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What Is Naked Value?

This article introduces some ideas explored in detail in Naked Value: Six Things Every Business Leader Needs to Know About Resources, Innovation & Competition. Contact dMASS Inc. for more information (info at dMASS.net). At one point while we were writing our new book, Naked Value, we used the working title “The End of Products.” But we knew the title wasn’t quite right. We weren’t simply talking about the shift away from selling products to providing services. And while we were observing more and more physical products being replaced by invisible innovations, like the change from CDs to MP3 files, we also knew that physical products wouldn’t disappear altogether. We saw something bigger going on with innovation.

Innovation is moving in a clear direction, and it has been moving in the same general direction for a long time. The difference today is that several factors are forcing companies to innovate in this direction to stay competitive - factors like population growth, increasing demand for resources, resource supply uncertainties and price fluctuations. Meanwhile, scientific knowledge is exploding. Discoveries in biology, nanotechnology, and materials science are opening up enormous possibilities for creating products that do better with less.

This isn’t simply about increasing efficiency or about managing environmental constraints. It’s about a different approach to delivering benefits to customers using the least amount of resources possible to manage risks, control costs, and differentiate in the marketplace. For  example, what if you could take the most resource-intensive aspect of your product and not only reduce the waste associated with it, but eliminate it entirely while retaining your product’s functionality? What if, instead of improving an existing product to capture a small share of the market, you established a new market with a product that delivered the same benefits in an entirely new way with a fraction of the resources? What if you could design a product that delivered exactly what your customers needed without anything they don’t need, and in doing so you were able to stop purchasing many of your company’s inputs?

As we talked more about these ideas, we started using the phrase “naked products.” We talked about stripping away resources from products. But we eventually realized that products shouldn’t necessarily be the focus. Products are delivery mechanisms; they deliver benefits. The real focus should be on value. That’s what matters to customers, companies, and investors.

Value is fundamentally about the relationship between the amount of benefits customers receive and the amount of resources it takes to deliver those benefits, everything from mining raw materials for a product to the fuel it takes to transport it. Anything a company can do to increase benefits (move up the Y axis on the chart below) or decrease resource mass (move across the X axis) is consistent with the direction of innovation. Of course, it doesn’t make sense to reduce mass by increasing toxicity; that would have a negative impact on benefits.

So what’s the ultimate aim for product innovation? That’s what we wanted to define. It’s not simply about eliminating waste, or even eliminating products. It’s about naked value: the most benefits with the least amount of resources. It’s what every company should work toward in product innovation, whether redesigning an established product or developing a new one.This can be a complex topic. We thought a lot about how to articulate the most important trends, the most interesting examples of product innovations, and the most helpful strategies for businesses in a concise, easy-to-digest format. That’s the thinking behind “Naked Value” and it’s what you’ll find when you read the book.

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Naked Value and Product Innovation

On May 16, 2012, dMASS.net kicked off the pre-release of the new book, Naked Value: Six Things Every Business Leader Needs to Know About Resources, Innovation & Competition. Review copies are shipping to bloggers for a virtual book tour. This article introduces some ideas explored in detail in that book. If I was in a room right now with 50 different industry leaders looking to improve their companies’ products, I would ask, “What are your goals for product innovation?” I would probably hear dozens of different answers related to efficiency, position in the marketplace, searching for innovative materials, and so on. There is one common aim for all product innovation that addresses all of these goals and more: naked value. Naked value is the ultimate value that your product delivers to customers. It is the reason that customers buy your product. It is the product benefit that remains when the product is stripped of most of the material components required to manufacture and deliver it. Naked value is the endgame in product design.

How do you get there? First, you need to know what naked value means for your product. Forget about your physical product; think about the benefits of your product. Do your customers want batteries or do they want portable energy? Do they want toothpaste or do they want healthy teeth? Do they want detergent or do they want clean clothes?

Companies in every industry are developing and introducing products that leverage new technologies to deliver the benefits people want with fewer tons of resources. Think about iTunes versus record stores, electronic devices that harvest ambient energy versus ones that require batteries, or ship hulls designed to prevent algae growth versus ones that require the use of tons of cleaning chemicals.

