How should this company respond?

Application A is generating the most money and profit for a company with a very happy customer base (high Current Value) and low Unrealized Value. Application B is fairly new and has low Current Value but has high Unrealized Value. The Product Owners of both apps are requesting significantly more funding to add improvements to their products.

How should this company respond?
A . AA should split the funding evenly in order to hedge and balance risk.
B. The company should split the funding proportionately to app revenue.
C. Invest funding for the B application on the grounds that it has more future potential value for the company.
D. Approve the request for funds to the A application because it is the primary driver of this company’s success.

View Answer

Answer: C

Explanation:

Customers are happy with Application A as it is; adding more features may actually decrease customer satisfaction. The best time to invest in new products is when the CV is low (Product is new) however the UV is high. (High market potential). In this example it would be Application B.

The consideration of both CV and UV provides organizations with a way to balance present and possible future benefits. Strategic Goals are formed from some satisfaction gap and an opportunity for an organization to decrease UV by increasing CV.

Example: A product may have low CV, because it is an early version being used to test the market, but very high UV, indicating that there is great market potential. Investing in the product to try to boost CV is probably warranted, given the potential returns, even though the product is not currently producing high CV.

Conversely, a product with very high CV, large market share, no near competitors, and very satisfied customers may not warrant much new investment; this is the classic cash cow product that is very profitable but nearing the end of its product investment cycle with low UV.