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Presentation

If You Build It, Will They Come?
Product Strategy and Management Insights
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paul mauritz: product management insights

Thank you. I want to amplify a bit on what Phil talked about and get down to the process level, as well. First, we'll talk about the problem, then outline the approach, and then we'll get down to zeroing in on the process.

            Before I get into it, however, let’s ask: What is a product? It's hardware, software, or service for sale to an external customer. In the product management business we don't make a distinction between them. I'd like to say that if you drop it on the floor and it makes a noise, and somebody will pay you for it, then it's a product; however, if it’s something that you want to have value and you want someone to give you money for it, then it's also a product. You should look at it that way, whether you offer a service or you make phones. The second thing that is important is that there are technology initiatives going on inside companies that enable the marketing and selling of a product. In my view, and I think in the general view of product management, they should also be viewed as products. That’s because, if it supports the selling of product or the customer care for a product, then it should be thought of as part of that product. Those are the things that we'll define as a product for today's discussion, so let's talk about this problem. It's a big problem.

why products fail

            I have slides here to scare the heck out of you. My intent is not to scare. My intent is to say “These are facts.” They are facts from the Product Development & Management Association (PDMA) and Booz Allen, and their research shows that product management is very, very important. Product management is lots of things. I'm not up here trying to sell you product management, but I am here to show you a way to look at how you get your product out to market.

            Let’s look at some of these scary statistics. These studies were not done in the last 18, 24, or 36 months. Some were done five years ago, so it's not a new phenomenon that products get in trouble or are less than successful at market launch. What we saw in the last couple of years was an acceleration of good ideas and bad ideas all mixed together, getting funding, and going forward with or without progress or raising the percentage of success. The PDMA said that products have a success rate of 59% at launch. “Launch” is the point when you say to the world, "I have this thing and I want you to give me money for it." This study was done in 1995, I believe. Booz Allen cites a 65% success rate. You might say to yourself that 65% isn’t bad, but, remember, that study was seven years ago, and “successful” was defined as meaning that enough people paid for it to recoup the development investment. It's not wildly successful; it's not number one in the marketplace. Commercial success in this study is defined as "I made back what I put into it." If you want to dominate a market, what are the percentages there? Booz Allen also says that every seven times somebody has what seems like a good idea, only one will succeed. Again, I'm not trying to scare you, but PDMA says it's 11 to one. What do you do about it? Run? No, I don't think we're running. One more point, and this is probably the most important one. According to Booz Allen, 46% of all resources are spent on products that don't make it. Almost half of the resources that are spent today building products, you could look at as wasted.

            No, it's not really wasted. I happen to have been a co-founder of a company that didn't make it, but I don't feel like I wasted 18 months. I learned a lot. I really learned a lot. People gave us money, and they learned a lot, too. In a quieter moment, when I have way too many beers, I'll say, "You know it wasn't us. It was the market." We were a bunch of smart guys with a really good idea, but the market turned. In our rush to go fast, however, we didn't follow this process. As I stand up here and talk about this process, I can look at myself in the mirror and say, "I know some things I should have done differently. I know some things that, if I had had a process, if I had followed it step one through step 100, I might have had a better chance. That doesn't mean I would have succeeded, but I might have had a better chance.” At that time, however, we were saying, "We don't need process. Process will slow us down. We have to move fast, get big, and make a lot of money."

            Process is not intended to slow you down. Process is intended to make sure that all the inputs drive all the outputs, and that the work in between gets you what you want. So let's forget the bad news and stop talking about it. 

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            What causes products to fail? Three things, and I'm going to spend most of my time talking about one of them. First is a lack of new product strategy. I'm not going to belabor this point, but if I could just repeat what Phil said, there is a strategy that says, “I know what I'm doing, and I know I'm good at it; therefore, I can do it.” That is what we're talking about, one that is embodied in, and integrated with, the overall business.

            Let's take a phone manufacturer that says they’re going to get into the phone sales automation process. I would ask them, "Are you sure? Is that really a good idea? You're over here and you want to go over there. I'm not saying you can't do it, but you have to figure it out.”

            The second reason is that once you’ve decided where you’re going to go, you don’t apply enough resources. I don't mean pile on the resources, but you want to invest for success. If you want to use as your criteria for success that you make more money than you spend, spend what it takes to get that money back. If you want to be extremely successful and make a lot of money, you have to be focused on what it takes. I'll talk a little about market segmentation a bit later, but it's important to say, “If I'm going to go to market with the best technology product in the world, I’d better have a world class engineering team.” If I don't care about how good my product is, and, by the way, there are some great businesses where the product is not the best in the market, I had better have a world class sales force to get people to buy something that is really not that good. Where am I going to commit my resources? What are they? You really have to think about that and commit to win.

