I was thinking about Tivo earlier. While it’s no rocket science product, it certain has become a common standard in households in the US now. In fact, Tivo has achieved the status of Google in the sense that people now use it as a verb. How many times have you heard, “I tivo’d that show”, “I will tivo that movie tonight”, “wanna come over, I have that game tivo’d”?
Anyway, I just thought it was interesting to note that one of the ways Tivo creates value for its users, is by reducing/eliminating the opportunity cost for its users. Opportunity cost or economic cost, is the cost of something in terms of an opportunity forgone (and the benefits which could be received from that opportunity), or the most valuable forgone alternative (or highest-valued option forgone), i.e. the second best alternative.
For instance, if there were two shows on two different channels that will show at the exact same time. If you only had one TV, you must pick only 1 show to watch. Even if you had 2 TV’s, you can’t really watch both at the same time. So in the pre-Tivo and DVR days, you would pick the show you liked better. The opportunity cost for viewers would be that other show that they unfortunately could not watch. Tivo fixed that. And good for them, because this is a pain that customers were willing to pay in order to get rid of. Just as a contrast, there are plenty of problems that aren’t painful enough such that customers aren’t willing to pay for a solution.
I like problem solving, and am on the lookout for interesting ways to create value. This is one way, so from now on, I will keep my eyes peeled for opportunity cost problems that can be solved.
