MindShift,New Normal,Notable Quotes

Idea Gaps, Your Business and a Changing World

When things change as rapidly and disruptively as they do today there is a increased probability that we are not communicating.

The problem – the gap between the ideas people have in their head, the way they are seeing the world.

Here’s some food for thought on how idea gaps might be impacting you or your business.

Economist, Paul Romer, claims that in a supply and demand economy, an object gap determines who is rich and who is poor. Objects are things. While once true, Romer argues that this traditional view of economic does not fit today’s world. Ideas and idea gaps rule. Apple, the world’s most valuable company, Apple, own a few builds but employees some very creative people. General Motors who went bankrupt and is struggling to rejuvenate itself, own manufacturing plants and acres of unsold cars.

The Theory of Asymmetrical Information won economists, Akerlof, Spence and and Stigliz the Nobel Prize in 2001. In essence this theory says that when the buyer does not have the same information that the seller has, they will devalue the product. For example, when a potential buyer looks at a used car, he or she usually has no way to judge the mechanical soundness of the vehicle. This information gap forces the buyer to negotiate on the assumption that the car will, in fact, have mechanical deficiencies. They believe the “used car salesman” will say anything to close the deal and an adversarial, win-lose situation occurs. Contrast this with the case of the “certified pre-owned vehicle.” Lexus introduced this year’s concept ago and most auto companies have followed suit. The customer is guaranteed through a through inspection and warranty that the car is mechanically sound. It costs the dealer some money but customers are willing to pay a premium.

What happens when a company introduces something innovative and their customer base doesn’t get the value to the innovation? They dumb the product down by comparing it to existing products.

For more on “Idea Gaps” and customers see Addicted Customers: How to Get Them Hooked on Your Company.

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