Archive for the ‘Strategy’ Category

Are you working on the right new product development projects?

Wednesday, July 25th, 2012

A common theme we hear from Executives…

“I don’t know if we’re working on the right New Product Development projects, and I keep hearing that projects are late because we don’t have enough resources. The solution to every problem seems to be ‘Give me more people,’ but I’m not going to throw more resources into NPD if we can’t even manage the resources we already have.”

Sounds familiar? This is probably the most common theme we hear from the leaders of our client companies. Some companies already have a portfolio management and resource allocation software system in place, but it’s rarely used or relied upon. Whether the software system is home-grown or the best that money can buy, if it doesn’t clearly identify the most valuable projects, and kill inappropriate projects, and optimize resources without imposing an excessive administrative burden, it’s time for an overhaul.

What do I do about it?

A clear NPD strategy and unwavering leadership and participation from executive management are the first and most important prerequisites. The next step is to build a system for evaluating potential projects against the NPD strategy and against each other. A system for estimating required resources and existing resources is also essential. Armed with these directives, your company can begin to appropriately manage the NPD portfolio.

Prior to integrating a software tool, we recommend that you establish a portfolio management process that aligns to your organization. We have worked in many companies where the software tool is underutilized or not used at all by the team since it did not align with the company’s practices. You ideally want to make your team comfortable with the portfolio management process prior to integrating a software solution. Remember the old adage: don’t let the software drive your process…let the process drive your software. This approach will optimize your team’s performance and software solution.


# 1 Responsibility for a Product Manager

Thursday, July 12th, 2012

Product Management responsibilities are immense. Responsibilities include, but are not limited to life cycle management, P&L oversight, market research, segmentation, competitive analysis, pricing, launch strategies, marketing plans and sales force motivation.

Recently, I had an interesting conversation with a Senior Product Manager. We discussed the changing roles and responsibilities within his position. He no longer oversees the administrative duties of his role, such as life cycle management. He has delegated this responsibility to a more junior person within his firm. He is now primarily responsible for the strategic direction of new product development (NPD) within his product category. We have also seen this trend with some of our other clients.

So what strategic NPD activities are Product Managers responsible for within the new product development process? The most important activity is the development of a product strategy. Having a product strategy is a crucial need for your product category, but the process of creating a product strategy can create great a great deal of confusion. A product strategy lays out the role and goals of new product development, the kinds of products to be focused on, the resources to be allocated to new product development and a high-level plan for development.

Notice that by focusing on certain types of products, the company chooses to ignore others, and this can be a cause of distress because people perceive this focus as throwing away potentially good opportunities. But, this focus allows the company to avoid wasting resources on scattershot opportunities and to direct all its resources toward the opportunities that really matter: the opportunities that best utilize the assets and capabilities of the company.

Four Elements of Product Strategy

The first element of the strategy is the end result – what is the company trying to achieve by developing new products? Some companies develop new products because they are looking for new sources of revenue, others do it because they are trying to grow their customer base, and others do it because they are trying to hold on to their current customer base. Be clear about the role of new product development. Then set a measurable goal such as percentage of revenue from new products, percentage increase in the size of the customer base, percentage of customers making repeat purchases. We all know that what gets measured is what gets done.

The second element of the product strategy identifies where you will focus your new product efforts: what kinds of products, what customers and markets, and what technologies. This decision requires a thorough understanding of your markets, your customers, your competitors, your own company, your environment, technologies in use and on the horizon, and more. Spend the time and effort to understand all these dimensions and determine where to focus your new product development efforts. This decision provides the direction for all your new product development efforts to follow.

The third element is resources. How much money and how many employees are going to be devoted to your product category? This is an important decision and should reflect the importance of each of the areas you want to focus on. Some companies set the total budget by matching competitors on R&D as a percentage of sales; some do more of a bottom-up budgeting approach.

