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Product development

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Product development

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Product development

  1. 1. On Product Development: How to define and develop your products Ziya G. Boyacigiller This presentation was created and given by Ziya Boyacigiller who was leading Angel Investor and a loved mentor to many young entrepreneurs in Turkey. We have shared it on the web for everyone’s benefit. It is free to use but please cite Ziya Boyacigiller as the source when you use any part of this presentation. For more about Ziya Boyacigiller’s contributions to the start-up Ecosystem of Turkey, please go to www.ziyaboyacigiller.com
  2. 2. Ziya G. Boyacigiller (c) 2005 EMBA 2 Most Attempts to Create Successful Products Fail  60% fail during development  40% of those making it to market fail  ¾ of money spent is lost !  Yet failures are not random, they are predictable and avoidable.
  3. 3. Ziya G. Boyacigiller (c) 2005 EMBA 3 Only if marketers define market segments that correspond to the circumstances in which customers find themselves when making purchasing decisions can they accurately theorize which products will connect with their customers. Otherwise, they fail since they aim their products to phantom targets.
  4. 4. Ziya G. Boyacigiller (c) 2005 EMBA 4 Predictable marketing requires an understanding of the circumstances in which customers buy or use things.
  5. 5. Ziya G. Boyacigiller (c) 2005 EMBA 5 Milk Shakes
  6. 6. Ziya G. Boyacigiller (c) 2005 EMBA 6 Alternatives & Pains Morning breakfast Bagels/ egg sandwich/ coffee/ doughnuts/ banana/ … Crumbs/ greasy/ hungry/ makes hungry/ too fast to eat/ .. Snack for child Pick-me-up while shopping ….
  7. 7. Ziya G. Boyacigiller (c) 2005 EMBA 7 Customers “hire” products to do specific “jobs” – this “job-to-be-done” approach to segmentation is called “circumstance-based” segmentation.
  8. 8. Ziya G. Boyacigiller (c) 2005 EMBA 8 Circumstance-Based Segmentation  Customers have ‘jobs’ that need to get done.  Then customers look for products or services they can ‘hire’ to get the job done.  The functional, emotional, and social dimensions of jobs constitute the circumstances in which they buy.  Circumstances is what we need to analyze in segmentation, rather than the customers themselves.
  9. 9. Ziya G. Boyacigiller (c) 2005 EMBA 9 How you view the market for handheld devices will determine what product features you consider to be relevant Product View Demographic View Job-to-be-Done View Market Definition Handheld wireless devices Traveling sales person Use small snippets of time productively Competitors Palm, treo, clie, iPaq, wireless phones Notebook PCs, internet access, wireless & wireline telephones Wireless phones, WSJ, CNN Airport News, doing nothing, listening to boring presentations Features to Consider Digital camera, word, excel, outlook, voice phone, organizer, … Wireless internet access, downloadable CRM data/functionality, online stock trading, e-books, email, voice Email, voice mail, voice phone, headline news, simple-single player games, entertaining top-ten lists, always on, SMS top news, …
  10. 10. Key to Success for an entrepreneur is creating a Product/Service
  11. 11. Ziya G. Boyacigiller (c) 2005 EMBA 11 Crossing the Chasm is centered around your “differentiation”  Compelling reason to buy …translated into  Unique (differentiated) value proposition …leads to need to develop the  “Whole Product” – without which it is hard (very very hard!) to cross the chasm
  12. 12. Ziya G. Boyacigiller (c) 2005 EMBA 12 Whole Product Model Whole Product includes anything else you would need around your product/service to fulfill your compelling reason to buy… GENERIC PRODUCT (tornado) EXPECTED PRODUCT AUGMENTED PRODUCT POTENTIAL PRODUCT
  13. 13. Ziya G. Boyacigiller (c) 2005 EMBA 13 Whole Product:  Ensures you have a monopoly to fulfill compelling reason to buy better than competitors (if you win on TTM)  Create a monopoly such that for the target market and application your product is the only reasonable alternative  This should lead to make your product a standard in the industry & the market
  14. 14. Ziya G. Boyacigiller (c) 2005 EMBA 14 Whole Product wins sales… Since your product is defined for the target segment and is a Whole Product, it will meet the requirements of the customers better than any other product available. This will make you own the market, have a monopoly. Ex: TI did this with their TI83 type calculators for high- school students… There are many other calculators but all high schools use the TI83. Why?
