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Even The (Seemingly) Best Product Ideas Can Fail

Is there any part of a product manager’s job that is more exciting then being responsible for introducing a new product? For that matter, is there any experience that can be more nerve racking than introducing a new product? If only there was some way that we could take out “flop insurance” that would help to prevent our becoming known as the product manager who introduced the next “new Coke” disaster…

Why New Product Fail

In 2003 34,000 new products were introduced. 90% of them failed. In 2008 122,743 new products were introduced and the failure rate was about 80%. Those odds don’t look so good for your next new product introduction, do they?

Dr. Rita Gunther McGrath has been studying the tools that companies use to plan for new product launches and she thinks that she knows what we’ve been doing wrong. It turns out that we’ve been using the wrong tools.

What’s Wrong With The Way That We’ve Been Doing Things?

As any product manager who has spent any time working for a large firm knows, there is no shortage of tools available to help product managers plan for the introduction of a new product. It turns out that most of these tools no longer work correctly.

The problem is caused by the simple fact that things have changed. A lot. Most of the tools that are currently available to product managers are based on an assumption that what’s happened in the past can be used to predict what will happen in the future. Now that most of the markets that we design new products for are moving so quickly, these assumptions are no longer valid.

Is There A Better Way To Plan For A New Product Launch?

Thankfully, yes there is a better way. Dr. McGrath proposes that we start to use what she calls “discovery driven growth”. This approach is basically a plan for learning more as the launch process moves forward. The part that I like about this way of doing things is that it doesn’t require the product manager to have a lot of analytical information at the start of the launch process. In my opinion that’s a good idea simply because there generally isn’t a lot of information available!

What Makes This Approach Different?

So in the graveyard of products that were bad ideas from the start (e.g. New Coke, Pets.com, etc.) what went wrong? These products had bright, smart product managers running the show and they created elaborate, beautiful plans that they followed to the letter when launching their products.

It turns out that they did two things wrong and these conspired to cause them to fail. The first was that they started with untested assumptions and then used them as facts on which they built their launch plans.

The second thing that they did wrong is that they built a false reality that blocked out the truth. They built products, and then second generation products, they launched advertising programs, etc. They did so much work that it all started to seem real to them, when in fact everything was built on some bad guesses about what the market really wanted.

What Is The Right Way To Launch A Product?

Dr. McGrath says that what we should do is to start any launch process by writing down what our assumptions are as we are creating the business plan. Overtime we’ll forget what our assumptions are.

Next you need to identify the milestones that you’ll be reaching as you get closer and closer to launching your new product. Once the milestones are known, you need to determine which of your assumptions you’ll revisit at that milestone in order to determine if they are still valid.

The ultimate goal of this is to spot when any assumptions are found to be no longer be valid as early in the process as possible. You may end up killing the new product, but you’ll save the company a lot of money.

What All Of This Means For You

Launching a new product is the ultimate thrill for a product manager. If successful it can make your career. Likewise, if it’s a flop then there is a good chance that your career at your company may be over and done with.

One of the biggest problems that product managers face when launching new products is that the planning tools that we use are out-of-date. They assume that the future will be like the past, and that just ain’t true any more.

Using the discovery-driven growth approach allows product managers to document what their initial assumptions were and to revisit them during the launch process. This allows any fundamentally wrong assumptions to be detected as early as possible and corrective action (including killing the product) to be taken.

Launching a new product is never easy. However, this new approach to launch planning just might make it turn out successful more often!

Have you ever based a new product launch on assumptions that turned out to not be correct?

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What We’ll Be Talking About Next Time

Quick: what’s the most valuable item in the world? Gold? Diamonds? Nope, it turns out that the thing that most of us would gladly give our left arm for more of is: time. Now since I can see that you are nodding your head in agreement with this, I’ve got a question for you. Why aren’t you selling time along with your product?

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Airline Product Mangers See Kiosks As Their Ticket To Success(c) 2007

Can you remember when flying was fun? I almost sorta can – I think that it was back when I was 10 years old and flying was something that was a special treat – I didn’t get to do it very often because it was very expensive. My how things have changed! Now I fly all the time and I pretty much hate it – the hassles, the delays, etc. Sure seems like a great opportunity for a product manger to step in and do something to make flying a better experience…

Airline Budgets – Where’s All The Money Been Going?

In the past few years, airlines have complained about fuel prices and fewer fliers. Even when faced with problems like this, running an airline is a big business. Since there are so many different airlines, there is a lot of competition between them. That’s why it’s surprising when you find out where airlines have been spending their money.

Airlines have traditionally invested in back-office products to handle tasks that customers never see like reservations and ticket pricing. Sure this makes the business run better, but we’ve seen what it does to the customer experience.