The fourth element includes planning your product introductions and technology acquisitions. Based on your research, you know what kinds of products to pursue and have some idea of the technologies required. Laying out a plan on a timeline, using tools such as product and technology roadmaps, helps to communicate the plan and get the organization focused.

As a Product Manager, with strategic NPD responsibilities, the development of a product strategy is by far the most important activity you can undertake for your product category. Of course, there are other early staged new product development activities that product managers are responsible for, but we’ll leave that for a future article.


If You Build It, Will They Will Come?

Wednesday, June 13th, 2012

So often, when developing new products, new product developers get caught up in the beauty of the solution. We believe the product is perfect and people will clamor to buy it. Like Ray Kinsella in Field of Dreams we believe “If you build it, they will come.”

But, so often dreams are dashed and the product never catches on. We blame marketing and sales, we blame the customer who didn’t see the value of the product, and we are dumbfounded that even though we designed the best solution to a problem, no one wanted it.

Maybe we need to think about the theories of diffusion and adoption. There are things we can do, as product developers, to improve the chance that our new product will catch on and be a success. Everett M. Rogers, author of “Diffusion of Innovations” and grandfather of diffusion theory offers many insights into how innovations are adopted and how characteristics of innovations can help or hinder adoption.


Diffusion is defined by Everett Rogers as the process by which an innovation is communicated through certain channels over time among the members of a social system. Some people take longer than others to try out and adopt a new innovation. The first ones to adopt an innovation are called Innovators. They tend to be avid consumers of mass media, from which they learn about new innovations they are eager to try out. They also tend to be big networkers, sharing information about innovations across far-flung social networks. Since innovators tend to be a little “out there” they don’t function as opinion leaders, but their value is in getting the word out to different far-flung social networks. They make up about 2.5% of the population.

The opinion leaders are in the next group called Early Adopters. They take a little longer to try out and adopt new innovations. They read mass media, but they also network with innovators and learn about new innovations. They are different from innovators in that they are looked up to by their social group as a source of advice on new innovations. Once they adopt an innovation, they use their personal influence with their social network to encourage adoption. Early adopters make up about 13.5% of the population.

The next group to adopt is called the Early Majority, and they make up 34% of the population. To a great extent they rely on the opinions and experiences of the early adopters in learning about and deciding whether to adopt new innovations. Later adopter groups also rely on their social network for finding out about new innovations, but they take even longer to decide try and adopt.

Implications for New Product Development

Based on diffusion theory, Rogers notes several characteristics of innovations that encourage diffusion and affect the rate of adoption. This is excellent advice for new product developers. To encourage diffusion and adoption, create a product with:

• Relative advantage over other products – innovators and early adopters look for a better value proposition

• Compatibility with existing values, beliefs, past history and needs of potential adopters – the less a potential adopter has to adjust their behavior the greater the chance of adoption

• Minimal complexity of understanding and use – the more confident a person is that they can master and use the innovation, the more likely they are to adopt it

• Trialability – free trials and demos let a person try the product with no risk

• Observabililty – very often people need reassurance that they are making the right decision by adopting an innovation. If they can see many people have already adopted an innovation, they will feel more comfortable adopting it

As an example, Rogers presents the case of cellular phones. In 10 years time, starting in 1983, 13 million phones were sold in the U.S. During that time performance improved and prices came down, which encouraged adoption, but the design of the product has all of the above attributes, which encouraged very rapid adoption:

• Relative Advantage: Saves time in missed appointments and delayed schedules, can be used in an emergency, considered a status symbol

• Compatibility: For the user, the cellular phone operates just like a regular phone and it connects into the existing landline phone system

• Complexity: Because the cellular phone operates just like a regular phone, the user did not need to learn new skills

• Observability: The portable nature of the product and its use in public places helped emphasize the benefit of status to potential buyers

• Trialability: It is easy to borrow a friend’s phone and try it out. Also, many rental cars came with a cellular phone, providing an opportunity for trial

The next time you develop a new product, think about how you can incorporate these attributes into your product design. It will make a difference.


