Pateo Management Consulting
New Product Proposition Development
We lead intense, directed communication to creatively exploit all the business's information to develop unbeatable New Product Propositions.The New Product Proposition:
"Product Propositions" encapsulate:
The information that describes a new product, a description of how it will be created and the way it will be marketed.
A
complete statement of why the new product will be successful - why customers will buy , including a risk analysis and a complete listing of assumptions.
Investment Analysis/Business case that
justifies - within the business's context - the new product development and the investments needed to develop it, build it and to bring it to market.
The development of Product Propositions can be considered to be amongst the most important activities in any business - perhaps the most
important of all activities.
The rationale for this statement is that for
any business at any point in time, the future can be largely predicted from an
analysis of the existing product line's future potential in the market. When a new product has been launched, and appropriately marketed, customers will appraise it and may then choose to become customers for it based on their needs and their appraisal of alternative offerings from competitors. New products therefore offer the only possibility of market share growth beyond existing and potential customers perceived limitations of current products - or alternatively of the loss of market share if a new product proves unattractive to potential customers.
Alternatively it can be argued that Product Proposition
Development is the heart of every business because every other activity in a
business can now be outsourced. It can also be argued that almost all business
failures can be attributed to the failure to develop New Product Propositions
that are appropriate to the businesses future
environment.
Paradoxically, despite its central and critical importance, the development of new product propositions is badly handled by many businesses. The reasons for this are:
Uncertainty about Responsibility: There is often no permanent organizational structure that is focussed on new Product Proposition Development. As a consequence each new product proposition is developed using an approach that has learned nothing from the successes and failures of previous approaches.
Hubris: Key individuals in a business often have significant personal investment in previous and current product strategies and abandon these personal commitments only after the significant loss of market share has demonstrated their failure.
Organizational: The
major functional players in new product definition - Sales and Marketing,
R&D, CEO, Financial Management - rarely share the same view of the market or
of the opportunities for change created by technology, the business and market
environment, or changes in competitor's offerings.
In particular:
Sales Dysfunction: Sales Departments usually have
a view of the customer that is totally informed by their experience of selling
the business's current products because these products define the markets the sales people attack. This results in an attitude that is excessively constrained by current customer's views of current products - effectively locking Sales into a view of the future that is based in history. Sales departments highly developed
communication skills mean that their internal sales pitches are highly effective
in maintaining this outdated view. Additionally salespeople usually have many
limitations that are the result of their personal nature, the nature of task
they perform and customers often prejudiced view of their role, all
of which limit the value of market information supplied by sales people.
These issues lead to sales people effectively hiding
the ever changing nature of the market and their customers from their employers. These limitations are accentuated in many businesses by the Sales department being the main contact with 'the outside world'. Thus many businesses are 'trapped' behind their Sales departments.
R&D Dysfunction: R&D Groups often have the greatest potential for changing products - yet their lack of customer contact and narrow focus often mean they have limited internal credibility, lack insight into customers application of current products and usually also have inadequate knowledge of competitor's products. Engineer's characteristically poor communication skills limit their ability to internally 'sell' the opportunities created by technology advances of which they are often solely aware. Finally the most senior technical manager is often faced with a group of other senior managers (sales people, production people, financial people and often a CEO with a non-technical background) with whom he shares little and to whom technical knowledge appears threatening.
CEO Dysfunction: The CEO is often excessively concerned with short term financial results and often does not fully understand either R&D or Sales - or both, if his background is financial as is often the case. In addition the CEO is often overloaded by his overall leadership and management role.
CFO/Financial Management Dysfunction: CFO/Financial Management usually has limited understanding of product,
market and technology and are usually strongly driven by short term financial
results and by the need to conform to the demands of investors. This results in a usually excessively conservative input to the new product definition process. Often CFO data is considered highly confidential and is not fully explained to other senior managers, and this results in further non-markey and non-technology distortions of Product Proposituons.
Inter-Function Conflict: There are often
well-established unresolved issues between the major functions in a business,
and between their leaders, issues that seriously damage the credibility of
information supplied by them to the other functions. New Product
Proposition Development is a process that converts information into knowledge so the lack of credibility of information weakens a new Proposition.
Important side points:
(1)
With the widespread outsourcing of production limitations of the business's ability to make investment in 'plant and machinery' have largely disappeared. Hence the traditional Production function no longer plays a role in defining a business's new products.
