The Trade-Off - Kevin Maney

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Rated: 8/10

Available at: Amazon

ISBN: 0385525958

Related: Positioning: The Battle for Your Mind

Summary/High Level Thoughts

I read this book as one of several that Moisey Uretsky from Digital Ocean recommended, and, like each one he suggested, it helped me think about the strategy and path for our startup at the time.

I think the fact that I read it while in the early stages of building a company made a huge difference for how relevant it was, and overall the book is focused on a relatively simple premise: those who have the courage to make rigorous choices between high-fidelity and high-convenience do better than those who make no clear and rigorous choices.

It's a relatively quick read, and lays out some of the details surrounding this theory, but it gives a good framework for thinking about where you are going to fit into a given market, and what you need to seek when developing a product roadmap.

Favorite Quotes

  • Most successful products fall either at the far end of the fidelity axis or at the far end of the convenience axis.
  • Management needs to ask the question, Is our product on a clear path toward either convenience or fidelity? If not, that suggests trouble.
  • People who enjoy the most success can be found toward the extremes of fidelity and convenience.

Detailed Notes

  • His concept: that those who have the courage to make rigorous choices between high-fidelity and high-convenience do better than those who make no clear and rigorous choices.
  • To have a personal Hedgehog Concept means that you have constructed a path that meets three tests (the intersection of three circles): 
    • 1) passion (you adhere to your core values and do what you love to do); 
    • 2) genetic encoding (you do what you are genetically encoded for, activities you are made to do exceptionally well); 
    • 3) valuable contribution (you engage in work that makes a contribution of economic and social value, that gives you an economic engine for life).
  • People are willing to trade the quality of an experience for the convenience of getting it, and vice versa.
  • There are five key concepts behind the fidelity swap:
    • Fidelity versus convenience.
      • Fidelity is the total experience of something.
      • Convenience is how easy or hard it is to get what you want.
      • That includes whet her it’s readily available, whether it’s easy to do or use, and how much it costs.
    • The tech effect.
      • Technology constantly improves both fidelity and convenience.
    • The fidelity belly.
      • Any product or service that is neither extremely high - fidelity nor high - convenience risks sinking into what I call the fidelity belly — the no - man’s - land of consumer experience.
    • The fidelity mirage.
      • Contrary to what many businesses want to believe, achieving both high fidelity and high convenience seems to be impossible.
    • Super-fidelity or super-convenience.
      • This defines the winners. Most successful products fall either at the far end of the fidelity axis or at the far end of the convenience axis.
  • Here are two significant additional factors to watch for:
    • Social accelerants.
      • Our connection with others and our individual identity matter more to us than just about anything else. All other quality / convenience factors being equal, adding a social dimension can change the prospect of a product or service.
    • Wrecking - ball moments.
      • Every once in a while a new product or service smashes a market sector and starts an entirely new one, resetting the trade - offs people will make between fidelity and convenience. For example, when digital cameras arrived on the scene, they competed in the overall camera market, which included both film and digital versions.
  • Aura is sometimes based entirely on perceptions and marketing — a kind of perceived fidelity.
  • Perceived fidelity can be a powerful marketing tool, but it can be transient in nature.
  • The second aspect of fidelity that is easy to overlook is identity. Many of our consumer choices are a way to tell other people something about ourselves. This is particularly true when making high-fidelity choices.
  • Experience plus aura plus identity equals fidelity.
  • Convenience is ultimately about the ease of getting the result you want.
    • Any factor that makes something easier to obtain relative to its competition makes that product or service more convenient.
  • There is another critical, and perhaps counterintuitive, factor to convenience. And that is cost.
    • Cost is a key part of convenience for the simple reason that if something costs less, it is easier for most people to buy — which means the product or service is easier to obtain.
    • Most of the time, when we find ourselves ”paying for convenience,” we are really ”paying for fidelity.”
  • When you add together ease and cost, you get a sense of overall convenience.
  • Identity and aura play little or no part in convenience. Often the opposite is true — the most convenient product or service is practically devoid of identity or aura.
  • Technology and innovation are constantly moving the borders of both fidelity and convenience.
  • A successful business is either loved or needed.
    • Fidelity is all about being loved (although not necessarily needed).
    • Convenience, on the other hand, is about being needed.
  • High-fidelity products or services often occupy a high-end niche. They are relatively expensive, but have fewer customers. In fact, part of their fidelity has to do with their exclusivity, because it is their exclusivity that lends them social cachet and identity.
  • On the flip side, high-convenience products or services often serve the mass market. They cost relatively little but touch almost everyone. The mass appeal adds to the convenience because it tends to make the product or service more available and drive the price even lower. The mass appeal also diminishes the fidelity of a product or service — because if everyone has it or does it, it doesn’t do anything to boost our sense of identity.
  • But it’s very hard to be both loved and needed, to be both high-fidelity and high-convenience. In fact, trying to achieve both can lead to a breakdown.
  • As we’ll see in coming chapters, however, the fidelity mirage doesn’t mean that successful products and services are only high-convenience or high-fidelity. In fact, adding the right touch of fidelity to a high - convenience product or service, or the right touch of convenience to fidelity, can make for a powerful, competitor - beating concoction. The trick is to avoid getting greedy and foolishly chasing the mirage.
