Everyone wants products and services that deliver tangible benefits and long-term value. They are good for customers, good for manufacturers, good for merchants, and good for the entire industry.
Then why are there so few of them? Tired of reading already? Click here- LISTEN TO THIS ARTICLE. Blame it on the marketing people, research department, or product/service development group. There isn’t a business in America that doesn’t want to be more creative in thinking through products and services.
Brainstorming new products, however, is only the tip of the iceberg in delivering real benefits and long-term value. It’s not enough to simply create new products because your competition has something similar. I see too many companies (product and service providers) playing follow-the-leader. In this new economy, there is less and less room for copycat products and services. In fact in many industries, being first with a concept and first to market are critical just to survive.
Look at the consumer electronics industry. I was in this business for many years and I know that merely developing another DVD player isn’t enough. In fact, it is suicide! Now your new line of DVD machines had better have record functions, DVR, unified remote, multiple A/V interfaces, as well as that special feature that ONLY your brand offers. If you’re an electronics buff, you know what I’m talking about. If you’re not, know this… You had better find a way to LEAPFROG the competition with your product/service offerings because simply slapping clever marketing onto “me-too” products just isn’t going to cut it any more!
With this in mind, I thought we’d taka a look at what gets in the way of truly revolutionary product/service development and what we, as leaders can do to turn these obstacles into opportunities. This two-part essay will focus on how to create products that deliver.
Managing Uncertainty and Risk
Risk minimization is not the same as risk management. Minimizing risk involves avoiding any chance of failure. Managing risk is taking gambles that make economic sense. There is always technical and market risk. We must fully understand these in the framework of our industry. Knowing the technical capabilities of our competition is paramount in developing a product/service development strategy. For example if IBM would not have underestimated the technical savvy of Dell perhaps their market share would be double what it is today in the computer business.
Specifications vs. Market Benefit
Alan MacCormack, a professor at Harvard Business School, was studying successful software development processes. He and his colleagues asked executives at a software firm to provide two case examples, one from a “good” project, and another from a “bad” one. Two projects were identified, each of which yielded products that had just shipped. Observing the state of these products over time, MacCormack and his researchers saw that the “good” project failed in terms of such factors as market acceptance, expert quality rating, and productivity. According to MacCormack, the project that management said was a good project “turned out to be uniformly bad,” while the project that executives said was “bad” was a marketplace success.
MacCormack discovered that what executives judged to be a “good” project was one where the specification was completed up front, where the design had been frozen, and the project had been executed efficiently. For executives, a “good” project was one that built the product that it set out to build. A “bad” project, according to executives, was one in which the results ended up looking completely different from what they set out to build. Yet the market reaction to the project that had gone through continual change was much better than the project that had a design that was frozen in time. Says MacCormack, “The way they thought about ‘good’ and ‘bad’ in that case was completely upside down. The people who were overseeing projects there assumed that the good projects were the ones that delivered to the spec. In fact, good projects are ones that deliver to the market.”
The Cost of Delay
I think this is a greatly underestimated variable of product/service development. When creating product/service development budgets we take into account all kinds of variables such as research, materials, staffing, testing, analysis, product launch and so on. We fail to quantify perhaps the most costly and critical element of the product/service development process…time. Specifically the cost of delay. Releasing a new product BEFORE its time has come can have a devastating effect on not only the cost of the product but also the entire reputation of the company and its brands. Take for example the personal computer. I remember having sold the VERY first personal computer to over 250 Target and Venture stores back in 1980! I was part of the development team at Atari, and I went on several in-store demonstrations inside Target stores. I laugh hysterically today when I think about the reception we received when we demonstrated to your everyday Target shoppers how you could use your Atari 800 to do your personal finances, play games and keep electronic records. People thought we were absolutely CRAZY! This was well before the Apple was placed in mass merchants. At Atari we were attempting to sell a product whose time had not yet come to a marketplace that even today, in 2004 is barely getting a handle on their needs for home computing.
Next week we’ll focus on product/service development research, competitive analysis, creating inspiration and outsourcing. I hope that this “Business Update” has been helpful in assisting you to improve the performance of your organization. For more information on how the Small Business Advisory Network assists companies in improving their performance, please feel free to contact us at 310-320-8190 or email firstname.lastname@example.org
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