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Product Strategy I

T-109.410 Technology Management
21.10.2004

Eino Kivisaari
Researcher, M.Sc.
Technology Management & I...
”Product strategy begins with a strategic vision that
states where a company wants to go, how it will get
there, and why i...
Competitive Product Strategy
  Competitive Strategy Fundamentals
    Price-Based
    Product Differentiation


  ”Product ...
Michael E. McGrath:
Product Strategy
for High Technolgy
Companies

  Not available at HUT
  library

  Amazon et al ~35 €
Topics of this lecture
 Product Platform Strategy
 Product Line Strategy
 Leveraged Expansion
 Sustained Differentiation
 ...
What is
Product
Strategy??
Product Platform Strategy
 Platform is an architecture of the common
 elements implemented across a range of products

 On...
Product Platforms
                                      Product 3
                                                  Segmen...
Benefits of Platform Strategy
 Focuses management on key decisions at the
 right time
   Simplifies the strategy processs,...
Example of Product Platforms:
  Apple Computer Platform:
    Mac OS
    Motorola processors
    Easy-to-use GUI


Which ar...
Open Interfaces in Product
Platforms
 A product portfolio based on open
 interfaces
 Allows other manufacturers to
 partic...
Examples of
Open Interface Strategy

  Sun Microsystems: Java
  Nokia: Symbian
  Intel: AGP

Motivation in each case: to e...
Product Line Strategy

A time-phased plan for developing products
from a common platform, each product
targeting a specifi...
Product Line Strategy (contd.)
 Covers all primary targeted market segments
 Each product offering should be sufficiently
...
Product Line Examples
 Nokia Mobile Phones
   Everybody knows what I’m talking about!
Leveraged Expansion
Case studies show that:

The success of expansions to new
product markets depends highly on
ability to...
Maidique & Zirger (Stanford University, 1984):
A study on 158 product launches (50% failed, 50% succeeded)
The result: 8 P...
Examples of Leveraged Expansion

 Texas Instruments: The Little Professor
 Apple: PowerBook
 Adobe: Acrobat
 Microsoft
   ...
Sustained Differentiation
…is achieved with vectors of differentiation
that are significant to the customer