Putting Manufacturing Experts on Your Early Concept Development Teams

Monday, June 4th, 2012

Designing new products for Manufacturing and Assembly has always been a challenge. Typically, Manufacturing Experts are added to a Project Team AFTER the basic product configuration has been established. The manufacturing people are then charged with building the new product at the target price. This can be very difficult as the product concept configuration often dictates the use of certain manufacturing processes. For example, one product configuration may require the use of precision machined castings that require expensive tooling while another configuration (that serves the same function) may have been built using simple sheet metal weldments. The difference in cost and lead times can be substantial.
Quite often, manufacturing skills and talent are not added to the project development team until it’s time to build the product. At this point, approximately 90% of the product cost is already built in and the manufacturing experts can only influence a small piece of the overall product cost and lead times. The best they can do at this point in the product development cycle is to select qualified suppliers, develop good quality plans and make sure tolerances are suitable for the locked in manufacturing processes. Little can be done to substantially affect the overall cost of the product.
So what can be done? Firstly, include manufacturing expertise from the very beginning of a project. The type of person that will do best in this situation is someone who has broad knowledge of manufacturing processes but also has the ability to conceive and design from a blank sheet or paper (or CAD screen). In addition, they have to be a team player and put the project goals first and avoid being a “manufacturing silo”.
Secondly, Strategy 2 Market has developed a Design for Manufacturing Assessment tool for early stages of development. In addition, there are many computer based tools on the market to help develop early cost models. Using them can provide the team with the data necessary to make quick and well informed selection decisions amongst the various product configurations in the early stages of development. It would be the manufacturing expert’s job to provide the team with this information.
Thirdly, but certainly not last, the manufacturing person can help design in quality from the beginning by selecting the appropriate manufacturing and assembly processes for the desired functionality. This also gives the factory and early heads up as to what’s coming and what they need to prepare for.
Having manufacturing personnel involved from the very beginning of a project can help avoid many issues and headaches down the line.


Can you take small steps to innovation?

Wednesday, May 23rd, 2012

It takes a lot of effort to develop innovative ideas.  You practically have to transform your organization like A.G. Lafley did at P&G.  He successfully made this transition, but it took a lot of effort to do so.  The transformation included building a culture of innovation with strong senior management support, and the development and implementation of strategies, processes and infrastructure to support breakthrough ideas.   

Research states that the most profitable ideas are those that are breakthrough, but what if you’re not up to making a major transformation like P&G?  Can your organization take small steps to innovation?  I think so, small steps are very effective, especially when your organization is resistant to change.  One of the first steps in developing innovative products is to have an innovation strategy and strong leadership support; this in turn fosters a culture of innovation.   According to Booz Allen’s 2011 Innovation study, what drives innovation isn’t R&D spend, but rather strategic alignment and culture.

Your innovation strategy ultimately aligns with your business strategy, and it should indicate your strategic intent across your product strategies.  If you want to go beyond simple product revisions you need to indicate this within your innovation strategy.     ‘When’ is another important attribute that needs to be accounted for within your innovation strategy.  This is where you indicate the speed in which you implement changes to being more innovative, and it is totally appropriate to take small steps.   These steps can include:

1.  Development of a business and innovation strategy that is clearly communicated to the key players within your organization; including your new product development team members.  These strategies will enable your team to develop product strategies that align with your innovation strategy.  Alignment is KEY.

2.  Internal strategic initiatives sponsored by the CEO/President.   These initiatives can include an innovation day.  As the CEO/President, make sure that you’re present for opening and closing remarks, ideally participating during the entire session.  It is also important that it is not a one-off event, it is important to build a process for on-going idea submission and collaboration.

3.   Field studies that engage your staff in actively understanding unmet customer needs, this can be facilitated through a process called Design Thinking (see the link below for more information on the Design Thinker framework).

This is the time to get started on taking small steps toward more innovative products within your organization.    312.212.3144