(2) Two key pieces of information are needed before New Product Propositions can be considered. These are Businesses Vision of itself and the Business Objectives description. These are further discussed below.
We regard the process of Product Proposition Development as a combination of the following factors: The business's need for new products (as described in the business's vision of itself into the future)
with:
The constraints determined by the business's ability to invest.
Internal and external information
describing resources, technology, the businesses position in the market,
customer characteristics etc etc.
Critical Role of Communication
The New Product Proposition Development Process is given life by communication because the holders of the information are positioned horizontally across the business at all levels of seniority and experience and because much unique knowledge must be developed from information sourced from potential customers and other external information sources e.g. IP vendors, MR vendors, suppliers etc.
Product Propositions must be kept Consistent and Alive!
Consistency: A major objective of the initial Product Proposition development is to ensure that all aspects of the new product are consistent with the many factors that define shape and limit every aspect of a new product development - from available investment dollars through technology limitations to the business's market reach.Many of these factors can change during a development and many will suffer from incomplete information at the programs inception. To increase the probability of product success Product Propositions have to be continually updated from program inception to final obsolescence of the product and its removal from the market. Essentially the Product Proposition has to be kept alive for the whole product cycle.
This means that every aspect of the Product Proposition will be subject to continual change and that a way to continually test the Product Proposition in the market must be found.
Our Role:
By leading, intense, directed communication between the major players - usually R&D, various sources of market/customer information and executive management - we lead the creation of New Product Propositions that are consistent with these factors.New Product Proposition development is amongst the most important activities of a business. The process of creating New Product Definitions is that of creating sharply focused new knowledge * by using the company's Business Vision as the lens through which relevant information, distributed across the business, is focused on creating a future for the business.
For this critical knowledge creation activity to occur effectively the communication between individuals must be urgent, intense, excited, motivated as well as focussed on the critical objectives - hence the need for led, intense, directed communication and a process framework as discussed below.
*Knowledge - a definition:
"Knowledge is information that changes something or somebody --- either by becoming grounds for actions, or by making an individual (or an institution) capable of different or more effective action." (Peter Drucker)
Drucker's statement provides the basis for our approach: Information is converted to knowledge, becoming the basis for action in defining and developing a product - as the result of motivated, led, communication across the team responsible for defining and developing the product.
Potential knowledge is distributed throughout the business, as information in people's heads and in disparate systems focused on localized functions. Each individual's information can be catalyzed into the business's knowledge as the result of motivated, led communication - communication with individuals in the team, with the business's leaders during Business Vision transfer or with the outside world during customer, competitor, technology or business environment information acquisition.
We have broad experience of practical knowledge development, leadership and management in areas bridging business and technical activities in high tech businesses - such areas as new product definition, technology prediction, technology development, technology acquisition, competitor analysis, project management and development methodology. We use this experience to provide systematic solutions based on creative interpersonal and inter-group communication.
Product Proposition Development Scenarios:
Need
to Limit R&D investment and shorten product development schedule: A
new product family must be defined for newly identified, attractive though volatile market. Each previous new family required significantly increased R&D resources. A further increase is projected to require major additions of people as well as restructuring of R&D. You suspect that by tightly focusing the new product specification and compromising some aspects of it, it may be possible to significantly limit R&D growth and shorten the product development time - thereby keeping investment levels consistent with nature of the new market and the nature of the business. Clearly the product proposition development process will require close management. Yet all available management resources are busy for the foreseeable future on executing current prime objectives. Where can you find the leadership resources ?
Transition from individual dependency to process dependency: With second generation, increased complexity, products coming into view you believe your business must become more team-based, with less dependence
on the role of the founding technical leaders. What are the new roles for all the people, how is the transition to be made and what are the new internal communication and knowledge management
systems ?
Streamline New Product
Definition/ Developments: Product development times have to be further reduced as more complex
products are developed. A possible solution is the development of a new, formal
product definition system. Could New Product Definition and New
Product Development happen concurrently, instead of the currently employed serial approach ? What would the impacts be on the project management system and on schedule-performance-cost risks ?
Reducing Product Development Variability: Even the most junior person seems capable of generating significant, unexpected, performance or schedule glitches. You feel threatened by your dependency upon your people. You need a systematic approach to reducing these unexpected threats whilst preserving critically valuable elements of your business's culture.