  15. 15. Ziya G. Boyacigiller (c) 2005 EMBA 15 Network Effect (a.k.a. Metcalfe’s Law, snowball, hockey-stick)  Integral of the adoption curve  Positive feedback system  Ex: Microsoft Office/ DOS, CD vs long-play
  16. 16. Ziya G. Boyacigiller (c) 2005 EMBA 16 Why need Positioning…  Pragmatists need competition to evaluate products and vendors before buying.  Competitive Position is a condition for sales  Pragmatists look for market-centric (augmented by product-centric) inputs to buy  If there is no competition, create it! If there is, compare yourself to it…
  17. 17. Ziya G. Boyacigiller (c) 2005 EMBA 17 How to Position:  Name it! – New Product Category  Form The Claim – a.k.a. The Elevator Test • For target customer who are dissatisfied with market alternative our product is a name it that provides key problem solving capability. Unlike product alternative we have assembled key whole product features only you offer. • Pick one, and only one, claim!
  18. 18. Ziya G. Boyacigiller (c) 2005 EMBA 18 Why one-claim…  In all communications consistently use the same claim over and over again.  Establishing a position takes time and resources  Frequency of exposure to the merchandising message is important to establish position in customers’ minds.  Multiple claims will confuse customers – you can’t be all things to all customers
  19. 19. Ziya G. Boyacigiller (c) 2005 EMBA 19 Strategy for Crossing the Chasm • The only safe way to cross the chasm (unless there is a proven winner) is to put all eggs in one (segmented) basket (focus) • This concentrates your forces for maximum impact (one market, one message) • Identifying a single beachhead of pragmatist customer with a single application leverageable to other segments (pin). • Accelerating the formation of 100% of their whole product (fulfilling a compelling reason to buy). • Repeating the process with next pins, one at a time (Bowling Alley).
  20. 20. Ziya G. Boyacigiller (c) 2005 EMBA 20 S e g m e n t 1 A p p lic a t io n 1 Customer references W hole Product S e g m e n t 2 A p p lic a t io n 1 S e g m e n t 1 A p p lic a t io n 2 S e g m e n t 3 A p p lic a t io n 1 S e g m e n t 2 A p p lic a t io n 2 S e g m e n t 1 A p p lic a t io n 3 T O R N A D O .. .. .. .. . .. .. .. .. . .. .. .. .. . .. .. .. .. . .. .. .. .. . .. .. .. .. . Bowling Alley Market Development
  21. 21. Ziya G. Boyacigiller (c) 2005 EMBA 21 Bowling Pin Model • Each pin (niche or vertical market) is defined as the combination of the specific product application in a specific market segment. • Each pin requires its whole product. • Adjacent niches provide references. 1. Primary goal for targeting the pins: • Get your product adopted as the market leader (standard) in as many niches as possible. • Dominate a segment with >40% market share in 12 months (or other specific time frame) 1. Secondary goal: • Develop a compelling reason to buy.
  22. 22. Ziya G. Boyacigiller (c) 2005 EMBA 22 Bowling Pin Model, cont. • Key focus: end-user community economic buyer with budget responsibility (not a technical community). • Key criteria for selecting Bowling Alley pins: • Are they small enough? (Do not attack the segment bigger than you are; pick on somebody of your own size.) • Will they serve the strategic goal? • Over invest when invading a new pin to accelerate your rise to market leadership: • Deliver superbly engineered whole product without having to tie yourself to ongoing customization commitments. • This is the only way to divert resources to the next pin.
  23. 23. Ziya G. Boyacigiller (c) 2005 EMBA 23 The Chasm Crossing Warnings  Attempts to cross the Chasm without a niche market approach are almost always failing.  Consequences of sales driven strategy (chasing every opportunity) during the chasm period are fatal.  Company can afford to support only limited whole products.  Winning customers in several market segments does not create critical mass for “word of mouth” momentum indicating a leader.  Lack of “word of mouth” makes selling the product harder, more expensive and more unpredictable.  Lack of dominating leadership status (gorilla) does not entice pragmatists to buy.
  24. 24. Ziya G. Boyacigiller (c) 2005 EMBA 24 Bowling Alley Problems • People are in too much of a hurry to properly execute Bowling Alley strategy. • Companies fall in love with the first few niches and settle in them for life forgetting about Tornado. • Companies get trapped in the lure of recurrent service revenues and never design a pared down product (generic product for main-street) that could break free from the need for value added service support.  Structure of consumer markets does not support Bowling Alley strategy.  Inability of giving up R&D product-centric perspective in favor of customer-based application centric by entrepreneurial executives.
