| For almost three years, JR Andersen, CEO of
mid-size software company Andersen High Tech (AHT), and his board have been uneasy.
Business growth has been “OK” at eight percent but the market has been growing
at a 15 percent annual rate. With almost half the growth from price increases, unit growth
for the main product line has been less than five percent. Fortunately, margins have been
expanding nicely along with management bonuses, so things aren’t too bad.
Or are they?
With business growth rates well below the market, AHT is
losing customers and hence market share. At a minimum, this means lost opportunities.
Competitors are gaining enough critical mass to develop the
next product faster or better. AHT’s biggest competitor has won three bids with
“leading edge” requirements, leaving JR worried about his next generation
product.
If you were JR and his board, where would you look to
escape this predicament? My experience suggests the answer is in marketing strategy, not
in technology.
To increase your company’s business growth, your new
thinking and priorities should focus on:
- Finding hidden opportunities – Your potential business
growth solutions are buried inside your current approach to product enhancement and
development.
- Applying product discipline – You need to find and
apply the right balance of technical and business factors for proactive product
management.
- Discovering customer niches -- You need to find specific
customers with unique needs that you can serve better than others could.
Six months ago, JR started down this road. Here is his path
to business growth success:
Finding the hidden portfolio gold & fixing your
R&D investment black hole
AHT had a large “portfolio” of products and
product enhancements in development. Like many companies I’ve seen, AHT’s
pipeline had many small, incremental projects and very few truly innovative ones.
To fix his R&D problem, JR decided that he needed to
divide the projects into 3 categories:
1. Major new products: Greater than 10 percent of firm
revenue within three years.
2. Significant product enhancements: defined as substantial new customer functionality.
3. All other.
JR knew there were only four new products underway,
counting two in the very early stages. He was surprised to find only seven significant
enhancements, and even more surprised to find 73 “all other” projects.
Next, JR needed to understand the resources assigned to
each category. Because there had been no central resource tracking, this step was hard for
JR’s staff. They had to visit each product group and each functional organization
several times before obtaining the necessary information. Everyone was surprised to
discover only 20 percent of the resources assigned to major new products and another 15
percent on enhancements—with the remaining 65 percent working on “all
other.”
The solution was obvious.
Take resources from “all other” and add them to
new product development or product enhancements. Not only did this improve confidence in
launch dates, it opened a floodgate of possibilities for new products.
Applying Product Discipline
While looking at the AHT product development projects, JR
first drew them out on a calendar showing launch dates. Then he asked his engineers and
product managers some questions. They included:
- When are intermediate reviews scheduled and who is
participating?
- Can you show me the specific customer needs that preceded
the technical work?
- For existing products, do the product plans line up with
corporate objectives?
- What are the skills and background of the people in product
manager roles?
Like many companies, he found AHT only addressed these
issues intermittently, meaning he received many answers he did not want to hear. In
discussions with the vice presidents at the next staff meeting, JR and his executive
management team agreed they needed to personally apply more consistent attention and
focus.
Discovering Niches and Segments
Next, JR dug into the product plan for AHT’s product
with the largest growth objective. He found the sales target, marketing communications
plan, and the planned product enhancements. But the assessment of competitors was weak.
Worse, the description of target customers and applications was missing. In other words,
no description of why a customer would buy AHT’s product or which customers should be
interested.
I’ve seen this pattern at many companies. The value
proposition is missing or too broad, without real and specific customer benefits. Crafting
a great value proposition includes becoming very specific about benefits in terms that
affect the customer’s bottom line.
JR quickly realized that the most productive place to look
for revenue growth was in incremental uses and new customers for AHT’s three key
existing products. He asked his marketing, sales, engineering and customer service leaders
to carefully understand and document each benefit received by current customers, then
identify other similar customers.
Business Growth’s Bottom Line
After six months of focus, JR and his board are feeling
better. Revenue growth for the last quarter was 17 percent and the most recent product
launch was on time. The whole company now has a positive outlook and people are buzzing
with energy. It took two new product managers and a lot of executive attention, but the
customer niche/value proposition concept has really taken hold. The VP of sales even
became a believer when he landed an elusive key account after a presentation of AHT key
product benefits (rather than their technical capabilities).
The product launch schedule has six new products and
fifteen enhancements in the pipeline, all with strong executive support and no more
“black hole.”
I sincerely hope your company isn’t facing the
problems faced by JR and his board at AHT. But if you are, try JR’s roadmap for
business growth. Find the hidden opportunities, apply product discipline, and discover
your customer niches. |
