A revenue line attached to a customer irritation is an option written against you, and the strike price is whatever it costs somebody else to remove it.
Somewhere in most revenue statements sits a line that exists because something is difficult. A fee for changing a booking. A charge for expediting what was promised at ordinary speed. A margin earned by knowing which supplier is competent, in a market where finding out is hard. A premium tier whose main feature is removing a limitation the business designed in.
None of these is automatically illegitimate. Some are the honest price of real work, and some fund capacity that must exist whether or not it is used. But each attaches revenue to a customer irritation, which is an unusual commercial position: the enterprise is being paid to tolerate a problem it could remove.
Whether it should is a strategy question. Whether somebody else will is a timing question, and timing decides the outcome.
The Strategic Context
Friction takes two commercial forms, and the second is larger and harder to see.
The first is direct: a fee, surcharge or premium tier attached to an inconvenience. It appears in the accounts, has an owner, and is defended in planning like any other revenue.
The second is structural: an irritation that protects margin without appearing as a line item. A quoting process slow enough that few buyers compare more than two offers. Data that cannot easily be extracted, so switching is contemplated and abandoned. None of this need be deliberate. It is simply worth money, which is why it survives review after review.
Both share one property: the revenue depends on nobody removing the friction more cheaply than you can. That is not a position but a short option, and the enterprise holding it has usually not priced it.
The analysis holds in the public sector with the denomination changed: friction there funds establishment rather than revenue, and a process requiring interpretation requires interpreters.
Why the Line Gets Defended
Three habits keep frictions in place long after their commercial logic has expired.
The issue is classified as service, not strategy. Complaints about a fee route to the function that handles complaints, which can apologise, waive and record — and cannot decide. Nothing in that pathway reaches the forum where the fee could be abolished.
Durability is mistaken for defensibility. A charge that has produced revenue for a decade is treated as a stable asset. Its persistence is evidence only that nobody has yet found it worth attacking — a statement about competitors' priorities, not about your position.
Removal is costed as a loss with no volume response. The paper always looks the same: revenue foregone, certain and immediate; volume gain, uncertain and later. Occasionally that is true. More often the volume response was never estimated, because estimating it meant funding research into a proposal already rejected.
Reframing the Issue
Stop asking whether each fee is justified. Ask what share of revenue depends on a difficulty persisting, who could remove that difficulty more cheaply than you, and what the plan is for the quarter in which they do.
That converts an ethical debate that goes nowhere into an exposure question with an owner, a number and a horizon — and makes plain that the decision is not whether to give something up, but whether to choose the timing.
The Asymmetry That Decides Who Moves First
An incumbent removing its own friction destroys a known revenue line to fund an uncertain volume response. An entrant removing the same friction destroys nothing, having no line to lose. They are not making the same decision.
Clayton Christensen's account of why capable, well-managed incumbents lose to entrants turns on this asymmetry: the resource-allocation process behaves rationally at every step and starves the response anyway, because the response damages the margins the incumbent's best customers currently fund. That is not incompetence. It is a sound capital process applied to a threat disguised as a low-margin nuisance.
Two consequences follow. The internal advocate for the revenue line will always outrank the advocate for the customer, because one carries a number into the meeting and the other an anecdote. The decision therefore cannot sit with the function that owns the line.
Detection is the other half. Complaint data will not find a friction customers have stopped bothering to mention, and satisfaction scores will not find one that everybody in the category imposes, because it has become the definition of normal [Related article: The Customers Who Generate No Signal].
Feature Bloat Is a Governance Artefact
The friction that costs most is often one the enterprise created for itself and does not charge for. A product carrying features few customers use is rarely a design failure. It is an adjudication failure. Credible internal parties held different views about what the product should do; nobody had the authority, or the appetite, to rule between them; and shipping everything was the cheapest way to avoid deciding. The resulting complexity is a cost externalised onto the customer in exchange for internal peace.
It then becomes self-defending. Every feature has a sponsor, and removal requires that person to accept in public that their argument lost — so again the cheapest option is to decide nothing, and the product accretes.