  25. 25. Ziya G. Boyacigiller (c) 2005 EMBA 25 Show Evidence - Visionaries:  Benchmarks  Product Reviews  Design Wins  Initial Sales Volumes  Trade Press Coverage  Endorsements
  26. 26. Ziya G. Boyacigiller (c) 2005 EMBA 26 Show Evidence – Pragmatists:  Market Share  Partners and Allies (quality & number)  Third Party Support  Standards Certifications  Applications Proliferations  Vertical Press Coverage  Industry Analyst Endorsements
  27. 27. Ziya G. Boyacigiller (c) 2005 EMBA 27 Strategy for Approaching the Economic Buyer in Bowling Alley • Offer new product solving existing problem costing customer money (time to +ROI). • Show that the problem is inherently related to current infrastructure paradigm, and the situation is getting worse or not getting better. • Show that new paradigm eliminates the root cause of the problem. • Show that you learned the application in-depth, and you bring not only the core product, but the whole product as well.  Present the whole product.
  28. 28. Ziya G. Boyacigiller (c) 2005 EMBA 28 Partners and Allies… To build the Whole Product make use of Partners and Allies when necessary. This will get you to market faster and require less resources.
  29. 29. Ziya G. Boyacigiller (c) 2005 EMBA 29 Choice of Distribution for Crossing the Chasm  Use direct sales and support as a demand creation channel to penetrate the initial target segment, then (in fact CEO should sell first!)  Once the segment has become aware of your presence and leadership, transition to the most efficient fulfillment channel you can offer.
  30. 30. Ziya G. Boyacigiller (c) 2005 EMBA 30 Choice of Pricing for Crossing the Chasm  Set pricing at the market leader price point.  This reinforces the claim of market leadership.  Build a disproportionably high reward for the distribution channel into the price margin.  With time, you can respond to competitive pressure by reducing this award.
  31. 31. Ziya G. Boyacigiller (c) 2005 EMBA 31 Attack…  Demand Generation (Direct Sales is best for early sales activity to control results)  Demand Fulfillment (Web or Retail is necessary for high volume sales expansion)
  32. 32. Ziya G. Boyacigiller (c) 2005 EMBA 34 Side Bar: Product Road Map Revolutionizing Product Development, Wheelwright & Clark
  33. 33. Ziya G. Boyacigiller (c) 2005 EMBA 35 Why Product Road Maps?  To move from 1-product-company to multiple-products-company  To decide what products to develop first  To show key stake holders where the company is headed  To convince potential investors how value will be created
  34. 34. Ziya G. Boyacigiller (c) 2005 EMBA 36 Side Bar: Objective Specification Plan OSP “Plan” first in detail – it will look like precious time is being used up, but the overall project will be done faster. Inside every small project is a bigger one… Do not “waste” time with planning - start “doing” right away. Plans change anyways…This is not a big project…
  35. 35. Ziya G. Boyacigiller (c) 2005 EMBA 37 Major Benefits of OS Process  Forces feedback & input from team members (current & future) and market/vendors/partners  Forces methodical search for best alternatives  Forces coordination of people & departments  Forces proper resource allocation  Forces commitment & accountability  Forces new product pipeline discipline  Forces company to learn (P. Senge)  Minimizes changes & re-work, results in best time to market (TTM) once project starts
  36. 36. Ziya G. Boyacigiller (c) 2005 EMBA 38 Start-ups need to win on TTM
  37. 37. Ziya G. Boyacigiller (c) 2005 EMBA 39 Typical OSP Process 1. Team must include customer expert, business expert, implementation expert, and others as needed. 2. Obtain customer requirements including target price 3. Survey substitute products on market 4. Survey competition’s capabilities/likely responses 5. Review alternative solutions that can meet requirements 6. Analyze differentiators, and level of change versus risks 7. Converge on solution and write spec sheet 8. Document execution plans, by each team member & key department in detail (commitments) 9. Time-line 10. Cost analysis 11. Sales & profit forecast, including target customer info 12. Signature page 13. Execute plan (manage project)
  38. 38. Ziya G. Boyacigiller (c) 2005 EMBA 40 Side Bar: Product Development Pipeline  Pipelines are used to get predictable results, from processes that are unpredictable (Ex: sales, product development, batch manufacturing)  Pipelines work by making use of averaging, reducing variation.  Pipelines also work by defining a process and continuously improving it through organizational learning.
  39. 39. Ziya G. Boyacigiller (c) 2005 EMBA 41 What Some Product Development Pipelines Look Like
  40. 40. Ziya G. Boyacigiller (c) 2005 EMBA 42 What an Organized Product Development Pipeline Looks Like 1 2 3 4 5 Intro Checklist OSP Checklist

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