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Profitable Product Selection
- 1. Profits, Products and Promises Profitable Product Selection July 30, 2014
- 2. 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.
- 3. 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.
- 4. 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-
- 5. The Importance of Fundamentals Increased company revenue and profitability Increased Brand Equity and Awareness Incredible competition these days Low barriers to entry
- 6. Step 1- Create a Map Mission- How we attain our Vision Roadmap- The Plan and Direction Vision- Our Corporate Aspiration
- 8. Vision Example “To connect People to what's important in their lives through friendly, reliable, and low-cost air travel.” www.southwest.com
- 9. 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
- 10. The Corporate Map Will the product make a profit? Resources Do we have the time and budget? Knowledge Do we have domain knowledge? Values Does the product fit our vision/mission?
- 11. The Competitive Map Competition Do we have serious competition? Trends Who will buy it? The Market Do we have a potential product?
- 12. 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?
- 13. 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
- 14. A Few Bigger Questions Several things will impact our research: › Demographics › Society and Culture › Politics and Legal Issues › Technology › Economic › Global Business
- 15. 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?
- 16. Porter’s ‘Five Forces’ Competition Threats from Substitute Products Bargaining Power of Buyers Threats from Direct Competitors Bargaining Power of Suppliers
- 17. 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
- 18. Product Selection Matrix A 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
- 19. 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
- 20. ‘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
- 21. And the really important question Do you have the Time People Resources Know-How To pull it off? Quality Scope Cost Time
- 22. 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”
- 23. Disruptive Innovation- Computers 1960’s Mainframe 1970’s minicomputer 80’s/90’s Desktop Computer 00’s Smartphones
- 24. The Take Home Message Understand 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
- 25. And now for a little inspiration… “...decide...whether or not the goal is worth the risks involved. If it is, stop worrying....” - Amelia Earhart
- 26. Must Reads Michael Porter’s ‘Competitive Strategy’ Daniel Goleman’s ‘Emotional Intelligence’ Clayton Christensen’s ‘The Innovator’s Dilemma’