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Why Product Managers are worth their weight in gold

Why Product Managers are worth their weight in gold

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

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.

Platform Strategies

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

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

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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Posted by on December 28, 2011 in Product Management, Product Marketing

 

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Product Opportunities Assessment

Opportunities for new products exist all around us, in every market, even mature markets. This is because what is possible is always changing. New technologies are constantly emerging, new people with new talents join your company, and competitors come and go. The product manager must be able to quickly evaluate opportunities to decide which are promising and which are not, and for the ones that look appealing, which ones should be pursued, which are best left for others, and which ideas are not yet ready for productization.

In many companies, it just comes down from above that we really need to do this product. In other companies, the marketing organization determines what products are needed.

In either case, too often the process of deciding whether or not to build a product is left to intuition (or worse, a large customer will offer to fund a “special” and this becomes the basis for a product effort).

Typically someone on the business side or in marketing will create some form of a Market Requirements Document (MRD) that is intended to describe the problem to be solved, and usually includes a business justification as well. The purpose of the MRD is to describe the opportunity, not the solution. At least that’s the theory. In practice, many companies don’t really do MRD’s, or if they do, they’re essentially product specs that are called MRD’s. When true MRD’s are done, they suffer many of the same problems as PRD’s – they take too long to write, they aren’t read, and they often don’t answer the key questions they need to.

The result is that many product managers ignore the MRD. But the problem with not doing anything and just jumping right into the product is that it is generally a good idea to look before you leap. The challenge is to do this in a quick, lightweight, yet effective manner.

I consider this “Product Opportunity Assessment,” as I prefer to call it, an extremely important responsibility of the product manager. The purpose of a good product opportunity assessment is either to a) prevent the company from wasting time and money on poor opportunities; or b) for those that are good opportunities, to understand what will be required to succeed.

Fortunately, it’s really not that hard to do a useful product opportunity assessment. I ask product managers to answer ten fundamental questions:

1. Exactly what problem will this solve? (value proposition)
2. For whom do we solve that problem? (target market)
3. How big is the opportunity? (market size)
4. What alternatives are out there? (competitive landscape)
5. Why are we best suited to pursue this? (our differentiator)
6. Why now? (market window)
7. How will we get this product to market? (go-to-market strategy)
8. How will we measure success/make money from this product? (metrics/revenue strategy)
9. What factors are critical to success? (solution requirements)
10. Given the above, what’s the recommendation? (go or no-go)

The hardest question to answer is usually the first, which surprises people because it sounds like the easiest. But ask most product managers what problem their product is intended to solve, and you usually get a rambling list of features and capabilities, rather than the a crisp, clear and compelling statement of exactly the problem that’s solved.

Another difficult problem can be in assessing the size of the opportunity. You can get thoughts on this from industry analysts, trade associations, your finance staff, and from your own bottom up calculations. This is a topic in itself, but for now just remember to be conservative and realize that not every opportunity needs to be a billion dollar market.

The “go-to-market” strategy is especially important as that describes how this product would be sold, which can have very significant impact on the product requirements.

The solution requirements refer to any special needs or requirements that were identified during the investigation. Again, we’re not describing the product here but rather making clear any dependencies or constraints. For example, if this is a product that will be sold through system integrators, then these types of partners have requirements around extensibility of the products they deliver. Similarly, there may be branding or partnership requirements.

A product organization is all about pursuing good opportunities and providing great product solutions. Opportunities for new products are everywhere, and it is important that the product manager be able to effectively evaluate new opportunities and identify those that have the most potential for the company. It is just as important that bad product ideas get identified at this stage, before significant time and cost is lost chasing them. Choosing the right set of products to pursue is among the most important decisions a company will make.

It is important that the results of the product opportunity assessment be presented and discussed with senior management, and that the company make a clear go or no-go decision on whether to pursue a product to meet this opportunity. If you do decide to proceed, you will be much better informed as to what you are getting yourself into and what it will take to succeed.

So what do you do if the CEO tells you that this is what we’re doing, so just get to work on the product? First, realize that there are sometimes strategic reasons for doing a product, so you might need to pursue a product even when it’s unlikely to succeed in the market. That said, I have found that doing this lightweight, quick product opportunity assessment is still valuable in that I become much better informed about what this product involves. It is possible that what you learn will change your CEO’s opinion, but more likely it is a good opportunity, and your CEO was right to want to pursue it, but at least now you know what you’re up against if you are to succeed.

 
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Posted by on November 25, 2011 in Product Management, Uncategorized

 

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Marketing and New Product Development

Marketing management plays a key role in the new-product-development process along with the research and development department and other related departments.

New Products

The consulting firm Booz, Allen & Hamilton has identified six categories of new products in terms of their newness to the company and the marketplace.

New-to-the-world products (Product new to the company and the market)

New product lines: New products that allow a company to enter an established market for the first time (the product is new to the company not the market)

Additions to existing product lines: New products that supplement a company’s established products lines (package sizes, flavors, and so on)

Improvements and revisions of existing products: New products that provide improve performance or greater perceived value and replace existing product (Improvements in features and benefits of a product)

Repositionings: Existing products that are targeted to new markets or market segments (to be called a new product there must be some changes in the existing product to suit the new segments targeted).

Cost reductions: New products that provide similar performance at lower cost to the company.

Kotler says only 10% of all new products are truly innovative and new to the world.

New product development in various categories mentioned above is very important for any organization because existing products are vulnerable to changing consumer needs and tastes, new technologies, shortened product life cycles, and increased domestic and foreign competition.  Organizations have to be on the lookout for new products.

Factors That Contribute to Success in New Product Marketing

Madique and Zirger found the following factors:

1. Deep understanding of the customer needs.

2. High performance to cost ratio of the product

3. Being the early entrant into the market

4. Higher contribution margin

5. Larger amount of marketing expenditure

6. Strong top management support

7. Greater cross-functional teamwork among R&D, Engineering, Manufacturing, Purchasing, Marketing and Finance from the beginning

Effective Organizational Arrangements for New Product Development

An effective new product development organization starts with top management. The amount of money spent on R & D is an important top management decision related to new product development. Companies give the responsibility for new product development to product mangers, or new-product managers, or new-product committee, or new-product department, or new-product venture teams. In general product managers may not be able to devote adequate time to new products as they have to take care of existing products’ marketing and selling issues.

Managing the New Product Development Process

Eight stages are involved in the new product development process.

1. Idea generation

2. Idea screening

3. Concept development and testing

4. Marketing strategy development

5. Business analysis

6. Product development

7. Market testing

8. Commercialization

Idea Generation

A number of creative idea generating techniques can help individuals and groups generate idea. Some of them are:

  • Attribute listing
  • Forced relationships
  • Morphological analysis
  • Need/Problem identification
  • Brain storming
  • Synectics

Idea Screening

The purpose of screening is to drop poor ideas as early as possible and allow only promising ideas for further stage in the new product development process.

There is likelihood of two opposite types of errors occurring in this process. One, the drop error, results in dismissing a good idea. The other, the go-error, results in moving a poor idea forward.

Poor ideas result in product failures. Three types of product-marketing failures can be categorized: Absolute product failure loses money even on variable cost. Partial product failure recovers variable cost and some fixed cost. Relative product failure yields a profit, means it recovers variable cost and fixed cost, but the profitability is less than the company’s target rate of return.

Concept Development and Testing

A product concept is an elaborated version of the product idea and it is expressed in meaningful consumer terms so that consumer can visualize the product.

Concept testing involves an appropriate group of target consumers giving their reactions to the concept.

Will it Sell?

New Product Marketing Strategy Development

After the concept is finalized, marketing strategy needs to crystallized. At this stage the marketing strategy is expressed in three parts.

The first part: It describes the target market’s size, structure, and behavior. Product positioning is defined. The sales size, market share and profit goals are expressed.

The second part: The price and distribution strategy and the required marketing budget  for the first year are specified.

The third part: It describes marketing-mix strategy over time and evolution of sales and profit.

Business Analysis

At this stage, marketing department has finalized its market understanding and converted it into sales revenues and related marketing costs. The next stage is analysis of operating costs and profit analysis.

Product Development

If the business analysis clears the product, actual product development work is given to the research and development department

Test Marketing or Market Testing

High investment/high-risk products, where the chance of failure is high must be market tested. The cost of the market tests will be an insignificant percentage of the total project cost. Various types of market testing are:

Sales-wave research

Simulated test marketing

Controlled test marketing

Test Markets

 Commercialization

Based on marketing, if the company decides  to go for the manufacture and sale of the product, capacity decisions are to be made. The timing of the launch, the geography of the initial launch, the niche market within the target market and how to launch the product become important decisions.