            The last reason products fail is from a lack of a process. At a high level, process forces homework. It forces you, the product manager in this discussion, to ask hard questions about yourself and about your market. I can't tell you how many times in several different companies we all said, "We know the two people who told us they'll buy this as soon as we finish it, so let's go." I talked to somebody just this morning who said that they've been spending the last year or so getting into every one of the customers they have, talking to two or three people who aren't customers, and asking them, "What do you need?" To me, that is very powerful, because, at the very front end, what they need is what they'll eventually give you money for -- not necessarily what they want, but what they need.

the cornerstones of product management

            Let’s look at this process for guiding a product from idea all the way through launch. There are three cornerstones, and the first is that I have to have a strategy. I call it a new product, but it could be the next version of an existing product. Either way, it's going to be something new. It could be that I'm going to take my toaster and turn it into a Corvette. Who knows if it will really work, right? But it's still a new product. Second, I have to have a resource plan, and, third, I have to have a process to follow. Product management, to me, is half process and half experience. Now, “half” may be, in reality, 30% or 90%, it's not literally half, but it means having the wherewithal to know the 100 things I have to do, and it means being experienced enough to have been down that road before (or to have someone on my team who has been down that road before). You can't blow by customer focus early in the physical product development because, if you do, you might give them something that is square when they really want something that is round. You can't blow through the process because you think you know the answers. Product strategy involves:

  • clear goals or objectives

  • clearly defined arenas of focus to provide direction in areas such as technology and market

  • allocating resources against each arena

  • an arena-specific attack plan, such as are you a niche player, low-cost provider, etc.

  • long-term thrust and focus

  • the role of the new product in the overall business is well understood

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            When we’re talking strategy, we mean having clear goals and clear objectives. Having a specific package is really important in product management. If I'm going to go out and build the best technology product in the world, I’d better understand what people want and I’d better understand the three other people who say that they have built the best technology product in the world. If I'm going after price . . . there is a book called The Discipline of Market Leaders by Michael Tracy in which he says that there are only three ways to go to market: you can go on high-end service like Nordstrom's, you can go on technology innovation like Intel, or you can go to market on low price like Wal-Mart. That's really it. The winners, as he points out in his book, are those that are very good in more than one. Wal-Mart is a price leader, but they don't sell bad products. They sell good products at a great price so people go there. It's interesting to note that 76% of the revenue Wal-Mart takes is in cash, because their market is people who aren't paying with credit cards. They're writing checks or paying cash. If they didn't have good products that you can get really, really cheaply, they wouldn’t be as big as they are. They understand their niche. They understand the arena in which they want to play and attack it. That model is very important. The role of the new product process in the overall business is the piece that I'm going to bet my business on, so I’d better do it right. If I bet wrong, I don't have a business anymore, or I'm not the same company that I used to be. The product strategy, and how it fits into my overall company, is very important.

            The second cornerstone that I want to talk about is resource commitment. I'm a sales and marketing guy, so I have a bunch of marketing slides to make sure everybody remembers this part. I don’t mean marketing in the sense of making this pig smell good by dumping perfume on it, I mean that you’re going to do the blocking and tackling necessary from a resource perspective to understand the market. Me, I would define marketing as “demand generation.” I have to get people to want what I have to sell, and that means I have to understand what it is they want, or, rather, what they need. In sales, they teach you that people don't buy what they want, they buy what they need. There's a big difference. We can spend a lot of time talking about what they want, then, at the end of the day, they buy what they need. Address those needs. Once you decide that you're going to head down a path to roll something out to the market, then applying the right resources at the right time becomes one of the keys. That commitment means:

  • the necessary resources -- people, money, marketing, technology -- are committed by senior management

  • an adequate R&D budget to support product development

  • people in place and dedicated to the product development effort

            The last cornerstone is the new product process. I'll fly right through this now because I'm going to talk about it in some detail later. The essential points are:

  • high quality

  • guide and speed new products from idea to launch

  • enforce pre-development homework

  • include the voice of the customer

  • have early product definition

  • have multiple go/no-go decision points

  • highlight quality execution throughout  

            To the first point, “high quality” is not that your process has to be quality, but that your application of the process has to be quality. In my example I keep saying that there are 100 steps, I don't know if there are necessarily 100, but if there are, make sure that they're the right steps and make sure that you hit every date. Don't blow through any process, whether it's 100 steps or three steps. With quality work, don't go fast, at least not so fast that you miss. When I was managing products for a very large product company, we said, "We don't have to be completely right, so let's get ready, let's fire, and then let's aim after that to see if we were right." The last couple of years were kind of like, fire, get ready, then maybe we could aim. That’s kind of how it worked, but it never really worked. It’s “ready, aim, fire” on purpose.

