This is a continuation of ‘4M and Netcore 2.0: A Framework for Exponential Growth’, initially mentioned in ‘Mystery of the Missing Profits.’ In the first part of this series, I introduced the 4M Framework: Magical (products), Money (machine), Moat, and Monopoly, and how it could help create exponential growth and an enduring great company. I also discussed the first M (Magical) and how companies that offer vastly different product experiences have revolutionized their respective industries.
In this second part, I will list the criteria for a product to be considered magical and discuss the second M in the 4M Framework, Money (Machine).
Before discussing the second M, let’s look at the criteria needed to classify a product as magical, which could help a business create a money machine, moat, and monopoly.
A magical product addresses a pressing need or problem the target audience faces. It solves the problem in such an efficient, effective, and intuitive way that customers cannot imagine returning to a time before the solution existed. It could be a problem that users knew they had or something they didn’t realize existed until the product came along.
Time is a valuable commodity in a fast-paced world. A magical product optimizes processes to save time. It also provides monetary efficiencies through direct cost savings or by delivering outstanding value for its price. These efficiencies contribute to the perception of the product as an indispensable tool.
A key quality of a magical product is ease of use. It is intuitive, user-friendly, and removes unnecessary complexities. This convenience extends to all aspects of the user experience, from initial setup and everyday use to customer support and upgrades.
Innovation and uniqueness
A magical product introduces a new concept, technology, or application that was previously unavailable or not thought of. The product must bring something new regarding functionality, design, technology, or user experience.
A magical product delights users functionally and visually. Its design elements, shape, color, texture, and interface contribute to its overall appeal. Aesthetics are integral to the product’s appeal, making it an object of beauty and design excellence.
Beyond its tangible features and benefits, a magical product has the ability to touch users on an emotional level. It can evoke many emotions, such as joy, excitement, a sense of accomplishment, and belonging to a community. The emotional impact translates into user loyalty and word-of-mouth advocacy, contributing to the product’s success.
The product must evoke a sense of wonder, surprise, and delight among users. It must exceed user expectations and provide a remarkable and memorable experience, leaving them amazed.
Significant impact or transformation
A magical product should fundamentally alter things, disrupting established norms and creating new trends. It should lead to new trends and set new standards in its industry.
A magical product cannot be replicated due to its unique technology, patents, high development costs, or other significant barriers to entry. This gives a considerable edge over competitors and makes the product a game changer.
Scalability and market success
A product will not be seen as magical if it does not achieve market success. It must appeal to a large audience, demonstrate high adoption rates, and show evidence of strong sales or growth potential. It must also generate recurring revenue or create new income streams for the company.
As we move ahead, we must remember the criteria listed above. The more criteria satisfied, the greater the probability that a product will successfully make the 4M journey.
Before we proceed, let’s look at three charts from Statista. The first chart shows Google’s revenues over the past 15 years. (While Google has launched several products, most of its revenues come from search-linked advertising).
Revenue of Google from 1st quarter 2008 to 3rd quarter 2023 (in million U.S. dollars)
Apple iPhone revenue from 3rd quarter 2007 to 4th quarter 2023 (in million U.S. dollars)
Tesla’s revenue from FY 2008 to FY 2022 (in million U.S. dollars)
As these charts show, each magical product has an exponential growth in users and revenue. Here is how ChatGPT describes magical products.
“Magical products have a unique ability to captivate the user’s imagination and attention by fulfilling needs the user was not even aware they had. These products result from innovative thinking, technical analysis, and understanding of consumer behavior and desires. By introducing a truly unique product that provides an unrivaled solution to a problem, companies often see an initial surge of interest from early adopters. This initial surge sets the stage for potential exponential growth.
One of the key catalysts for the exponential growth of a magical product is the network effect, where each new user increases the product’s value for other users. For example, sellers on Amazon increase the variety of products available, attracting more buyers. This, in turn, attracts more sellers.
Similarly, each new user on a social media platform like Facebook or a music streaming service like Spotify contributes to the wealth of content and personalization of user experience, bringing in more users. This cycle fuels a quick and exponential increase in the product’s user base. As users grow, so does revenue. Initially, companies focus on user acquisition and retention, leading to a delay in revenue generation until the companies have achieved significant user growth.
Once a user base is established, companies can deploy monetization strategies such as advertising, subscription models, or transaction fees. These monetization strategies are designed to add value, leading to further growth. The larger the user base, the more attractive the platform becomes to advertisers, and the more revenue it can generate from user payments.”
The magical product creates the money machine companies can use to expand into adjacent areas organically or through acquisitions. For example, Google’s advertising prowess allowed it to acquire YouTube and created the next growth engine in the form of video attention and ads. Facebook’s cashflows and rising stock enabled it to buy Instagram and WhatsApp. This eliminated possible competition while creating new revenue streams.
To ensure the longevity of money machines, companies must think of how they can create moats to prevent attackers from taking over.
Continued in Part 3