Developing a Coherent
Knowledge Management System:As President you integrate into a top-level picture the business's knowledge of its customers. In parallel you maintain an ongoing involvement in all the important technologies in your product. You are aware that within the business nobody else maintains a coherent customer, product and technology knowledge view.
As the business grows you feel tension between these historical knowledge management roles and your increasing business relationship, vision development-evangelization and leadership roles.
How do you confidently hand-off these historical 'coherent knowledge' roles in such a way they are developed into an effective knowledge management system that continues to drive the businesses success ?
Our Approach to Product Proposition Development:
We use the same basic techniques whether we are leading the development of a single New Product Proposition or developing a Knowledge Leadership and Management Process for new product proposition for application into the future.
Our key assumption is that the process of new product proposition development has to achieve two objectives:
(1) The creation of the best new product proposition possible for the business
(2) The simultaneous motivation of everybody in the business to support the development and introduction of the new products.
Both interests are best served if the widest possible discussions occur during the process; achieving this discussion objective is a key Pateo objective.
Product Proposition Development - Meeting Focus:
Product proposition development is usually a process involving multiple individuals and hence multiple meetings. We use a carefully designed document set to provide focus to the meetings. We believe a successful product proposition flows from delaying a detailed focus until the 'space' within which the new proposition has to fit has been bounded as loosely as possible. This gives maximum room for subsequent creativity.
The process of developing a product proposition is seen as one of 'circling-around' series of issues until critical points become evident and a balance of risk, schedule, product cost and other factors starts to emerge. The whole process is extremely communication dependant; the documents are vehicles for communication.
Pateo's role is to ensure that cross-function communication occurs during key meetings, that key technical and business inputs are identified and stimulated from every level in the business, and that critical points emerge as quickly as possible.
The process we follow includes the following steps:
(1) Identification of key players for a Product Proposition Team. This is a working group whose purpose is to produce the document set outlined below. The team should include working participants from each area of the business, with a managed transfer of focus from business objectives to detailed definition as the documents come to a focus. "Working" means individuals who have the time as well the knowledge to put effort into research during the time between meetings; this requirement will often exclude executive managers because of their existing workload.
(2) Create a series of meetings involving senior management and the Product Proposition Development Team. These meetings are designed to 'sell' the product proposition team on the purpose behind the new proposition and provide an opportunity for extensive discussion.
(3) A key issue is establishing the critical schedule for the new product - principally the introduction-to-market date. This date is usually the critical driving factor in determining the technology to be used, the general form of the product development etc.
(4) The Product Proposition Team then starts creation of the document set outlined below, excluding the New Product Proposition itself. Usually the R&D people will become actively involved part way through the creation of the initial document set; usually their arrival will cause the documents to recycle until there is a rough consistency between business objectives, technical possibilities and market driven specification requirements
(5) At some point a consensus will emerge; often Executive Management will already have been required to take a number of 'key positions' as unexpected limitations and opportunities emerge in the discussion. At this consensus point development of the (detailed ) New Product Proposition document can commence.
Product Proposition Development - Document Focus:
We focus around a document set that may be developed specifically for a single product or may be already partially or completely available within the business:
Business Vision Statement - a short inspirational document.
Driving responsibility: CEO, with agreement and commitment sign-offs by all executives.
Practical Business Vision document - a clear statement of the business's general objectives over the next 2-5 years. This is a statement of what 'success' means for the business.
Driving responsibility: CEO, with agreement and commitment sign-offs by all executives.
Business Objectives Statement - a concise and specific statement of overall sales targets, market share, investment, headcounts, profits etc over, typically, the next 5 years, particularly showing the contributions required of the new product. This document would usually also contain a discussion of market segmentation, choice of new product target segment, an analysis of the companies strength, weaknesses, opportunities, threats (SWOT) in the target segment etc. This document reflects what has to happen for the Practical Business Vision to be achieved. It includes key business factors - for example how the product is to be marketed - if the new product is to fit existing distribution channels and the consequent assumptions about the level of market development investment needed. If new channels are to be used then these have to be separately identified and justified within the 'Business Case' for the new product.
Driving
responsibility: CEO, with contributions, agreement and commitment sign-offs by all executives.
