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Strategy 2 Market
Part 1: Product Managers Gold Series – Setting Strategic Direction
This is Part 1 of a series of articles we will publish on the role of the Product Manager within the new product development process.
A Product Manager plays one of the most valuable roles within your organization: managing the ongoing profitability and viability of their product/category. This very broad and critical charge requires attention to specific responsibilities requiring specific skills and talents. This article will focus on the responsibilities as they relate to new product development.
The driving force of a product/category is its strategic direction and framework. For your company’s innovation/new product development efforts this includes the set of Product, Platform, Market and Technology strategies, as well as Product and Technology Roadmaps. These elements focus resources on activities that translate into innovative, differentiated and profitable products. A Product Manager that defines and executes appropriate strategies that yield a sustainably profitable product/category is truly worth their weight in gold.
Before your Product Manager gets started
In order for your Product Managers to develop the appropriate strategic framework, they first need clearly stated and communicated business and innovation strategies defined by senior management.
The business strategy defines the long-term direction, or mission, of the organization, how the organization will achieve that mission, and what measurements will allow the organization to identify progress against or achievement of that mission.
The innovation strategy defines in what ways and to what extent the organization will use innovation to execute its business strategy. This boils down to defining what resources and the extent of resources to be allocated to innovation, and the types of innovations or levels of risk the organization will undertake in the pursuit of innovation.
Why is strategy so important? We’ve worked in organizations that have clearly stated strategies and those that don’t. The difference between the two is like night and day. If I had to choose two words to describe the company with strategies, and those without it would be ‘clarity’ vs. ‘chaos’.
The organizations with strategies provided clarity to the team and organization. The strategies provided direction on where the organization was going, and how it was going to get there. Everyone had their marching orders, they knew what to do and their efforts were aligned. It was not uncommon to see the Product Managers continually referring to these strategy documents because they provided a framework and an understanding of the resources and constraints they have to work with.
In contrast, in organizations without clearly stated business and innovation strategies we’ve seen a lot of valuable time wasted by product managers forced to develop their product/category strategies in a vacuum, trying to infer the direction of the organization or worse, setting direction without regard to the mission of the larger organization. This situation creates chaos for the entire organization as the various functions try to cope with different agendas, different resource requirements and different priorities.
It takes effort and time on the part of senior management to develop business and innovation strategies, but the payoff is tremendous. Ensure that your Product Managers are well-equipped with the strategic direction of your organization. They will then be able to develop appropriate and aligned strategies for their products/categories.
The Product Manager’s role in defining new product development strategy
The following content provides an overview of the five key strategy documents that Product Managers should consider when developing their product/category strategy framework for guiding new product development.
Product strategies help guide your organization in the development and evolution of categories, product lines and products. The product strategy includes the goals for new product development within each category ( e.g. market share, revenue, new markets), the arenas of strategic focus (the markets, technologies, product types to be focused on), spending/resource allocation for each arena and a timeline showing the planned new product introductions.
Platforms enable your organization to create new products faster and more efficiently by bundling together elements that can be common across multiple product lines. A platform strategy guides your organization in the development of platforms and derivative products. The important elements of the platform strategy are defining the capabilities and limitations of the platform, as well as creating the platform’s point of differentiation. The platform strategy is also an integral part of developing product and technology roadmaps.
Market strategies guide your firm in the development of markets and distribution channels. The market strategy defines who the target customer is, what segments will be served, what is the value proposition or point of differentiation when compared to the competition, and what distribution channels are needed to reach the customer.
Technology strategies guide your organization in the acquisition, development and application of technology to gain a competitive advantage. The elements of the technology strategy include identification of the source of technology, as well as the timing of implementation to support the product strategy timeline.
Product and Technology Roadmaps
Product and Technology Roadmaps provide the graphical representation of the current and planned evolution of products and platforms that match market need to specific technologies. They basically illustrate the portfolio of projects that the organization needs to work on in order to achieve its business strategy and be successful. It especially helps the organization with forecasting required technology and the skills that need to be acquired.
Communicating the New Product Development Strategy
To be effective, these strategies must be agreed to and supported by senior management, and clearly communicated to everyone involved in new product development. Progress against these strategies needs to be openly and continually monitored, with adjustments made to react to changing market, industry and technology conditions. We recommend monthly new product development portfolio review meetings and quarterly strategy meetings with the Product Managers presenting their findings to the senior management team.
Product Managers have the ability to make a real difference for your bottom-line. You will quickly realize that they’re worth their weight in gold by 1) Ensuring your product managers have access to business and innovation strategies created by senior management, 2) Ensuring your product managers have the time to create and update their product strategies on an on-going basis, 3) Communicating the new product development strategies to senior management and the project teams, and regularly monitoring progress.
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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.
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.
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