  • In any market segment, there’s usually at least one high-fidelity player that every other player admires and strives to imitate. That entity does things better than everyone else. People love the product or service. They want to own it, to make it part of their identity. They will tolerate terrible inconveniences — high prices, difficulty in obtaining it — to acquire it. Like some strange law of quantum physics, at the pinnacle of fidelity, convenience can almost disappear. Instead, pure desire takes over. Even lust.
  • Being the highest-fidelity company or having the highest-fidelity product or service is a great place to be.
  • Is super-fidelity sustainable? Corning shows that it is. But sustainability requires constant investment and long-term thinking. It helps if the fidelity of a product results from a real, tangible competitive advantage.
  • Achieving the highest level of fidelity is hard. And if someone catches up, you have to invest and sweat until you come up with something that’s far better yet.
  • “Every business, no matter what it is — you find convenience over your competitors, and you win.”
  • High convenience is typically low margin, but huge volume.
  • High convenience is not about love, but about need. At its best, it is about habit.
  • you have to be good at everything that makes a product or service easy to get and use.
  • Achieving high convenience can be a long slog. It doesn’t happen quickly.
  • But there is a threshold in the fidelity / convenience trade - off; cross it, and irrelevance awaits, as consumers stop feeling like they either love or need a particular a product or service.
  • Management needs to ask the question, Is our product on a clear path toward either convenience or fidelity? If not, that suggests trouble.
  • The surest and shortest way out of the belly is a straight line along one axis or the other.
  • Success often comes about when someone finally sees a path out of the belly to the market beyond.
  • Because the tech effect constantly moves the borders outward on both convenience and fidelity, a product or service doesn’t have to decline or become worse to fall into the belly — it only has to stand still or fail to keep pace with improving technology.
  • Managers running a high-convenience operation face pressure to increase margins, so they chase fidelity. Managers running a high-fidelity operation face pressure to boost growth, so they chase convenience.
  • As the fidelity/convenience tradeoff shows,”mass luxury” is a fallacy. Mass is about convenience, and luxury is about fidelity. They can’t coexist.
  • When there’s a tie on fidelity, the most convenient version of that fidelity wins. This works the other way, too — a convenience tie can be broken by the product or service that offers higher fidelity. In fact, it is the very essence of innovation and differentiation. If you and your competitor offer essentially the same product or service, but you can sell yours for less — you win. If you and your competitor offer a product or service that cost about the same and is just as easy to get, but yours is a little better — you win.
  • Most companies are not the super-fidelity leader, or the super-convenience powerhouse. Nor are most companies hopelessly stuck in the depths of the fidelity belly; rather, they land somewhere between convenience and fidelity, while leaning more heavily in one direction than the other. Competitors tend to cluster around each other in the same area on a fidelity / convenience chart. To gain an edge, these companies have to decide whether to move up a notch in terms of fidelity or down a notch in terms of convenience.
  • create a fidelity / convenience trade - off chart, and try to understand where the new product would fit in. Here are a few things to consider:
    • Don’t forget the tech effect. The outer borders of fidelity and convenience constantly move outward, driven by evolving technology. Wherever a product or service lands on the fidelity - or - convenience axis today, it will be in a different position tomorrow.
    • Success is not about whether a product is cool or hip — it’s about where the product falls amid fidelity / convenience tradeoffs.
    • Different sets of consumers make different fidelity / convenience trade - offs.
    • Never evaluate a product or service based on the enthusiasm of early adopters.
  • Starting small gives a product or service agility, so it can adjust in response to the tech effect and competitors.
  • New technologies almost always start out inside the fidelity belly. The ones that make it out are the ones that clearly aim at either high fidelity or high convenience. Aiming at both is a bad idea.
  • One sign to look for in any market: the complete domination by one model, which probably leaves an opening at the other end of the fidelity / convenience trade - off.
  • There are probably dozens of industries dominated by either fidelity or convenience, leaving a major opportunity at the other end of the market. One such opportunity in the United States is health care.
  • To paraphrase Leonsis, strive to be either loved or needed. And if you can’t be either of those, get out.
  • He said that there are two ways to get to the top. One is to climb an existing ladder, which can be a bit crowded. The other is to make your own ladder, and put yourself at the top.
  • It’s a twist on the Hedgehog Concept — if you can’t be the best in an existing category, figure out what you can be best at, and create a category that fits.
  • In general, the most successful people snag a high-fidelity position on some fidelity/convenience trade-off.
  • The higher the fidelity, the more you’ll be in demand and the more you can charge for your work — and the less you’ll have to be convenient.
  • Not everyone, of course, is cut out to be the highest-fidelity in any bucket. Then the smart strategy is to aim for high convenience. If you can’t be the best, most polished real estate agent in town, then be the most convenient. Make yourself available in an instant via text message. Do whatever will make your services easier for a home seller to obtain. Lower your fee — which would add to your convenience — to beat out your competitors. Do everything to be the most convenient.
  • People who enjoy the most success can be found toward the extremes of fidelity and convenience.
  • If you’re the best or most convenient at a given occupation, technology will inevitably advance and provide the tools for someone to do it better or more conveniently.
  • When you have a clear sense of what distinguishes you from those around you, that sense of quiet desperation disappears.