Date post: | 22-May-2015 |
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Profits, Products and PromisesProfitable Product Selection
April 12, 2023
Our talk today is about business fundamentals used to select products for development. It’s important to be objective about the products we choose to develop. They have a major impact on our company’s profitability.
We won’t talk about any one selection process or method. We’re going to stick to time-honored basics that are a part of good decision making.
Real Quick…
What do we mean by ‘business fundamentals’?
For our discussion it relates to how we identify new opportunities and product lines.
This talk is intended to get you thinking about the basics.
Have the business fundamentals been
observed?
What is the launch budget and timeline
Is the right infrastructure in place?
… and so on
Ask the Right Questions!
From Our Product Launch Discussion-
The Importance of Fundamentals
Increasedcompany
revenue and profitability
Increased Brand
Equity and Awareness
Incredible competition these days
Low barriers to entry
Step 1- Create a Map
Mission- How we
attain our Vision
Roadmap- The Plan
and Direction
Vision- Our
Corporate Aspiration
Roadmap Examples
www.nestle.com
Vision Example
“To connect People to what's important in their lives through friendly, reliable, and low-cost air travel.”
www.southwest.com
Mission Example
“The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”www.southwest.com
The Corporate Map
Will the product make a profit?
ResourcesDo we have the time and budget?
KnowledgeDo we have domain knowledge?
ValuesDoes the product fit our vision/mission?
The Competitive Map
Competition
Do we have serious competition?
TrendsWho will buy it?
The MarketDo we have a potential product?
What Do People Say We Need?
What do our customers and sales/marketing people say we need?
› Listening vs. Hearing› Is a small group of people ‘shouting’?› Is there a legitimate need/requirement?› Is this an enhancement or new product?› Oh man, is this a pet project?
And while we’re on pet projects…Pets have been the undoing of many good PM’s, so,
› Have a visible corporate sponsor
› Have clearly defined goals
› Keep everyone informed of progress/pitfalls
› Be prepared for the worst
A Few Bigger Questions
Several things will impact our research:› Demographics› Society and Culture› Politics and Legal Issues› Technology› Economic› Global Business
The Market
Once you understand the bigger picture ask:› What will the product be?› What sort of features will it have› How big is the market?› And do you need special features for different markets?› Are there business and cultural barriers?› Can the market be reached?
Porter’s ‘Five Forces’
Competition
Threats from Substitute Products
Bargaining Power of Buyers
Threats from Direct
Competitors
Bargaining Power of Suppliers
A Couple of Quantitative Tools
SWOT Analysis› Strength, Weakness, Opportunities, Threats
› Strengths and Weakness- Refers to the product idea and your company (‘Internal’)
› Opps and Threats- Refers to your market and competitors (‘External’)
› Tells you how your company compares to the competition› Gives you an idea where you are today
Product Selection MatrixA product selection matrix will help narrow down your choices:
Criteria Weight Product A Product B Product C
Looks Good 3 2 (x3)= 6 5 (x3)= 15 1 (x3)= 3
Creates Value
5 5 (x5)= 25 5 (x4)= 20 4 (x5)= 20
Good Margins
4 1 (4)= 4 3 (x4)= 12 4 (x4)= 16
Total 35 47 39
Oh Yeah, How Much Will it Return?Net Present Value (NPV)Tells you how much dollar invested today will be worth at some point in the future
It’s a good way to compare multiple products
and whether to build, partner or buy
Excel function is =NPV
Return on Investment (ROI)Tells you in percentage terms how much a product has returned v. it’s initial investment
Requires accurate forecasting of both development costs and sales revenue
You can use ROI as a screening method to approve new product development
Excel function is =IRR
‘Build, Buy or Partner’Build› The product be built in-
house with existing resources
› Can go to market quickly› Maintains profitability› Maintains your company
reputation
Buy/Partner
› Product already exists› Product expertise is not in-
house› Teams up against a common
competitor› Maintains profitability› Enhances your reputation
And the really important question
Do you have the
TimePeopleResourcesKnow-How
To pull it off? Quality
Scope
CostTime
A Word About Disruptive Innovation
Do you have the opportunity to introduce a new product that:› “Addresses simple applications at bottom of your
market,› Moves relentlessly up the market› And dislodges established competitors?”1
1Clayton Christensen- “The Innovator’s Dilemma”
Disruptive Innovation- Computers
1960’s Mainframe 1970’s minicomputer 80’s/90’s Desktop Computer 00’s Smartphones
The Take Home MessageUnderstand your company aspiration- it gives you a better idea what to develop.
Understand your competitors- it gives you a better idea of what to develop and whether you’ll be successful.
Understand your customers- it gives you a better chance of success.
Understand your resources- it will keep you profitable
And now for a little inspiration…
“...decide...whether or not the goal is worth the risks involved. If it is, stop worrying....”
- Amelia Earhart
Must Reads
Michael Porter’s ‘Competitive Strategy’
Daniel Goleman’s ‘Emotional Intelligence’
Clayton Christensen’s ‘The Innovator’s Dilemma’