A company that is able to improve products on the way toward naked value will create a significant competitive advantage. It will be less sensitive to resource price fluctuations and supply constraints. It will begin to optimize resource use and produce less waste. It will lower environmental risks and decrease liabilities. Its products will be more precisely focused on what customers want and will be differentiated in the marketplace.

Success in any field requires having a vision of where you want to eventually end up. A pitcher throws strikes by focusing on an imaginary strike zone, the place where the ball needs to go. An artist draws a freehand straight line by focusing on where the line should end. Product innovation today is no different: companies need to aim for naked value.

The concept of naked value is described and explored in more detail in Naked Value:  Six Things Every Business Leader Needs to Know About Resources, Innovation & Competition. The book is now available in paperback and ebook through Amazon. Contact dMASS for information regarding bulk and conference sales (info at dMASS.net).

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Efficiency vs. dMASS

Hurricane Irene, the massive storm that hit the U.S. east coast in late August, gave me a lot of time to think (in the dark).  The quiet time helped bring to mind several important dMASS issues that I will discuss below and in upcoming postings.  The first issue concerns the difference between the concepts of efficiency and dMASS.

Benefits

Improving efficiency is about minimizing the amount of energy used to yield a given amount of useful work (in physics terms, reducing the amount of entropy resulting from some activity).  dMASS, on the other hand is about improving the performance of all resources (fuels and materials); it’s about reducing the resource mass needed to deliver a given amount of wealth-producing value from some activity or product use.

If the distinction seems elusive consider this:  no products, tools, or resources have intrinsic value to people.  Their perceived value is derived from the actual benefits they deliver to people who buy or use them.  All material products are really benefit delivery mechanisms in much the same way that a pill or an IV is a delivery mechanism for a health benefit, or a cup is a delivery mechanism for nutrition.   But over time we come to associate, even confuse, products with their benefits.  The products become symbols of the benefits, so we covet them.  But the products and benefits are not the same.

Understanding products in this way allows us to see that it is the benefit delivered that counts, not the mass or resources needed to deliver it.  In a resource constrained world, every successful business needs to focus on measuring the ultimate benefits delivered, as well as reducing the total mass of all resources (fuels, water, and materials) required to deliver those benefits.

So when we talk about dMASS, we are talking about activities or innovations that improve a simple ratio between benefits and resources.  An increase in performance comes about by either increasing benefits or reducing resources:

On the other hand, when measuring efficiency we are only interested in work done, whether or not that work is useful.  You can improve the efficiency of a cigarette factory, a crystal meth lab, or a poison gas plant, but you probably haven't contributed to our individual or common wealth.  In fact by making these things more efficient and cheaper, you are probably reducing total wealth.

Redundancies

There is another difference between dMASS and efficiency.  Efficiency can always be achieved by minimizing energy inputs.  But minimizing energy isn't always a dMASS activity because it isn't always the best way to achieve a real benefit.   For example, let’s return to our hurricane.   From an economic efficiency perspective, emergency preparedness for storms isn't a good idea.  Emergencies don't happen frequently, so most of the time the resources we use to respond to emergencies aren't really needed.  Investing in them seems inefficient.   All redundancies are technically inefficient.   But highly efficient systems can be the most vulnerable to failure or other risks than ones with seemingly inefficient redundancies.  When one thing goes wrong, the most efficient systems break down like a chain that is only as strong as its weakest link.  Redundant systems, like the human body, keep chugging along when lots of things go wrong because they have redundancies.

Adaptive behavior requires available alternatives and standby response capabilities.  dMASS performance requires balancing reliability and sustainability with resource reduction.  A responsible amount of redundancy to improve the reliability of life support systems and to protect public safety during a storm is a good investment.  So is investing some resources in post-disaster response.  Because people are the ultimate generators of wealth, activities aimed at reducing the amount of time that healthy people need to spend surviving and recovering from storms like Irene are usually wise investments.

Related

What is wealth?

You Don’t Make Widgets: Why design is about function, not things

Performance vs. Efficiency: dMASS Thinking for Better Design

 

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