Apple is thriving and U.S. taxpayers now own General Motors because the former can count its laptop offerings on one hand while the latter seemingly has more car lines than buyers, says Michael Davies, a senior lecturer at MIT’s Sloan School of Management.
It’s not a novel theory — for example, Booz Allen Hamilton put a slightly different spin on it several years back — but it must be music to a bean-counter’s ears these days. From an MIT press release trumpeting Davies’ research:
In fact, his studies show that companies can increase market share in the short term and customer satisfaction in the long term by offering fewer product choices with more streamlined, useful features. Companies that offer too many products make customers unhappy, and products with too many features risk long-term customer dissatisfaction.
“People respond much more strongly to losses than to gains, a phenomenon known as ‘loss aversion,'” he wrote. “As a result, as the number of possible choices increase, at some point the increasing unhappiness from the opportunity cost of the choices forgone outweighs the benefits of having more choices.”
Instead of asking how to best allocate available resources to increase product pipelines and portfolios, managers should be asking different and more fundamental questions such as how small the product portfolio can be, how few choices customers need, and how little they can spend on in-house R&D, Davies said.
Of course, it might also be that everyone wants an iPhone and GM’s idea of marketing is “100 years of Oldsmobile Innovation,” but who am I to argue with the MIT guy?
