the new product economy _bethtemple4u

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the new product economy

why the practice of building new products is critical to your business

2013

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It is commonly estimated that between 33-95% of new products fail.

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Sources: 1) http://faculty.msb.edu/homak/HomaHelpSite/WebHelp/New_Product_Failure_Rates.htm 2) Clay Christensen's Milkshake Marketing, Harvard Business School, Working Knowledge, 2/14/2011

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Which is a frightening statistic because new products are continually in demand.


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Evidenced by the fact that product lifecycles are shortening.


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Why product lifecycles are shortening


rapid advancement of

technology

an overabundance

of products

creates

consumer attention spans

shortening

requiring

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!e short life of the netbook


1977 2001 2007

5 years

iPod/ iTunes

PC desktop

iPhone

2010 iPad

1985 Laptop

2012: end of

Netbook2

2013 Surface

Pro

Sources: 1, eWeek, July 2010; 2, The Guardian, Dec 2012

“Netbook sales are showing no signs of waning, ABI Research announced July 22 [2010] … Nearly 60 million netbooks are expected to ship worldwide by the end of 2010, and that figure is likely to double by 2013.”1

2007: Netbook

introduced2

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A company can’t rely on outside forecasts – change is

occurring too rapidly and it is directly affecting product viability.


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Change happens within industries when new products with

new business models enter the market.


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Industry leader

New industry entrant

1985: first Blockbuster store opens 1986: goes public 2010: filed for bankruptcy Out of business in 25 years

Blockbuster photo credit: Los Angeles Times, latimes.com


Industry leader


1971: opens first store 1995: goes public 2011: filed for bankruptcy Out of business in 40 years


Industry leader


?

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Even more concerning is competition comes from non-peer companies building new products that aren’t

obviously competitive.



Industry leader

Non-industry entrant

1889: founded by George Eastman 1976: 90% marketshare 2012: filed for bankruptcy From market leader to bankruptcy in 36 years


Industry leader


2007: first Flip Ultra 2009: acquired by Cisco 2011: division shut down Out of business in 4 years


Industry leader


?

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And it’s not only traditional companies that are at risk from

new products entering the market.


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“(Steve) Blank believes that the leading tech companies are in a particularly vulnerable spot. Tech behemoths —

Oracle, SAP, Cisco, even Google — are facing serious threats from smaller

players, who can push new products into the market at a faster rate.”


Steve Blank on ‘continuous innovation’ February 16, 2013

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How many businesses will be at risk with the adoption of this

new product?



3D printing: The Printrbot Jr. in the process of making a 3-D model.

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So how can a company survive in this new product economy?


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ü  Be paranoid – expect constant change

ü  Have a vision – allow for wiggle room

ü  Establish a distinct value proposition – don’t veer from it

ü  Create an amazing experience – constantly make it better

ü  Make size an advantage

ü  Hire Swiss Army knives

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Be paranoid - expect constant change

n  Specifically, don’t assume long-term dominance or marketshare.

n  Intel's Andy Grove had it right: “only the paranoid survive”. This has to be top-down paranoia that requires constant evaluation of customer needs, market opportunities, and emerging trends.

–  Make your Chief Strategic Officer is a Chief Paranoid Officer (seriously!)

n  Foster open communication and on-going ideation. –  Take in data from all levels, create a system to share the findings.

n  Don’t assume your competition is in your category or industry.


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Case study: Facebook

n  Facebook was built on the web (founded in 2004).

n  With a clear dominance on the web, the company continued to grow the web platform.

n  However, by early 2012, as it prepared for an IPO, there was glaring evidence that Facebook was critically behind in mobile (despite the fact that the founder was using a smartphone).

n  Facebook had to ramp up fast and just prior to the IPO made a $1 billion acquisition of the mobile app Instagram to prove its mobile intentions.


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Have a vision – allow for wiggle room

n  Establish a broad mission for the company but don't box the business in.

n  Constantly reexamine your overall vision in the context of the wider market and make strategic adjustments as necessary.

–  Do this, at least, annually – quarterly would be better.

n  Think: flexibility and agility.


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Case study: IBM

n  IBM has been brilliant at being agile with their vision.

n  From the beginning their vision was to package technology for use by businesses.

n  They started out making and selling punch-card tabulators and ended up as technology consultants.

–  In between they brought to market some of the most well-known business technologies: the mainframe, the PC, the ThinkPad, to name a few.

n  As business needs changed over the past 100 years, so did IBM.


