided that the best way to illustrate simplifying — and to identify how to simplify — would be to explore case studies of the most successful simplifiers of the past hundred years or so. This was easier than we expected. There were plenty of great case studies available to us, from both the distant and the very recent past.
Then the truth dawned on us — the real secret of simplifying: Nearly all of the great success stories of the twentieth century — right up to the present day — are stories of simplifying.
We discovered that simplifying not only should lead to great economic success — as the theories of strategy and economics suggest. By observing men and women who have changed not only the face of business but how we work and live, we also learned that clever and creative simplifying has and continues to do just that. It really does lead to extraordinary success, and it has a huge impact on society to boot.
If you make a list of the people who have been most successful in the last hundred years — or, if you prefer, the last fifty, twenty, ten or even five years — a large majority of them have been great simplifiers:
Henry Ford;
Allen Lane;
the McDonald Brothers and Ray Kroc;
Walt Disney;
Ingvar Kamprad;
Kihachiro Kawashima;
Bruce Henderson;
F. Kenneth Iverson;
Herb Kelleher;
Steve Jobs and Jony Ive;
Akio Morita;
Bill Bain;
James Dyson;
Mitt Romney;
Jeff Bezos;
Pierre Omidyar;
Larry Page and Sergey Brin;
Daniel Ek;
Joe Gebbia; and
Travis Kalanick and Garrett Camp.
The list goes on and on, and it continues to grow as new “unicorns” (private companies valued at more than a billion dollars) emerge every month.
All of these entrepreneurs simplified. Some of them were quite upfront about it. For instance, Henry Ford said of his revolutionary new car, the Model T, that
“… its most important feature was its simplicity . . . I thought it was up to me as the designer to make the car so completely simple that no one could fail to understand it. That works both ways and applies to everything. The less complex an article, the easier it is to make, the cheaper it may be sold, and therefore the greater number may be sold.”1
Ray Kroc wrote that the McDonald brothers had created
“… a radically different kind of operation, a restaurant stripped down to the minimum in service and menu, the prototype for legions of fast-food units that would later spread across the land . . . Of course, the simplicity of the procedure allowed the McDonalds to concentrate on quality in every step, and that was the trick. When I saw it working that day in 1954, I felt like some latter-day Newton who’d just had an Idaho potato caromed off his skull.”2
His first motto for McDonald’s, he said, “was KISS, which meant, Keep it simple, stupid.”
Steve Jobs described his whole approach as “very simple . . . the way we’re running the company, the product design, the advertising, it all comes down to this: Let’s make it simple. Really simple.”3 His biographer, Walter Isaacson, wrote that Jobs “made devices simpler by eliminating buttons, software simpler by eliminating features, and interfaces simpler by eliminating options. He attributed his love of simplicity to his Zen training.”4 Jony Ive, the creator of every Apple device from the iPod onwards, constantly harps on to anyone who will listen that his approach is to make products that are incredibly simple to use, even though the design process itself is extremely difficult. He stresses that it is hard to make something so simple. His task, he says, is “to solve incredibly complex problems and make their resolution appear inevitable and incredibly simple, so that you have no sense of how difficult this thing was.”5
Given these clues, Greg and I find it extraordinary that, so far as we can tell, nobody has previously realized that simplifying is the key to the kind of product and business innovation that creates incredibly high value for customers, society and shareholders alike. Simplifying has been an invisible red thread running through business history in our lifetime, and that of our parents and grandparents.
But now the secret is out! And this should enable tens of thousands of new innovators — perhaps you are one of them—to create extraordinary value for themselves and others. The process of intelligent innovation can be speeded up!
Not only that, Greg and I have made another discovery. All of these simplifiers — every single one — followed one of just two simplifying approaches. So if you want to know how to simplify, our answer is that you have a choice of two equally reliable and well-validated models.
The two simplifying strategies are quite different and nearly always incompatible. So, as we’ll show through multiple examples, if you want to simplify, you must choose just one of them. After some reflection and a few tests, which we will explain in detail later, it will become clear which of the two strategies is better suited to your venture, aspirations and market opportunity. You must then be uncompromising in executing the chosen strategy.
The strategies themselves are simple.
The first we call price-simplifying. This requires cutting the price of a product or service in half, or more. Sometimes, within a few years, prices may be cut by 90 percent. On the face of it, this might sound unrealistic. Yet we will show you numerous examples of when it has happened. The new — hugely cheaper — product or service is not identical to the old, expensive product, but it fulfills the same basic function. For example, no one would argue that traveling on a budget airline is as pleasant an experience as traveling on a full-service rival, but they still get you from A to B quickly and safely. And yet, as we will explain, the way to cut prices by 50–90 percent is usually not to provide an inferior product, but rather to organize the delivery of the product in a different way that allows much higher volume and greater efficiency . . . and often to co-opt the customers into doing some of the work!
In a nutshell, price-simplifying works because markets usually respond to dramatic price cuts by multiplying their size exponentially. If the price is halved, demand does not double. It increases fivefold, tenfold, a hundredfold, a thousandfold or more. If prices are reduced to a fifth or a tenth of what they were originally, demand may multiply by ten thousand or a hundred thousand times. Occasionally, the multiples may be measured in the millions — look at what McDonald’s did to the hamburger market.
Yet price-simplifying makes financial sense only if you are able to make the product simpler to make and thereby cut costs by at least half.
Of course, it is not easy to halve costs and prices, let alone drive them down to a tenth of what they were. But there is a reliable template for doing this. Even better, it works equally well in every industry and region of the world. Price-simplifying can involve radical redesign not only of a product but also of the way that the industry is organized — what is called in the jargon business system redesign. To stand a whole industry on its head is hard. Still, there is a reliable way to transform the industry, common to nearly all the examples in our research.
Video by Richard Koch: How price simplifiers exponentially spike demand, creating markets that did not exist before: