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5 Ingredients for Creating the Optimal Product Strategy

A Recipe for Survival and Growth in the New Economy

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WHITE PAPER | 5 INGREDIENTS FOR CREATING THE OPTIMAL PRODUCT STRATEGY

As a senior executive responsible for overseeing product innovation and development, youve witnessed your company endure what can only be described as a cataclysm reduced budgets and headcount lower demand longer sales cycles and downward pressure on pricing. The only thing on the rise is competition. But if youre waiting for the business cycle to return to the old normal following this most recent recession, youll be disappointed. Superior customer value and flawless execution define the new normal while engineering-driven solutions are now relics of the past. The winners going forward will be companies that consistently deliver the right products and services to the right customers at the right time and price. But how do you transition your organization from one that falls short of meeting product revenue goals to one that consistently delivers solutions customers must have? The answer lies in turning your product innovation strategy into a core business process aimed at listening to the voice of your customer.

The bottom line is that you need to innovate rather than invent. Thats because invention focuses on creating new technologies. Innovation focuses on deciding which ideas, or combination of ideas, will bring the greatest verifiable value to your customers. Further, you need to make product innovation a core business process that spans all product activities, and is bound by your companys business objectives and strategies is implemented using best practices and is accountable to senior management for results. Its a tall order, but there is a way forward.

A New Recipe for Product Innovation

So how do you transition your development organization from a culture of invention to one where product innovation becomes a core business process? The answer: By halting the paternal approach to product development and aligning your product groups outward towards the customer. Your objectives in this effort are to: 1. Focus all internal organizations executive, strategic planning, marketing, product management, development, support and sales on making each products acceptance the prime measure of success. 2. Create a product innovation strategy based on analysis of market data and voice of the customer rather than on a silo mentality and sporadic invention. 3. Foster a culture of cooperation, transparency and openness. 4. Incorporate product innovation management software that fully supports your process. By adopting this new recipe, youll be first to uncover new market opportunities; offer solution customers will pay for; invest in incremental innovation for existing products; reduce time-to-market by streamlining requirements; diagnose product failure early and take action; and promote cross-organizational visibility into product plans, progress and performance. Turning your fragmented and inward-focused product organizations into an integrated and outward-looking team requires leadership, commitment and persistence. It also requires a plan.

Making the Right Decisions

Customers in todays post-recession economy want to see verifiable value from the products and services they buy. In other words, they expect solutions that demonstrably lower costs, improve efficiencies or increase revenues. This means you need to deliver products and services they are willing pay for, and you must convince prospects that yours is the best solution available. This is a long-standing idea, but if you are not doing it today, youll need to start in order to grow (and even to survive) in the global marketplace. The biggest challenge, however, is deciding which product and service investments will provide the best returns. To make the right choices, you must consider multiple variables: customer needs; your companys business objectives; the markets you serve; the skills and resources you have at your disposal; your development and distribution costs; and how your competition will respond. In the old economy, you could gamble invent a new technology and try to sell it. If the product lost money, youd invent something else. In the new economy, the costs and competitive risks of continuing that cycle are too high. Instead, you need to determine the best place to invest before, not after, you create a technology, product or service. And many times the answer will be to not create something new at all, but to enhance a current product or service, or to combine existing technologies in a different way.

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WHITE PAPER | 5 INGREDIENTS FOR CREATING THE OPTIMAL PRODUCT STRATEGY

Here are five key ingredients that must be part of your companys recipe for a successful transition. 1. Begin with an innovation framework The integrated product innovation framework establishes the foundation you need to fuel your innovation process. Table 1 below lists examples of framework components you should consider as the basis for your plan. Framework Component Company goals Key initiatives Market strategy Description Revenue, market share, margins, brand value Product themes and solution spaces Target markets, unique messaging, customer profiles, pricing, and sales and distribution channels Budgets for product enhancements, new products, and market development Strategies and tactics for gathering, analyzing and incorporating customer ideas Available resources mapped to the highest value activities Process for evaluating product and market opportunities and setting priorities Methods of gathering, approving and prioritizing product requirements

2. Add one truth Under fragmented planning systems, internal groups hide data make unilateral decisions override agreed-to decisions define success in their own terms compete against each other and blame each other. Innovation expert Paul Sloane has written that such internal politics can reach the ridiculous stage where the enemy is seen as another department inside rather than the competitors outside. The cure for this silo mentality is a dose of open communication and transparency. Overcoming the negative behaviors will be your biggest challenge, but your companys survival is at stake if you dont. Employing best practices in collaboration will help encourage employees (even in geographically dispersed organizations) to break down organizational barriers, get to know one another, and understand each others roles and expertise. Todays superior product innovation management applications support collaboration by providing dashboards and analytics. These features ensure that everyone has access to each groups data as well as the aggregate picture. Be sure to specify in your plan the application features you need to let executives and decision makers:
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Product investment model Voice of the customer

Capacity, value, risk Product portfolio

Display up-to-date sales and return projections, market segment analysis, program costs, resource utilization and schedules Automatically generate plans, schedules and requirements documents from the ideas database Reflect priority changes across all internal plans and specifications Link requirements to specific market segments and tier-one customers

Product requirements

Table 1: A product innovation framework specifies the rules of the road when aligning product organizations

