“Cost is more important than quality but quality is the best way to reduce cost.” – Genichi Taguchi
In business, one notion has been widely accepted: there is a trade-off between value and cost. To offer more value, businesses must incur more cost. But what if I told you that this age-old belief is not an unbreakable rule, but rather, a challenge to overcome?
Consider the case of IKEA, the world’s largest furniture retailer. They managed to break the value-cost trade-off by offering stylish, good quality, self-assemble furniture at a fraction of the cost. The secret? They eliminated the cost of assembly and passed the savings onto the customers. In doing so, they increased value by providing affordable, stylish furniture, and reduced costs at the same time.
This might seem like a simple idea in retrospect, but it was a radical departure from the industry norms at the time. It challenged the accepted belief that high quality furniture had to be expensive and that lower prices meant inferior quality. IKEA’s success proves that the value-cost trade-off is not a hard and fast rule, but a barrier that can be broken with innovative thinking and strategic planning.
To break this trade-off, you must challenge conventional wisdom, question the accepted trade-offs, and think creatively about how you can increase value and decrease cost. It’s about finding ways to do things differently, more efficiently, and more effectively.
Breaking the value-cost trade-off is not just about reducing costs or increasing value; it’s about doing both simultaneously. It’s about finding innovative ways to deliver high quality at a lower cost.
You’re not just thinking outside the box, but also about redefining the box.
Can you eliminate any unnecessary costs that don’t contribute to the value perceived by the customers?
Can you enhance the elements of your product or service that customers truly appreciate?
Can you introduce new elements that increase value and keep costs low?
These are the questions that can guide you towards breaking the value-cost trade-off.
Remember, in the modern business landscape, competition is not just about price or quality. It’s about delivering exceptional value at a reasonable cost. And the businesses that manage to do this are the ones that stand out from the crowd, that thrive and grow while others struggle.
So, go ahead, challenge the conventional wisdom. Break the value-cost trade-off. Because when you do, you’ll find that you’re not just improving your business, you’re transforming it.
If you want to learn more about the value-cost-trade-off and explore how to implement it in your business, check out this week’s book of the week “Blue Ocean Strategy” by W. Chan Kim and Renée Mauborgne. It’s full of strategies and ideas that can inspire you to break the norms and create a unique value proposition.
And be sure to check out tomorrow’s email where we’ll take a look at 3 components to shape your strategy!