It’s September 1997. You’re an employee at Apple and things aren’t looking good.
You’re hearing news left and right that Apple is less than a couple months away from bankruptcy and there are no signs of a turnaround anytime soon.
Just recently, BusinessWeek put a shiny Apple logo on its front cover, unfortunately accompanied by the title “The Fall of an American Icon” — a scathing illustration of public sentiment toward the company. Wired just ran an article suggesting a sale to IBM or Motorola to save the remnants of Apple before it’s too late.
All in all, times have been better.
Just yesterday, though, you heard the news that Steve Jobs is coming back to run the company, in a last-ditch effort to turn the ship around. Analysts and journalists seem all but enthused, though.
Fast forward one year.
Somehow, Apple’s still around. Half your friends and colleagues have been laid off, but you’re still holding on. Times are leaner, too. 5 of the 6 official Apple retailers have been dropped. Just last year, there were 15 different Apple computer models. Today, there’s one. There used to be a long list of handheld and portable devices under development. Now, there’s one single laptop.
Until now, customers would walk into an Apple distributor and ask a salesperson for advice on which computer best fit their specific needs. They’d spend time weighing up the tech specs of each model and evaluating options. Sometimes, a difficult process.
“A friend of the family asked me which Apple computer she should buy. She couldn’t figure out the differences among them and I couldn’t give her clear guidance either.”Steve Jobs in Good Strategy / Bad Strategy
Today, they walk in and get offered a grand total of 1 solution: the Power Mac G3. Take it or leave it.
As it turns out, they took it.
In hindsight, a move to cut back operations, product lines, and staff to mission-critical only, trimming the bloat, focusing on a niche core offering seems like an obvious move. If it was so obvious, though, why did it take the return of the previously-ousted founder to do it?
The simple response is inertia, though that’s a focus for another day (no, really, I’ll write about that soon, it’s so interesting!).
What we’re exploring today is what went wrong in the first place. What happened that left Apple so spread across numerous product lines, deviated from their core focus?
It seems obvious that giving more choices to consumers is almost always a good thing — but it turns out that more choice isn’t the solution itself.
The age of abundance
Almost all product or service merchants, be that today or 10,000 years ago, began with a single product. Only as agricultural technology and techniques developed did these initial product lines widen in lockstep with the capacity to cultivate, grow, and sell a wider variety of produce and livestock. Still, the offerings were largely constrained for thousands of years by geographical limitations.
Fast forward to 3,000 BC to the emergence of the first formalized interregional trade routes in the middle east and Asia. It’s at this stage that optionality in commerce truly reached new heights.
International maritime commerce and land-based trade routes redefined the landscape for choice in the marketplace across a number of verticals. The ongoing development and growth of international freight over the following millennia through the industrial revolution, combined with modern globalization and innovation in shipping logistics set the stage for the age of commercial abundance we consider standard today.
The dawn of the internet age supercharged that growth.
Suddenly, the incremental cost of commercializing an immense variety of SKUs dropped almost overnight.
With the rise of the internet, new opportunities for choice in almost all commercial sectors boomed. The cost of developing, testing, and commercializing similar but new solutions plummeted.
This trend to increased optionality is a natural evolution of commerce and distribution thanks to technical and technological progress. The internet didn’t spawn this, but it augmented it.
If we characterize the last ~hundred~ years as an age of rapid growth in commercial and retail opportunity built on the innovation in international communication, logistics, and technical evolution, we can characterize the last ~5-10 years~ as a tipping point in that growth.
Increasingly, founders are building companies with a mission to make sense and sort the fruits of this age of abundance. These take the form of aggregators.
Others are building companies and strategies around a completely inverse vision of commerce. Rather than offer a wide array of products and variations, however niche they may remain, there will always be an alternative strategy in hyper-focus on a single line.
At the root of this view is a core philosophy: the perceived benefit of having a wide array of options to choose from is quickly illusory. We think we want more choices, but that’s not the whole story.
Everybody has heard the famous quote by Theodore Levitt that claims “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”
Typically this quote is viewed through the lens of features vs. benefits. The quote can be applied to the framework of abundance, though. Through this lens, abundance, however plentiful, remains a means to an end, not the end itself.
Choice, then, is not the end goal it’s made out to be.
Choice is the means by which the consumer seeks to extract maximal value from a transaction, in the belief that their own decision making is the most rational means by which to ensure it.
To quote Scott Galloway:
Choice is a tax on your time and attention. Consumers don’t want more choice, but more confidence in the choices presented.
Consumers want more confidence in the choices presented. We make choices in the goal of picking the most favorable, rational outcome available, all else equal. The act of choosing in itself, of making a decision, is one committed only by necessity.
Aggregators are working their way towards negating this necessity of choice to a maximum extent.
In a first use case, let’s look at travel booking aggregator Kayak.com.
Booking aggregators are nothing new. Booking.com itself was founded in 1996, with a mission to reduce friction in discovering the range of offers available, and picking the apparent ‘best’. Kayak, while very similar, was founded with a slightly different principal vision.
Booking.com or Expedia were originally laser-focused on hotel reservations. With a destination in mind, the sites served to aggregate and compare offers from a number of hotel options at once. In booking a hotel stay, price is an important factor. Price alone, though, is not the (almost) singular factor in the decision-making process. Location, quality of the room, facilities, services, etc. are all important factors that can vary highly from hotel to hotel, all at similar price points.