            You have to have go/no-go decision points all along the way. At the end of our company's existence we said, "We really should have done this." But we never asked ourselves that hard question in the first month. We were all sitting around the coffee shop trying to figure out what to do, but we never asked, "What if we get to this point in time and we haven't had anybody say yes, or if no big company has adopted us, or  if we don’t get the one or two strategic partners we need? What are we going to do then?” We never asked ourselves the hard questions at every step of the process to say, "I don't know if I want to keep investing those dedicated resources even though I've got senior management approval. This is integral for my overall company strategy, but I'm not hitting my dates, I’d better stop or slow down. More importantly, I have to re-evaluate where I am.”

the cornerstones of product management

            If you get right to the bottom of the product management process, the world looks like this today.

 

            There are engineers building things, and marketing people trying to figure out how to get somebody to buy it -- in my words, the “demand generation.” The sales people are going back and forth, saying "I've got to make money." You may have a product manager, although, in my experience, they're not usually called a “product manager,” they're called a CEO, or head of marketing, or CTO or whatever. They're called all kinds of different things, but, hopefully, there is somebody whose single function it is to get this thing out there so people can pay money for it. There has to be somebody who is the champion for the discussion. We'll call him a product manager. What process does is that it brings all of those roles together, like so: 

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            It's a single way to get input from, work with, and produce output for the support functions of getting my product to market. The process shouldn't be an inhibitor. As in the earlier discussion of salesperson automation, the salesperson shouldn't say, "I can't let the product manager in to see my customer, because he's going to get excited about things I can't deliver." The process has to have a voice from the customer, and the sales force has to have that. You have to have your marketing organization doing the research about where the customers are and what they really need, and more importantly, to find out if they will buy from you. It means having an engineering group that listens, that is compelled to listen to the customer, rather than just make something and throw it over the wall. That just doesn't work. If you look historically, it just doesn't work.

            What you really have to focus on, then, is the methodology, an approach to follow, a way to do this more than once in a row the same way.

 

Whether it's one step or more than 100 steps, it doesn't really matter. It starts with: What should I build? Maybe it starts with: What could I build, because I have core competence, or I have some skills, or I have some experience, or I understand the market segment? Going through that, now I know what I could build, what should I build, and what should it look like? How much should I charge for it? Who are the people who buy it? Let’s say I'm a phone company and I want to get the ability to download the icons and new ringtones in the US. Not everybody wants that, right? It's really only people 14 to 25, using Phil's example. More importantly, it's 14- to 25-year-olds who can download them, so it's not everybody who owns a phone, it's some addressable segment of the market.

            Now I need to design and build it. Okay. I know what it is. I've written it down. I've written down the functional specifications and the design specifications for a product, or the architecture for a service, or whatever it is. I won't stand up here and tell you it has to look just so, that it needs to have 13 headings and be 38 pages long. That is not the point. The point is that you've written it down, so somebody who isn't you could say, "I get it. I understand who wants it. I understand why they want it, and I understand what it is. I can go build it."

            Phil talked about contract programming. I tell people trying to build hardware and software products that they should write their functional specs as if they have to send it to somebody they’ve never met. If they don't really know what they're building and why they're building it, well, that's really important to the people you want to sell it to, so think it through. You probably won't get it right. If I'm going to build a software product, I should say to myself, “I do not know who is going to build it for me. I've got a team of really smart people, but I'm going to act as if I don't know who's going to do it.” You have to figure out how to write it down and get it captured in a way that they could build it for you so you can get it to market.

         I mean “get it to market” in a very broad sense. Throw it out there. Have a launch party. Do all the right things to get people to say, "Wow, that is going to be cool." Then, do the work to make sure your marketing organization understands how to position your product so demand generation can occur. Your sales organization is trained and they have the tools. If you're selling value or you're selling ROI, your sales force had better understand how to position it that way. The phase of getting it to market also asks: Now that it's out there, how am I doing? Am I meeting the needs of the customers who said they wanted to buy it? By the way, are there enough “wants” in there to drive the people over the edge who say that they need it, but they need that thing over there, too?

[continued]

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