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WHITE PAPER | 5 INGREDIENTS FOR CREATING THE OPTIMAL PRODUCT STRATEGY

3. Fold in ideation and customer intimacy The voice of your customers can come to you through multiple channels, even from your competitors. During ideation, youll need to tap into as many of these channels as possible to gather stories, requests, and complaints. Table 2 below shows the internal and external sources of ideation. You can use a variety of means to collect ideas from these sources: surveys, interviews, customer meetings, email, customer service forums, social media crowdsourcing, conference calls and research. Internal
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4. Simmer with objective decision context Managers and planners often make decisions based on feel, crisis of the day, or loudest customer. Thats because the volume of planning data is large, making it difficult to analyze objectively. The result is a cycle of subjective decision-making, which is perhaps the single biggest contributor to chronic product failure. Instead, by creating an objective decision context, you will ensure that all of your product decisions remain aligned with company objectives and product strategy. An objective decision context halts the tendency to make subjective decisions only to have someone randomly change those decisions further down the development pipeline. Establish your objective decision context by associating a set of decision categories with a scored set of criteria. Ensure that key stakeholders agree on the criteria and target scores for each category. Then use analytics to help create a prioritized list of products and features. Here are some examples of decision categories and criteria: 1. Decision categories include new products, new markets, product enhancements, initiatives, product features and market segments 2. Decision criteria include cost, ROI, time to market, product differentiation, competitive position and market share 5. Serve with rapid iterations Whats better a partial version of a product used to elicit early customer feedback, or a fully released product that customers refuse to buy? Sometimes, failing early is not only an option, its a prerequisite to success. Iterative development methodologies, such as agile, enable engineering organizations to refine product features, performance and usability based on actual usage. But development is not the only group with a stake in customer feedback. Planners, product and portfolio managers, and executives need to stay abreast of customer reactions as well. Whether your company uses agile or other development methodologies such as Stage-Gate or PACE, your transition plan must include a process for early customer access and response. And you must ensure that all planning and executive roles have an opportunity to participate in follow-up analysis.

External
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Compliance
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Marketing Sales Management Engineering Manufacturing Primary research

Customers Competitors Strategic partners Channel sales Economic data Market data Analysts Consultants

Industry standards Government regulations

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Table 2: Product ideas come from many potential sources

Your transition plan should identify every potential source of ideation along with who is responsible for each source. Ensure that your product innovation management application provides the ability to capture and centralize all ideas; evaluate, combine and prioritize them; and establish an audit trail for each idea throughout the planning and development pipeline.

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Be a Hero: You Can Stand the Heat

Transition is difficult. But turning innovation into a core business process does have its advantages. The consulting firm Booz Allen Hamilton tracks the worlds largest R&D budgets in their annual Global Innovation 1000 survey. What they have discovered is that companies with integrated innovation processes significantly outperform their peers across a variety of performance indicators including revenue, margin and profit. You can do it too if you take an evolutionary rather than revolutionary approach. Here are some suggestions:
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Take the next step

Accept Corporation has helped restructure the product innovation processes for many of the worlds premiere enterprises in industries such as semiconductors, software, manufacturing, financial services, transportation, telecommunications, education and business services. With our Accept360 Suite of on-demand software for product strategy and innovation management, you can:
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Automate your entire innovation process, including ideation, strategy and portfolio management, and requirements definition Use dashboards, analytics and scenario modeling to let planners and executives visualize alternative scenarios and make the right decisions Integrate your planning processes with the development processes you use today

Start with a pilot program Get executive sponsorship early Leverage established best practices Define metrics and measure Select a comprehensive innovation management application Deploy as a service Find an experienced partner to work with

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Accepts approach to integrating product innovation strategy, together with the Accept360 Suite, has proven indispensible in enabling our customers to deliver the right products to the markets they serve. For more information about Accept360 Suite, or to find out how we can help you integrate your product innovation process, contact us today:
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No doubt your company has profited by fine-tuning its processes around manufacturing, inventory and supply management. You can improve the bottom line even further by applying those same principles to product innovation. To begin, follow the steps above and start your plan using the five ingredients. Now is the time.

On the Web: www.accept360.com By telephone: +1 866.423.8376 By email: sales@accept360.com

References
Sloane, Paul. Breaking Down Internal Barriers to Innovation. Blogging Innovation. April 5, 2010. http://www.business-strategyinnovation.com/2010/04/breaking-down-internal-barriers-to.html.
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Barry Jaruzelski, Kevin Dehoff, and Rakesh Bordia. Smart Spenders: The Global Innovation 1000. Strategy+Business (Booz & Company), no. 45 (Winter 2006).
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About Accept Corporation Accept Corporation offers the best product innovation management software to help technology-driven companies choose the right products for the right markets with the fastest time-to-profit. The Accept360 Suite is the only complete end-to-end software solution that dynamically links company and product strategy with product execution through ideation, portfolio analysis, requirements prioritization, collaboration, dashboard visibility and real time analytics. For more information, visit www.accept360.com or call us at +1.866.423.8376

2010 Accept Corporation. All rights reserved. Accept360 is a trademark of Accept Corporation. Product and brand names used in the document may be trademarks or registered trademarks of their respective owners. Any such trademarks or registered trademarks are the sole property of their respective owners. AS.WP.5ICOPS100610