New Product Necessity Statement - a document defining, within the widest possible
bounds, a sandbox within which the New Product Definition (and subsequent
Product Development) can occur. This is an inspirational, challenging, mixed
technical and business document intended to create significant creative
excitement within the product development team. It is a document inspired by the
concept that 'necessity is the mother of invention' - the idea that rational limitations positively stimulate creativity.
Sometimes more than one Product Necessity Statement will be developed to reflect different levels of investment and return needed for different types of product (e.g. a short development time evolutionary development vs. a longer development time revolutionary development). Alternatively there may be a number of competing developments for a finite R&D resource (people and/or dollars) leading to alternative strategies depending on choices made between different products.
Driving responsibility: CEO, with contributions, agreement and commitment sign-offs by all executives.
New Product Definition document, produced by people from R&D. This is a very wide ranging document that includes the following basic elements:
- a project description and schedule
- a risk (schedule, cost, performance, resource requirement) evaluation, including a summary of key assumptions
- a risk management plan
- a description of what the product will, and will not do, including possible simulation models
- a detailed description of the project deliverables
- a development resource estimate
- a product evolution plan
- a summary of alternate technical and project plan approaches considered
- a technical architectural statement for internal critique
- a detailed product cost analysis, for both product and capital equipment, over time
- an NPI (New Product Introduction) plan showing specific requirements that must be met by the production facility.
Preparation and sign off by R&D Executive.
New Product Marketing Plan produced by Sales and Marketing
- a detailed discussion and plan for bringing the product to market, including distribution, advertising etc.
- a resource estimate for all market development efforts.
Preparation and sign-off by Sales and Marketing Executive.
An NPI Plan:
a. A detailed discussion of the steps needed to bring the new product into production.
b. A cost and schedule analysis
Preparation and sign-off: Operations Executive.
Expected Success Analysis:
This centrally important document reconciles all the previous information with a customers view of the proposed new product. It includes a detailed analysis of why the new product will sell, to whom (i.e. market segmentation and target segment), volume projections, market share projections, competitive impacts/reaction projections, selling price projections etc. It specifically includes a Risk Analysis, includes a summary of all key assumptions and a listing of all major risks undertaken by proceeding with the product development.
Preparation and sign-off by Sales and Marketing Executive.
Investment/Business Case Analysis:
A detailed analysis of the business impact of the products
development . This analysis pulls together all the previous data and most
critically demonstrates financial consistency of the investment with the
Business Objectives Statement and the business's financial situation.
Preparation and sign-off by CFO.
Information and Knowledge Communication Processes:
Our Practical Communication Focus:
We learn the unique style of the business - nature of the culture, connection to market and
technology, internal communications methods, the reward system, changing market demands, speed of response, peoples key views, historical responses to change, competitive pressures, the manner that information and
knowledge is developed et al - to build a 'Communication Backdrop' description.
We identify the characteristics of the existing internal human communication network - the formal and the informal, the
spoken and unspoken, the discussed and the un-discussed, the technical environment.
We then consider the nature of the change demanded by the businesses leaders against the 'Communication Backdrop' description and the
communication network.
We formulate a design for the new process, design and sell it concurrently, by encouraging the people who will use the new
process to shape it. We primarily focus on (i) the sources and nature of the information to be captured and the means of its communication, (ii) the creation of the circumstances and forums in which
the information is processed into the businesses knowledge and (iii) on persuading the people involved to see the value of the approach chosen.
We not immediately concerned with the technical (IT or software) aspects of Knowledge Management, since the development of Knowledge is primarily an inter-personal and inter-group communication issue. Once an understanding of the business's information repositories and knowledge development needs is established a technical support solution can be identified, if possible or needed.
Design of Information and Knowledge Communication Processes:
Our basic thrusts are:
(1) To reveal and harvest existing in-house information, and to identify and fill key information gaps.
(2) To identify and understand existing informal knowledge leadership and product definition systems.
(3) To design and establish systems for creating and
identifying information and turning it into knowledge as the basis for defining
and developing better products.
(4) To identify key information that is
required but not already available from and internal or external source.
Examples:
Development of internal information capture and transfer networks and systems
Strategic product direction development facilitation and management
Technical ideation/creativity development programs for new products
Development of project/program risk assessment and management measurement methods
Development of project and design methodology development methods
Introduction of innovative project definition and project management approaches, including concurrent approaches that depend
upon systematic communication management
Development of team horizontal and vertical communication development methods
Team horizontal and vertical communication development
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