The diagnostic is one question: for the last three significant features shipped, who was empowered to say no? If nobody can name the person, nobody was — and the enterprise has a decision-rights problem wearing a product costume. The remedy is not a simplification project but naming an adjudicator, granting them authority to decline, and accepting that some parties will lose.
Which Frictions Are Actually Yours to Keep
Not every friction should go. Some encode real work, and removing them removes the value. What matters is who bears the cost and what they get for it, and that varies by segment: a buyer meeting the irritation yearly barely registers it, while one meeting it weekly will pay a great deal never to meet it again — a segmentation question with its own logic [Related article: The People Who Have the Problem, and the People Who Want Never to Have It].
| Category | What it is | The right response |
|---|---|---|
| Intrinsic | The difficulty is the work | Keep it, and explain it |
| Absorbed cost | A cost passed on rather than carried | Price it openly or absorb it deliberately |
| Unmade decision | Complexity standing in for an adjudication | Name an adjudicator and decide |
| Deliberate rent | A charge that monetises the irritation | Model the exposure and set a date |
Decision Framework
Build a friction register, classify each entry against those categories, and record revenue attached, cost of removal, who could remove it more cheaply than you, and the share of customers who encounter it. Then apply three tests.
The language test. Does the internal name for a revenue line differ sharply from the customer-facing name? That gap is the most reliable indicator of a rent no governance forum has examined.
The entrant test. If a well-funded competitor offered this free from next quarter, what share of revenue is exposed and how fast does it move? An enterprise that cannot answer has not modelled its own downside.
The reversal test. Would we introduce this charge today if it did not exist? A quick no is a finding.
Removing a friction of any size is not a pricing adjustment. It changes what the enterprise is for, and requires operations, service, sales and finance to move together or the position will not hold [Related article: When You Chose a Position, Did Every Function Change — or Only Marketing?].
From Strategy to Execution
Immediately, produce the register and put it in front of the executive committee once. The value of the first pass is not the analysis but discovering which functions defend which entries, and how quickly.
Over two or three quarters, build the capability to price removal: willingness to pay estimated from observed behaviour rather than stated preference, cannibalisation modelled honestly, sequencing decided deliberately. Give one executive accountability for the register, because a document owned by everybody is reviewed by nobody.
Over years the position hardens into capability. An enterprise that systematically removes the irritations in its category becomes the one buyers describe to others, and that description is worth more than the fees.
Signals to Monitor
- Third parties building tools or services that route around one of your steps — the earliest warning available, and free to watch.
- Entrant pricing that is free precisely where you charge, particularly where the entrant is small enough to dismiss.
- Fee revenue growing faster than delivered volume, meaning the charge is doing more work than the service.
- Complaints concentrating on one step, especially where the volume is falling because people have given up.
- Regulatory interest in fee structures in your category. In Australia this can touch consumer-protection and unfair-contract-terms considerations; any position requires professional legal verification, and ERANORTH is not a law firm
[FACT CHECK REQUIRED].
Questions for the Leadership Team
- Which revenue lines exist because something is difficult for the customer, and what do they total?
- For each, who could remove that difficulty more cheaply than we could, and how long would it take them?
- Would we introduce our three largest fees today if they did not already exist?
- For the last three significant features we shipped, who had the authority to say no?
- What must be true about volume for removing our largest friction to create value, and is that testable before we commit?
Closing Perspective
Friction is not in itself a governance failure. Enterprises that solve genuinely hard problems earn large premiums, and charging for difficult work is what a business is for.
The failure is holding a revenue line that depends on a difficulty persisting while nobody is accountable for deciding when it ends. That arrangement is comfortable because it requires nothing: the line keeps producing, the complaints keep being handled, and no forum is asked to choose.
The choice is not whether the friction goes; in a market with any competitive energy, most go eventually. It is whether the enterprise removes it on a date it selected, at a price it set, and keeps the customer — or has the date chosen for it by somebody who was never carrying the revenue.
About the author
Kevin Jogin is Founder & Principal Advisor at EraNorth. Meet the Founder.