This is where Kayak, with a leading focus on air travel, differs. In plane travel, the quality of services and amenities are almost identical at each incremental price point, regardless of which carrier you decide to go with. Price points can vary greatly over minor factors, but at each price, the offers are relatively identical.
Kayak, unlike its hotel-focused counterparts, aids in reducing the decision-making process entirely. When booking a hotel, there will often be a handful of attractive options at similar prices, but ultimately, location and amenities act as the deciding factor. This has been the case since the birth of travel agencies.
In flights, though, once you’ve filtered your search to the requirements you expect, there’s rarely more than 1 single option which makes the shortlist: the cheapest. Kayak and it’s numerous competitors serve to take away the need for choice entirely. They recognize that choice is simply the means to an end, and the faster the choice is made, the better.
Companies are best positioned to capture large value when, beyond offering more choice, they give us confidence in the choices presented to us.
Trust me, I know best
Meanwhile, other companies have been able to reduce this choice process by integrating vertical solutions directly.
AmazonBasics is a (ahem) prime example of this.
In product verticals where differentiation is entirely secondary to price, AmazonBasics has largely taken away the decision-making process within the aggregator feed entirely.
The Amazon Basics label, rightly or wrongly, represents a badge of quality, of certainty. For products with little room to differentiate, or for whom the delta between high quality and bare minimum is narrow, an AmazonBasics product is an attractive sell. Why bother wasting time hunting for something that Amazon, a trusted company, offers itself? Unless you’re a stapler aficionado, or have a more specific use-case, the AmazonBasics stapler instantly requires the least cognitive effort, is likely among the cheapest, and radiates a certainty of getting an at least pretty good product.
There are over 8,000 different staplers available on Amazon.com. Productive progress, technological innovation, and economies of scale mean that hundreds of these staplers offer better features than the AmazonBasics one. Some come with finger guards (???), some with champagne gold casings, others with sizing tools. But for the majority of consumers, the standard stapler is enough, no more, no less.
In the same vein, Steve Jobs wasn’t blind to the fact that many consumers loved the specific use-cases offered by their specific computer model. What he recognized, though, is that for many, many more, the standard Power Mac G3 was plenty for almost all use cases.
You don’t have to buy a Power Mac, but when you do, you buy the built-in peace of mind that you made the right decision.
More and more brands are following the Apple playbook of either reducing or limiting the growth of their offer to a small, core set.
Nowhere is this more noticeable than DTC lifestyle brands.
Ironically, the entire DTC model, on the surface, appears perfectly structured to offer a wide catalog of products, with marginal additional costs — therefore expanding your total addressable market with little downside in terms of variable costs.
The largest DTC companies we know today, though, saw that model, and ignored it completely.
In a radical departure from traditional commerce, where horizontal expansion and product diversification at low costs seem a no-brainer in capturing additional value from new markets, the DTC model has so far thrived on a more restrained focus on individual core offerings. Just as Apple steered away from offering variations of a single product, the model has stayed true in top DTC brands today.
Allbirds, the sustainable shoe company lauded by VCs all over the US, launched with a single product, the Wool Runner. They’ve slowly expanded their offering since, but each new product is notably different in form and focus to the prior.
Casper, even today, limits its core product line of mattresses to just 3 SKUs.
Quip, the top dental care DTC brand started with an initial offer of only a toothbrush and has little deviated even into years of success. They offer a handful of other products, but each is a complementary addition to the other, none cannibalizing any other product — a combination perfectly crafted for cross-selling and upsells.
But a product line of one (or very few) products is a difficult one to sustain, leaving you little diversified in the event of consumer trends that work against you. To offset this risk in the DTC space, and owing to the nature of a distributorless sales model, a heavy investment in brand-building is required.
By leveraging a large focus on company values, core vision, and main mission, brands position themselves effectively against competitors otherwise engaged in a race to the bottom.
In reducing your core offering to a small line of products, there lies an inherent implication that “we spent a lot of time making the boring decisions so that you don’t have to”. When you purchase a Casper mattress, you can go to bed in full certainty that you opted for a high-quality solution from a human-oriented brand. You know you can engage with the creators easily on Twitter, you know your mattress was invented not in an opportunistic profit-capturing expansion, but in a mission to create a great sleeping experience.
Rather than testing a bunch of similar-feeling mattresses at Mattress Firm and wasting a day making a choice you really don’t know, nor care all that much about, Casper offers just 3 options, each for a slightly different type of consumer. They let you know the whole way through the purchase journey that they’re only happy if you’re happy — even offering a 100 nights trial period on each mattress.
The age of abundance drove opportunities for product discovery and development previously impossible. This same abundance, though, has driven the side effect of increased anxiety across younger generations more than ever before.
Reducing choice appears limiting on first viewing, we hate ruling out options. Building out product lines for each different client use-case appears a tactical win in a strategy to grow your total addressable, and then addressed market, but as the saying goes, when you create for everybody, you create for nobody. Entropy and inertia eventually catch up and drive down profit potential across each line one by one.
Choice is only the means to an end, and Jobs understood that perfectly. Today, companies are refining and reducing the span of their niche, taking decision making off the table — taking a leaf out of that fabled Jobs playbook: here’s the offer, take it or leave it.