Product Offerings: Short Vs Long Term Dilemma

Every organization goes through a dilemma whether to go for new customers by adding new offerings or expand the existing customer base by continuing to improve traditional offerings. Take an example. Disney was minting a lot of money by providing content to other streaming platforms like Netflix, Amazon Prime. And in the early streaming years, content providers were kings, getting all their content auctioned and providing content to the highest bidder. So, Disney had two choices either to continue with the same model or build its own streaming platform, pull content from other platforms, take a massive hit to short-term (1–2 years) revenue till their own platform is matured. In short, short term vs long term product offering dilemma.

This is a typical dilemma every product faces. And simple category would be -

1. New customers with new demand. e.g. everyone is interested in electric cars nowadays instead of traditional fossil fuel cars
2. New customers with existing demand. e.g. Apple found a new customer base outside of the USA and got more growth from Asian countries with existing products.
3. Existing customers with new demand. e.g. on-prem customers are interested in moving their workloads to cloud platforms to get needed agility
4. Existing customers with existing demand. e.g. customers are satisfied with what they are getting…

So, the key is to decide which (above) category will give more business and then design your product offerings.

Let's take an example. Tesla was built by insanely ambitious Elon Musk. A lot of small/big innovations went into the battery pack, software-controlled hardware, maintenance-free, etc to make Tesla a huge success. Contrary, history for Japanese companies (like Toyota) tells us that no major innovations were made in terms of car design, but significant process improvement innovations (like an assembly line, Andon cord) went into to make high-quality, low-cost profitable cars. In short, Tesla created a new customer base whereas Toyota continues to expand its existing customer base meeting new demands like a hybrid car, high-quality standards, lower cost, etc.

So, how to choose which way (Tesla vs Toyota) to go, when you are deciding on a roadmap for a product or new offerings.

The answer lies in organizational vision and culture. For example, Amazon heavily reinvests profits in R&D of new products/services and doesn’t care much about market sentiments. Similarly, Tesla / Apple has a vision and culture to build a best-in-class product by testing the limits of technology. If your organization doesn’t have that vision and culture, then you will never be able to build such products. But, it doesn’t mean that you can not make money without innovations. You can continue to operate the Japanese way and build better quality products at lower cost and incrementally move towards best-in-class technology. e.g. Samsung phones copied all the features of the iPhone over a period of time. Although iPhone continues to be the leader with mobile phone innovations. Samsung continues to have a significant market share of mobile phones.