Airlines are only now starting to boost their spending in the development of products that are customer facing. This is where product managers are going to have a chance to shine.

The Problem With Bags

So my question to you is do you check bags when you fly? I desperately try not to – I’ll attempt to squeeze everything that I need for a 5-day trip into a single carry-on bag that still (pretty much) meets the carry-one size restrictions. Why all the effort you ask? Simple – I’m afraid that the airline will lose my luggage if I have to check it.

It turns out that missing or lost bags cost airlines almost $3B in 2008. Sure seems like an issue calling out for a product manager’s touch.

Kiosks have been popping up in airports as an effort to streamline the check-in process and print boarding passes for passengers. It now seems as though some enterprising product manager has realized that these kiosks might be able to do double-duty and help with the luggage issue. The thought is that passengers will soon be able to trace their checked baggage at self-service airport kiosks.

You can well imagine what this will do for the customer experience: you are waiting for your bags to come off of the delivery system and they never do. After everyone else has claimed their bags, you go to a kiosk, scan the bar codes on your luggage tags and learn the exact location of your bags – in other words discover that your bags are on their way to South Dakota.

In the end, this will allow you to report missing bags in less than 2 minutes instead of the average of 45 minutes that it takes to report missing bags to an agent today. This may not seem like that big of a deal, but let me tell you when you are mad at the airline, the quicker they can get a solution to you, the quicker you’ll cool off.

Final Thoughts

The airline industry is in bad shape these days. It just might take product manager to pull them out of it. If product mangers can create products that take the hassle out of flying then customers will flock to that airline.

The ability to quickly locate your lost luggage is one way to do this. There are other innovative changes being discussed such as having the airlines offering new wireless services such as notifications of flight status and delays via text messages. Of course the holy grail of all of this is the ability to to send encoded boarding passes directly to cell phones in order to completely eliminate paper.

If product mangers can find ways to make flying fun once again, then they will have have found yet another way that great product managers make their product(s) fantastically successful.

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What We’ll Be Talking About Next Time

Jeff Vance over at Sandstorm Media talked with me to get some inputs for an article that he was writing for the Project Manager Planet site. Yeah, yeah – I know that we’re Product Mangers not Project Managers. However, Jeff did a very good job of capturing a lot of what makes our job so hard to do.

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© Dr. Jim Anderson for The Accidental Product Manager, 2009. | Permalink | 2 comments | Add to del.icio.us
Post tags: airline, airport, American Airlines, business, carry on, competition, Continental Airlines. Southwest Airline, customer, kiosk, lost luggage, luggage, luggage tag, passenger, product manager, United Airlines, wirless

How A Product Manager Prepares For A Face-To-Face

This post is an invitation for you to come along with me as I work with one of my clients to help them get ready to present their solutions to a customer in the hope of getting them interested enough to start to move forward towards a sale.

You’ll recognize a lot of what we’re going to be doing, but there just might be a couple of surprises along the way.

Meet The Customer

My client has already met with their potential customer and presented three high-level IT solutions to them. The customer appeared to be interested in all three of the presented solutions and asked for a follow-up meeting in which more detail would be presented. This is where things currently stand.

I got brought in to help out because my client doesn’t actually have any of the three product solutions that they presented – they are all POSSIBLE products. Even if you’ve never done this before, you may have done something similar in presenting features that were not quite “there” yet…!

The Plan

When I sat down with my client, we started the discussion with the one question that every product manger should ask before meeting with a customer: what do we want to get out of this meeting? The client has a pretty simple goal: they want to collect enough information to slim down the list of three possible solutions to just one and get the ok to make a proposal for that solution. How hard could that be?

The Preparation

All product mangers will recognize this challenge – limited time before the meeting with the customer. Since the three possible solutions have already been presented to the customer, this was the best place to start. However, there wasn’t going to be enough time to dive deeply into any single solution – we were going to have to cover all of them down one or two more levels.

Face time was the budget that we had to spend. The meeting with the customer was scheduled for two hours in the afternoon. Clearly, that would be too long to spend doing a product presentation. My client and I agreed that targeting an hour for the presentation and the remaining time for pre-discussion and post-presentation wrap-up. Now all we had to do was decide what we wanted to talk about.

Planning The Presentation

My client had planned on doing the traditional In-Focus projector darkened room presentation; however, I talked them out of it. When I had asked them how many people would be attending from the customer’s side, they had said that they estimated about four. I told them that since it was going to be that small of a group, it would be a better idea to change the “feel” of the meeting from a presentation to more of a working discussion. They liked the idea.

Presentation Content

This all lead up to what was going to be in the presentation itself. I pointed out to my client that they couldn’t be neutral about this – which of the three solutions would THEY like to implement. For a variety of technical and, of course, financial reasons there was one solution that was the clear winner for them.