  One very pr...
High-Tech Differentiation
 Unique features
 Measurable benefits
 Ease of use
 Improved productivity
 Unique fundamental ch...
Unique features
 most commonly used
 an ”easy” strategy
 endlessly adding new features does not
 give sustained differenti...
Measurable benefits
 reduced eletricity bill
 longer recording time
 faster Internet access
Ease of use
 A very important vector of differentiation
 Sometimes technology advances do not
 deliver enhanced productivi...
Improved Productivity
 Longer battery life
 Better quality (of voice communications)
 More responsive UI
 Technology advan...
Unique Fundamental
Characteristics
 Example: The imaging method of Polaroid
 cameras
 Often protected by patents
   If bas...
Design
 More and more important in maturing
 markets…
   …such as mobile phones!
 Hardware Design & User Interface Design
First-to-Market Strategy
  Market share advantage
  Earlier market & customer experience
  Influence on markets and standa...
Fast-Follower Strategy
 Wait until market is clarified
 Avoid market education costs
 Nearer in time to eventual market, e...
“Fast product
development abilities
enable
sustained
competitive
advantage
and ability to
stay ahead
competition”
(McGrath...
See you next week!
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  1. 1. Product Strategy I T-109.410 Technology Management 21.10.2004 Eino Kivisaari Researcher, M.Sc. Technology Management & ICT Business
  2. 2. ”Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful.” ”Product strategy is like a roadmap, and like a roadmap it’s useful only when you know where you are and where you want to go.” (McGrath 2001)
  3. 3. Competitive Product Strategy Competitive Strategy Fundamentals Price-Based Product Differentiation ”Product differentiation strategy provides the primary source of competitive advantage for most high-technology products” (McGrath 2001)
  4. 4. Michael E. McGrath: Product Strategy for High Technolgy Companies Not available at HUT library Amazon et al ~35 €
  5. 5. Topics of this lecture Product Platform Strategy Product Line Strategy Leveraged Expansion Sustained Differentiation First-to-Market vs. Fast-Follower Strategy
  6. 6. What is Product Strategy??
  7. 7. Product Platform Strategy Platform is an architecture of the common elements implemented across a range of products One element in the platform usually represents a defining technology Dictates life cycle, capabilities, limitations Important to understand the role of a defining technology The choice if defining technology is perhaps the most critical strategic decision that a hi-tech company makes
  8. 8. Product Platforms Product 3 Segment A Unique product elements and Product 1B Product 1C Product 1 common channel Product 1A Segment B elements of product line Product 2 Product 5 Segment C Element Common Platform A Element Elements B Element (McGrath C 2001)
  9. 9. Benefits of Platform Strategy Focuses management on key decisions at the right time Simplifies the strategy processs, helps concentrating on critical decisions Enables rapid & consistent product development Encourages a long-term view on product strategy Can leverage operational efficiencies Manufacturing costs Design costs Makes marketing and support easier
  10. 10. Example of Product Platforms: Apple Computer Platform: Mac OS Motorola processors Easy-to-use GUI Which are supporting, which are defining technologies?
  11. 11. Open Interfaces in Product Platforms A product portfolio based on open interfaces Allows other manufacturers to participate Gives the company a smaller portion of the entire market, but… …makes the market significantly bigger A piece of a big cake may well be a lot bigger than the small cake!
  12. 12. Examples of Open Interface Strategy Sun Microsystems: Java Nokia: Symbian Intel: AGP Motivation in each case: to enlarge a market where you are a rather strong player yourself
  13. 13. Product Line Strategy A time-phased plan for developing products from a common platform, each product targeting a specific market segment The true potential of a platform strategy is extracted with an effective product line strategy
  14. 14. Product Line Strategy (contd.) Covers all primary targeted market segments Each product offering should be sufficiently focused Time-phased scheduling / sequencing all products cannot be released simultaneously priorization Similar products / product lines are coordinated To avoid rework and confusion in marketing and among customers
  15. 15. Product Line Examples Nokia Mobile Phones Everybody knows what I’m talking about!
  16. 16. Leveraged Expansion Case studies show that: The success of expansions to new product markets depends highly on ability to leverage: Existing market knowledge Technical skills
  17. 17. Maidique & Zirger (Stanford University, 1984): A study on 158 product launches (50% failed, 50% succeeded) The result: 8 Principal Factors of Product Success: 1. The developing organization, through in-depth understanding of the customers and the marketplace, introduces a product with a high performance-to-cost ratio. 2. The create, make, and market functions are well coordinated and interfaced. 3. The product provides a high contribution margin to the firm. 4. The new product benefits significantly from the existing technological and marketing strengths of the developing business units. 5. The developing organization is proficient in marketing and commits a significant amount of its resources to selling and promoting the product. 6. The R&D process is well planned and coordinated. 7. There is a high level of management support for the product from the product conception stage to its launch into the market. 8. The product is an early entrant.
  18. 18. Examples of Leveraged Expansion Texas Instruments: The Little Professor Apple: PowerBook Adobe: Acrobat Microsoft DOS Windows Windows + Internet Internet Explorer & MSN
  19. 19. Sustained Differentiation …is achieved with vectors of differentiation that are significant to the customer One very prominent feature or An appealing combination
  20. 20. High-Tech Differentiation Unique features Measurable benefits Ease of use Improved productivity Unique fundamental characteristics Design
  21. 21. Unique features most commonly used an ”easy” strategy endlessly adding new features does not give sustained differentiation can contradict ease of use
  22. 22. Measurable benefits reduced eletricity bill longer recording time faster Internet access
  23. 23. Ease of use A very important vector of differentiation Sometimes technology advances do not deliver enhanced productivity, because of usability problems A big challenge in an era when everything is integrated in a single device (mobile phone)
  24. 24. Improved Productivity Longer battery life Better quality (of voice communications) More responsive UI Technology advances complemented with good usability Often a crucial factor in buyer’s decision making process
  25. 25. Unique Fundamental Characteristics Example: The imaging method of Polaroid cameras Often protected by patents If based on a special technology Not so common in ICT where interoperability is a fundament
  26. 26. Design More and more important in maturing markets… …such as mobile phones! Hardware Design & User Interface Design
  27. 27. First-to-Market Strategy Market share advantage Earlier market & customer experience Influence on markets and standards Possibility to build entry barriers Image benefits, a glamorous strategy Big risks! Somewhat problematic in ICT: as interconnectivity is the rule, market dominance can seldom be achieved An exception: Cisco
  28. 28. Fast-Follower Strategy Wait until market is clarified Avoid market education costs Nearer in time to eventual market, easier to predict Ability to use newer technology Fast means fast! The name of the strategy is not just ” Follower Strategy” Advantages of being fast: Jump ahead and stay ahead
  29. 29. “Fast product development abilities enable sustained competitive advantage and ability to stay ahead competition” (McGrath 2001)
  30. 30. See you next week!

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