Tuesday, January 27, 2009

Planning for breakthrough products.

Breakthrough products are rare and consume unpredictable amounts of time and money - “they take what they take.” The most frustrating cases, which are often the most important ones, are next-generation core products (like the Ford Taurus) which are true advances and whose success is central to a company’s fortunes. Introducing frequent small improvements based on customers’ reactions is less risky than taking one great leap forward based on the prognostications of market researchers. That way, new products are a series of little pops, not big bangs. Variations on existing products are predictable enough that phased development works, especially for companies that dominate mature markets. H-P believed it could grow incrementally by integrating its test, measurement and computer capabilities to provide unique offerings (information appliances such as hand-held gas chromatographs, for example) for customers building complex networks. Innovations that depend on technical platforms or infrastructure that others lack provide a sustainable source of competitive advantage. Little advantage comes from just developing clever technical applications.

Faster product development comes from pausing to plan basic technologies. Technology planning keeps developers from chasing technical sophistication that only engineers can appreciate. In most new products, only 20% of the design brings added value. It’s important to establish checkpoints for a technology’s readiness and robustness before letting the designers use it. Think about successors to new products as well as the products themselves. If you don’t plan new generations early, you end up looking at your competitors’ innovations saying, “I wish we’d done that.” Trying to recover quickly by adding features that you didn't initially think results in an expensive, unreliable, untimely (late) product.

Experience suggests that successful marketing strategies emerge from identifying multiple niches, focusing on just one niche and doing very well there, then leveraging this success into other segments. As a company increases its volume through success in other segments, it can re-define the market in terms of its product or service. When Peoplesoft started out, for example, prior to merging with J.D.Edwards and being being acquired by Oracle, it knew it couldn’t compete against much larger software companies. So it concentrated on creating a client-server capability for HR applications and won 70% of that market segment, thus becoming the industry leader. This enabled it in time to move into other segments, such as finance. It now provides Human resource management systems (HRMS), customer relationship management, Manufacturing, Financials, Enterprise Performance Management, and Student Admin. software solutions to large corporations, governments, and organizations.

The difference between a new product idea and a business revolves around the question of how are you going to make that first sale.
- Find people with pain.
- Define that pain.
- Then define the market size.
- Find industries in pain.
- Find the people in those industries who feel that pain.
- Then get a Beta customer, someone who says, “Yes, I think I could use that.”

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