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Why Underestimating Our Product Value Is Dangerous

Main Takeaways
Reading Time: 3 minutes Companies having an indifferent understanding of their own product values lack a product vision and product definition. They have a conception of the output only, but they don't have an overall conception of the outcome their products have.


I'm in IT consultancy and Agile Coaching for several years now. In all this time, working in Forbes 500 or small and medium-sized enterprises (SMEs), I've experienced that many high-tech engineering firms and traditional manufacturing companies like the Automotive and related established industries make the same serious mistakes unintentionally: they often underestimate the value of their own products. In a recent post, I wrote that managers and engineers often answer my question "What is your Product?" with a long list of technical specifications only. In addition, they blow their trumpet for technical excellence in building their products.

This phenomenon is spread over several branches. Even startups which claim to be agile. And this yields for service design companies as well, and happens especially in the government sector.

If a company underestimates the value of their own products it often takes product value as the sum of their features only mistakenly.

These companies ignore dramatically the impact of their products being used. And more important is the value of possessing the product only without its usage because the social value trumps (Job-to-be-done theory).
Products have a purpose the customer pays for — and much more the customer is willing to pay for the product's reputation in their social community. To name a few, the pioneering work of Clayton M. Christensen, and Tony Ulwick with their variants of the Job-to-be-done theory, and the publications in modern product development of Teresa Torres and Marty Cagan. Instead, there is a multi-dimensional scale of how the customer attributes value to the product. The monetary and social value of a product ranges from its operational performance fit (product as a tool to perform certain jobs, like fixing a picture on the wall) up to social aspects in the customer's community (social reputation and appreciation, personal ego boosting, etc.) driven by social influencers.

Companies having an indifferent understanding of their own product values lack a visioniering big picture. They have a conception of the output (amount of features, feature factory) only, but they don't have an overall conception of the outcome their products have.

If we underestimate our product's benefits in the eyes of the customers, we don't know our product's potential monetary selling point for both, us as manufacturers and the customers. At worst, we cut our margins and sell too cheaply.

As a manufacturer, we have to balance how far we can push the product's social value in Dollars or Euros (this should be our marketing department's responsibility) and what the customer's community is willing to pay for (investigated by customer surveys). Apple is the best example of this kind of balancing. We all know that today manufacturers like Apple price their products not only by production costs plus a certain surcharge only. The surcharge is driven by how much marketing and influencers can push social value.

Let's nail it down. Why do certain companies have no clear product vision and therefore underestimate their our product's benefits?

Companies without a clear product vision and acknowledge of product value have no clear product definition.

Thus, take this: a Product is...

“...something that creates specific Value for a group of people, the Customers and Users, and to the organisation that develops and provides it.”

— (Pichler 2016, Jun 14)

Roland Pichlers product definition fits for multiple reasons. First, it combines the manufacturers' view with the customer's perspective. And second, it relates product value to the manufacturer's monetary production cost and to the customer/user multi-dimensional value space.

Costs of production are one part of the Product Value equation. We have to take into account all the aspects: cost of production and margin surcharge (manufacturer), customer perspective: the value of doing a  job, and social dimension.

Prod.Value = Manufacturer (Cost of production + Profit.Surcharge) + Customer (Job.Perf.Value + Social.Value.Dimension)

These mechanisms apply to all kinds of goods. Easily we can leverage the social value of each consumer good like iPhones, apparells, and luxury goods such as cars, aeroplanes, or vessels as well. And it is even effective for non-tangible goods like digital services. When the best agers joined Facebook massively, its market shares declined since Facebook suddenly became old-fashion. In consequence, users moved to TikTok which shares raised accordingly.

Further Reading

  1. Cagan, Marty (2018): INSPIRED: How to Create Tech Products Customers Love (Silicon Valley Product Group). Wiley; 2. Edition, 2018.
  2. Christensen, Clayton M (2016): Innovator's Dilemma: When New Technologies Cause Great Firms to Fail (Management of Innovation and Change). Harvard Business Review Press; Reprint Edition, 2016.
  3. Pichler, Roman (2016, Jun 14): What is a Digital Product?
  4. Torres, Teresa (2021): Continuous Discovery Habits: Discover Products That Create Customer Value and Business Value. Product Talk LLC, 2021.
  5. Ulwick, Antony W. (1999): Jobs to be Done. Theory to Practice. Idea Bite Press, 1999.

: Andrej Lišakov via, .