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Product Strategy: Back to Basics for a Strong Start

Product strategy plays a critical role linking corporate strategy to product development, guiding the innovation engine for product effectiveness.  Despite this importance, there is often a disconnect between corporate strategy and product development.  We believe that product strategy needs to be based on a thorough understanding of the market and company capabilities - both current and desired.


Where to compete.  To gain proper context, start with a business value scan to determine competitive conditions. Observe potential shifts in market dynamics, including market and competitor analysis, and how to act accordingly.  If inorganic growth is a possibility, then initial acquisition targets should be identified.


Industry and competitor analysis.  Industry analysis involves an in-depth analysis of current state of the industry and the upcoming trends.  Industry analysis should include geographical regions, product segments and customer industries to determine opportunity areas for the firm. Historical performances of competing firms can provide insights into the strategy of each competitor.  Many customer interviews should be conducted to capture Voice of Customer (VOC), spanning all regions and representing each customer industry or consumer, depending on the customer type.  VOC analysis is conducted to validate and refine the industry and competitor analysis, plus to hear more specific customer concerns.


Product portfolio analysis.  The current portfolio should be reviewed and benchmarked against peer group companies and those with similar strategies to identify differences in R&D investments and find potential gaps.  The current portfolio should also be analyzed to determine degree of fit with corporate strategy.  This will show how the product and solutions portfolio matches with competitive offerings.  Often portfolios are shown to be product-centric (i.e. hardware, software, services), without regard to product maturity.  A product life cycle view emphasizes products that cater to particular customer needs based on current stage of the life cycle. With the appropriate portfolio perspective in place, field surveys can be done to ascertain relative competitive position in the market for each offering category, based on product life cycle stage.  This combined internal-external analysis can provide a more well-rounded perspective on the optimal portfolio.


Internal capability analysis. The best plans won't matter if internal capabilities cannot match the aspirations.  Current operational capabilities need to be mapped for supply chain and cost competitiveness, as well as sales and marketing, to determine the operational obstacles to move the current sales model into a product life cycle view.


Organic and inorganic strategy.  Even for companies committed to organic growth, it is useful to consider a two-pronged approach of acquisition strategy and operations improvement.  This ensures that a fresh, market-oriented view is part of the strategy, and it also allows a secondary plan if the internal growth and portfolio strategy fall short.  If the internal cost structure is noncompetitive, then operational improvements need to put in place also. Identify priority areas for R&D investments by using the analysis results.  Then determine alternatives for new offerings, products and services supporting the strategy, including potential obsolescence risks.


Product strategy is not a one-time event, only for times of crisis or major decisions.  It is helpful to embed the above steps into the annual planning process, with each step in just as much detail as needed.  That will keep the product portfolio better aligned with corporate strategy and avoid needing a major makeover at an inopportune time.


For related observations, see http://jeffkavanaugh.net.


Companies tend to forget the basics especially during economic downturn. They tend not to invest in product innovation which tends to detrimental for the organization. Organization that invent in product innovation during downtime are ahead of their competitors when the economic turns around

Voice of Customer (VOC) is a critical piece of the puzzle in Product Strategy. VOC analysis needs to be conducted in a very systematic and delicate way to avoid any design flaws or miscommunication between customer needs and design characteristics.

Quality Function Deployment (QFD) is a very effective method to capture spoken and unspoken customer needs, and translate them into design characteristics to convey VOC all the way to manufacturing.

QFD can be employed in conjunction with Lean Six Sigma to achieve a well structured and customer-driven product framework.

Many successful companies use QFD extensively as part of their Product Strategy.

Thought-provoking perspectives. While acquisition is a logical option for inorganic growth, it can be expensive and challenging in terms of integration. Leveraging the ecosystem for a hybrid organic-inorganic approach can be a valuable element of product strategy. Open or collaborative development can be beneficial in today’s environment of rapid globalization and increasing change & complexity in the business and technology landscape. A strategic commitment and plan at the corporate and business unit level can open up new and efficient avenues for enhancing product and business competitiveness.

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