Kim’s Happy Line is a theory from Blue Ocean Strategy author W. Chan Kim. The theory provides a framework for organizations to understand how well customer needs are being met, identify areas for improvement, and prioritize investments.

To determine the Happy Line for your customers, create a matrix that displays how customers rank the importance of different needs against customer ratings of existing solutions. Draw a line between all points, and you’ll have a Happy Line. This displays the minimum threshold at which customers will be satisfied.

It also identifies gaps in provision and helps leaders better allocate resources. Organizations should meet minimum requirements in all needs, but should prioritize investments in the needs most important to the customer; that is, those to the left of the chart, where the line starts to slope upwards.

If organizations vastly exceed customer needs in low-priority areas, they should redirect resources to improve performance in higher-ranked needs. By better meeting important customer needs, organizations can drive superior financial returns in the long-run.