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Packaging technology for businesses


1911

1992 2002 ThinkPad

laptop

Punch-card

tabulators

Acquired PwC

consulting

1957

Electronic data

processing machine/ FORTRAN

This is only a partial list of the many transitions and products (including patents) developed by IBM.

1961 Selectric typewriter

1964

IBM System/360 computer

1974 UPC and scanner

1981 IBM PC

1997

Coins the term

“e-business”

2005

Sells PC business to

Lenovo

1952 Mainframe

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Establish a distinct value proposition – don’t veer from it n  Once you have a clear (and flexible) vision, let the world know

why you exist and are different than all the other alternatives.

n  A value proposition equates a company’s core offering to audience needs.

n  It is the standard by which all decisions must be made.

n  Too often companies try to duplicate the efforts of the market leader – these companies can end up late to the market and first to exit, decreasing overall value.

–  Example: HP’s TouchPad was on the market for a total of 48 days.


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Case study: Apple

n  Apple has always had a distinct value proposition based on high design.

–  All decisions are based on creating a well-designed product.

n  From the early Mac through to the iPad, they’ve designed great-looking products, both hardware and software, that work well together.

–  More recently that design has included the commerce-based ecosystem based on the centralized iTunes.

n  In the beginning design was seen as a benefit to only a small percentage of the market – but this market grew, exponentially.


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Create an amazing experience – constantly make it better n  The value proposition should come shining through in the

experience your customers have with your products and your company.

n  Every touch point should reinforce both your vision and your promise.

n  When adding to an established experience, any incremental decisions must result in a much better experience.

n  To ensure this, comparison test the present experience against any possible changes with customers before going to market.


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Case study: Netflix

n  Netflix introduced itself by delivering a better rental experience.

n  Not only did we not have to drive someplace to pick one up, there were no late fees and we could manage our own video list.

n  Unfortunately they made a major decision (splitting streaming from DVD and making a significant price change) without considering the impact on the existing experience.

–  It’s unlikely they tested the change with customers.

n  Customers noticed a dilution in the experience and left in droves (yes, pricing is part of the experience).


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Make size an advantage

n  We often hear that bigger companies can’t move fast enough to counter smaller insurgents, and there is some truth in it.

n  But size has its advantages: established distribution channels, financial resources, brand recognition … customers!

n  Assuming you are being paranoid and you are looking across industries, you should be identifying possible disrupters earlier giving you an earlier head start.

n  Use some of the human and financial resources to test new products throughout the year – be proactive.


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“One of my fears is being this big, slow, constipated, bureaucratic company that’s happy with its success … Companies fall apart when their model is so successful that it stifles thinking that challenges it.”

- Nike CEO Mark Parker


Source: Fast Company, March 2013

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Case study: Nike

n  Nike became famous for its shoes and then its apparel.

n  In 2012 they added the FuelBand bracelet because their customers were going digital.

–  Could have easily lost their large audience to competitors Jawbone & FitBit.

n  They also disrupted their own main product – shoes!

–  Their FlyKnit material changes the shoes and how they are manufactured.

n  Nike proactively tests new products in multiple ‘innovation’ labs.

n  All of these evolutions and still true to its performance brand.


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Hire Swiss Army knives

n  A flexible company needs an adaptable, curious, and self-directed workforce.

n  Along with the specialists, hire generalists who can interpret what is going on from multiple perspectives.

n  Reconstruct yearly reviews to focus on what employees are seeing in their jobs and in the marketplace; talk to them about the products they use.

–  Make these reviews quarterly.

–  Couple this with the reviews of market needs and emerging trends that are hallmarks of a company that is aware that change is constant.

–  Eliminate: “This is the way we’ve always done it.”


R

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Case study: W. L. Gore

n  While not exactly employing ‘Swiss Army knives’ (employees have specialities), W.L. Gore (a product development company) has one of the most innovative organizational (non)structures to foster creativity and teamwork.

–  There are no bosses – instead associates and sponsors.

–  Teams organize around opportunities and leaders emerge; this is dynamic and not structurally permanent.

–  Associates have freedom to commit to projects that match their skills.

–  No pre-determined chains of command or channels of communication.

n  W. L. Gore has both consistently churned out innovative products and received honors for being one of Fortune’s “Best Companies to Work For.”


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In the new product economy, its not good enough to survive –

you have to thrive!



Beth Temple bethtemple4u llc http://bethtemple4u.com

Let’s build your next new product together!

beth[at]bethtemple4u.com