Consumer Adoption Process

Marketers need to understand the new product adoption process to build an effective strategy for developing market for the product. Adoption is an individual’s decision to become a regular user of a product. The adoption process is followed by loyalty process.

Stages in the adoption process

Rogers defines the innovation diffusion process as “the spread of a new idea from its source of invention or creation to its ultimate users or adopters.”

Adopters go through the following five stages:

Awareness

Interest

Evaluation

Trial

Adoption

New product marketer has to aim his effort at facilitating the movement of consumer who is an adopter of new product  through the five stages.

References

 

Philip Kotler, Marketing Management (Main text for revision and article)

Modesto A. Maidique and Billie JO Zirger, ” A Study of Success and Failure in Product Innovation: the Case of the U.S. Electronics Industry,” IEEE Transactions on Engineering Management, November 1984, pp. 192-203

See Bibliography also

Bibliography

Determinants of New Industrial Product Performance: A Strategic Reexamination of the Empirical Literature by GARY L. LILIEN AND EUNSANG, 1989

http://www.garylilien.info/publications/47%20-%20Determinants%20of%20new%20industrial….pdf

New Product Successes in Japanese Consumer Goods Market,

Hotaka Katahira, Makoto Mizuno, and Yoram Wind, 1994, Wharton School Working Paper

http://marketing.wharton.upenn.edu/documents/research/9402_New_Product_Success_in_the.pdf

New Product Diffusion Models in Marketing: An Assessment of Two Approaches by Malcolm Wright and Don Charlett, Marketing Bulletin, 1995

http://marketing-bulletin.massey.ac.nz/V6/MB_V6_A4_Wright.pdf

 
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Posted by on October 18, 2011 in Product Innovations

 

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Product Marketing Planning Process – II

Please click  for Part I  for first part of this series

After doing a competitive analysis of your product v/s the products that you have in market as your competitor, comes next is to study the performance of your product over the span of three years period.

Performance History:

  1. Existing Customers

In order for you to do the performance analysis of your product, this is what you should keep in your mind:

  • Is the primary target market growing, stable, or declining?
  • Under which circumstances do customer purchase the product?
  • Are most customer new or repeat buyers?
  • Are the customer end users? If not, then what info is available about end users?
  • How sensitive customer been to past price changes?
  • Does the customer base consist the few large customers or many small buyers?
         2. The Product
The analysis about the product should not only have Quantitative variables but also should include qualitative variables too.
  • What does the name of product implies?
  • For each feature you should ask “So What”?
  • Mark your product on a scale of 1 to 7 (7 being the highest)
  • What is the unit-break-even sales for the product?
       3. The Sales ForceAs a product manager, you do not have much control over sales force, but still you should be aware of the problems and the issues which would help you in making your Marketing Plan better.
  • Are the target customers reached in most effective manner?
  • How effective has the product/Sales training has been?
  • How the sales team is being trained to make sure they communicate the benefit of the product to concerned customers?
   4. PricingThe ‘Right’ price covers the all cost, and is positioned correctly to give product a competitive value. It also takes in to account the customer perceptions. As a product manager you should look for answers to:
  • Have significant amount of business being lost due to pricing?
  • Are errors too frequent in making a price guess?
  • Is your company a price leader or a price follower?
 4. The Promotional CampaignsThe Promotional campaign should be the part of an integrated marketing plan, and communication efforts.
  • What current image of the product is being perceived by your customer?
  • Did the Advertisement strategy decided by you, was a success? If yes, they why, if no, then why not?
  • Is your company a price leader or a price follower?
Trend Dynamics:
An examination of trend and their dynamics relative to a product’s success is the final part of the background analysis. You should try and attempt to have answers to all these:
  • What technological trends you foresee?
  • What have been the Industry trends in:
    Product changes
    Pricing
    Distribution changes
    Merger etc.
  • What are the basic trends in the economy?

Whenever possible, prepare for the changes, rather than being forced to do so…

 

 
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Posted by on October 12, 2011 in Product Management

 

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