The biggest winners in New Product Development are the companies that continue to create a steady stream of new products in new categories. Product development strategy is the way to create growth through generating streams of new offerings.
But too many companies fail to manage strategically the product concepts that represent the future. They fail to manage the portfolio of ideas that are the key to growth.
Product concepts, those undefined ideas that might be the next blockbuster, are virtually impossible to manage absent a product development strategy. An effective product development strategy includes:
A Vision: a statement of where a company plans to be 3 to 5 years from now
The steps you will take to realize that vision, over a 2 to 3 year span
Product roadmaps, technology roadmaps, and budgets, linked to the to programs that will make the company’s vision a reality
We advise clients to think of their product concepts as a portfolio, which you manage like any other investment portfolio. Some of the concepts in this portfolio are worth a great deal and others very little. How can a company manage this portfolio of product concepts? Through two linked systems, one a yearly process, tied to budgets, and the other, an ongoing process that selects the projects that are aligned with corporate strategy, and prioritizes and initiates the development of new product concepts.
Two Systems for Product Development Strategy
Having a minimal but effective process for managing the front end of development, in addition to a yearly strategic plan for new product concepts, helps to keep the focus on the work required to launch a new product, without being overwhelmed by other strategic initiatives such as capital structure, M&A, marketing initiatives, etc. Having both a yearly strategic process for new products…
Helps guide the company toward a stream of new products tied to the vision and strategy
Provides a means to manage investment in new products
Ensures that programs are ready to enter the development pipelines
Having these two linked processes, one an annual event, the other an ongoing, dynamic process, supports not only planning but also execution. It increases the predictability of new product development success.
Product Portfolio Management: Deliverables and Milestones
Most product development processes have reviews, gates, and schedules with clear milestones. Companies can manage early stage product concepts in an analogous way. The discovery and early stages of development may also have milestones and deliverables that move concepts closer to realization.
To define a yearly, systematic, portfolio planning process:
Create two decision points that help to:
Manage orderly starting points for projects that arise from the planning process or are new ideas congruent with that plan
Ensure that they are staffed properly with the right resources
Ensure that the projects will address the key issues that impede fast and predictable development
Ensure that there is a meaningful commercial potential
Define the placement of these decision points. Select two points in time to review projects at a high level.
First Review (move from Pre-Discovery to Product Discovery): ensures that the project is worthy of forming a cross functional team and outlines the steps to test the hypothesis – this phase is complete when the effort transitions from one individual to a small team, typically 10-15% of the way down the path
Second Review (move from Product Discovery into Development): ensures that the team demonstrates feasibility, defines the broad parameters of the product offering, and addresses risk. This phase should ensure that the team is ready to enter development, that they grasp the major risks, and that the team is within a quarter or two of entering the formal development process.
The governance body for this front-end process establishes the criteria for the key milestones. This body should include executives who manage the functions most closely related to product innovation and strategy: Engineering, Marketing, etc. It may be the same body that manages the strategic planning process.
Managing the front-end of development might also include deliverables that ensure that early-stage concepts align with strategy, and that the risks have been considered.
Such deliverables could include:
First Review/Approval: The leadership team reviews the proposed opportunity for strategic fit and approves or denies requests for further investment
Market Assessment: Validates and documents the under-served market need
Commercial Feasibility Assessment: Describes the target segments, target customers and documents the commercial potential
Technology Assessment: Summarizes proposed technologies, missing elements, critical partners, and known technical risks
Second Review/Approval: The leadership team reviews the request to enter the product process and approves or denies requests for further investment
Other documents might include:
Business Case: Includes relevant estimates for conversion rates, click through rates, activation rates, consumables trail, cannibalization, ASPs, NPV, IRR, payback period, gross profit, and operating profit. Also, may include an explanation of the business risks.
Business Assessment: Verifies commercial and, where applicable, regulatory readiness
Early Phase Report: Provides evaluation of technological feasibility, manufacturability and costs
Updated Portfolio Roadmaps: Prioritizes newly approved projects
Moving Concepts into the Pipeline
These deliverables indicate that the team can do a great deal of work on a program before it enters the pipeline. They help to ensure that the company has selected only the very best product concepts, that will deliver for customers, for the company, and for all other stakeholders.
Gates, milestones and deliverables bring order to the front end of product development, mitigating risks and refining the value proposition, while generating a reliable stream of new products.
Along with a formal strategic planning process, an orderly process for managing the portfolio of product concepts will help ensure that your organization’s very best and most fruitful product concepts define its product pipeline.
Clarifying Programs While Reducing Risk
Many companies do not have a systematic process for managing their portfolio of product concepts, and many others claim that such a system is impossible.
We insist that it is possible to clarify programs in their earliest stages, reducing both risk and uncertainty. Your company can bring a semblance of order to the notoriously vague front-end. First establish criteria for prioritizing products according to your organizations vision. Then develop milestones and deliverables that give your company the best chance of fielding the next blockbuster. And the one after that.
(Disclaimer: The author works at tcgen)