Thursday, October 1, 2009

Why technology products are not what they used to be?

Have you ever asked yourself what makes your new cellphone such a great device? Or, why will the new Palm Pre never succeed in the marketplace? A new technology gadget is no longer just a gadget. It is a combination of one or more of these three elements: a physical product (like the table you bought at IKEA), a service product (like the on-star system on your car), and an information product (like the installation instructions that came with your new IKEA table). Allocate 100 points across the three categories: Physical, Service, and Information and you have the product's PSI. For example, you may argue the PSI for an iPhone is 40-40-20. Why the high Service component? Because this component was offered with the product for free, and it is called iTunes! To compete effectively in a market, any gadget should have a PSI that is commensurate with what the consumers want. Try it out: why is Microsoft's Zune not able to compete with the iPod/Touch? The PSIs are very different due to the service component associated with iTunes. Microsoft just have not had the penetration with their service tools for the Zune to be able to compete well with the iPod/Touch. Thus, these products are not similar, much like Amazon versus your local bookstore. The PSIs are so different that they are not competing head to head (which is good, but could be bad if you are trying to garner market share).

1 comment:

  1. The PSI provides a relative weighting between Product, Service, and Informational components. To get a Composite PSI score, could we multiply P * S * I? In your example, 40 * 40 * 20 = 32000. The highest possible score would be a completely balanced offering: 33.3333*33.3333*33.3333. The lowest score would be 100*0*0=0, which is completely unbalanced.


    How do you suggest handling the competitive "gap" between your offering on each dimension and your competitive benchmark? If you multiply the relative competitive position (e.g. 110%) for Product, Service, and Information by the PSI value, then this may result in a good Competition Adjusted Composite PSI.

    Dr. Ray Patterson
    University of Alberta
    School of Business

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