Having a product strategy is a crucial need for all businesses, but the process of creating a product strategy can create great angst. 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 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.
Whirlpool recently discussed just such an issue in the May 8, 2006 issue of BusinessWeek. CEO David Whitman revealed that Whirlpool learned the hard way that sending teams off to generate new product ideas without the guidance of a product strategy wastes time and effort. A team asked to develop out-of-the-box ideas that would differentiate Whirlpool in the future spent a year coming up with an idea for racing stationary bicycles over the Internet. This idea did not build on Whirlpool’s strengths and did not align with Whirlpool’s business strategy. Had the team been better focused and guided by a product strategy, chances are they would have come up with ideas better suited to Whirlpool.
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, 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, 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. Doing a slap dash job here will cause you great heartache later. 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 you going to devote to new product development? How are you going to allocate those resources among the different areas you identified above? This is an important decision and should reflect the importance of each of the areas. 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 and last element is to plan out 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.
Having a product strategy is the first critical step in new product development. It sets the stage for all subsequent activities and determines whether or not your company sets off down the right path. Invest the time and effort up front, and save heartache later.
For more information, please contact us via our Contact Us page.