Every solution has its advantages and disadvantages. I convinced my client to present the other two solutions first and then conclude by presenting the solution that they wanted their customer to select. This was a variation on the Goldilocks “too hot, too cold, just right” strategy.

Finally, as my client was creating the material that they would cover during the meeting, I had them include enough detail for each solution so that the customer would be able to visualize how the solution would look if they implemented in their company. The specific details of how it would be built or interfaced to their existing systems were left out – “to be discussed later”.

Final Thoughts

As product mangers it’s rare that we have an opportunity to be present at the birth of new product let alone one that is being directed by a customer. When these opportunities show up, we need to be able to guide the discussion with the customer so that their pain points are revealed and we are able to design a product that best meets their needs.

If you can find a way to do this successfully, then you will have found out how great product managers make their product(s) fantastically successful.

Questions For You

Have you ever had a customer drive the creation of a new product? How detailed did they get about what they wanted the new product to do? Were you able to steer them in a particular direction that was best for your company? How successful was the product? Leave me a comment and let me know what you are thinking.

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What We’ll Be Talking About Next Time

As product managers we are tempted to look to our competition for guidance on what we should be doing when things get tight. However, maybe that’s the wrong thing to do. Instead, maybe this is when some of that “outside of the box” thinking might come in handy. Who could show us the way? Maybe a grocery store?

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© Dr. Jim Anderson for The Accidental Product Manager, 2009. | Permalink | 2 comments | Add to del.icio.us
Post tags: client, customer, features, new product, new product development, new products, presentation, product, product development, product manager

The Ford Mustang Story Shows Both How To And How Not To Design A New Product

Hopefully we all know about the Ford Mustang. This is the sports car that just about every male (and quite a few females) lust after in the heart at just about the same time that they are getting their driver’s license for the first time. It has been around in various forms since the 1960′s and yet it still can teach today’s product managers a great deal about how to design and price your next product…

This story really starts in the early 1960′s. Back then, America was in love with sports cars. We thought about them, wrote songs about, and basically lusted after them. THE sports cars to have back then came from either General Motors or from Europe.

The good folks at Ford realized that in order to survive as a company, they needed to create a sports car of their own. The question was how best to go about doing this?

The tradition way to design a new car was for Ford to ask its designers to build a sports car that would be more successful than the other sports cars on the market. Each designers would have studied existing sports cars and would have created individual parts for a Ford sports car such as the suspension, body, engine, and brakes.

Next a single design would have been picked and the marketing department would have asked focus groups if they liked the Ford sports car better than other sports cars. The price would have been set at a level that would have covered Ford’s costs and delivered the profit level.

It’s quite possible that this sports car would have won Ford much praise for how it looked and how it performed. However, very few people would have actually purchased it because it would have cost too much for most people to afford.

What makes the Mustang product management story different from so many other great products that went on to fail, is that Ford’s general manager at the time was a guy named Lee Iacocca. Unlike most of the folks at Ford, Iacocca was not a finance, accounting, or production guy. Instead, he was a marketer.

Iacocca didn’t start the design of the Mustang by going to Ford’s design department. Instead he started by researching what customers wanted. What he found out is that there were a lot of people who really wanted to own a sports car, but they couldn’t because they could not afford one.

What was really interesting was that most consumers didn’t really need very much of what makes a car a good “sports” car in order to meet their car lust. They didn’t really need the sports car performance – the things that really drove the price up: engine, drive train, and suspension. What they really wanted was sports car “excitement” which consisted of basically styling, bucket seats, vinyl trim, and fancy wheel covers.

The key to selling a successful sports car would be to provide a sports car a a price that most buyers could afford: less than $2,500 (remember, it was the early 1960′s!)

How did Ford create a sporty low cost car? Simple – they built sports car style on top of an low-priced existing car, the Falcon. Of course this offended lots of sports car buffs both inside and outside of Ford.

Ford was able to introduce the Mustang at base price of $2,368. They sold more Mustangs in the first year than any other car the Ford had ever built. In the first two years of selling the Mustang, Ford generated $1.1B in 1964 dollars.

As product managers we all like to talk about listening to the customers. However, Iacocca showed that finding out what your customers’ desires and challanges are is the real key to creating a great product.

Do you think that Iacocca was correct to bypass the standard product design process? Do you think that your company’s product design process works correctly? Do you think that Ford learned anything from this product design and launch? Leave me a comment and let me know what you are thinking.

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© Dr. Jim Anderson for The Accidental Product Manager, 2009. | Permalink | 17 comments | Add to del.icio.us
Post tags: Ford, Lee Iacocca, Mustang, new product, new product development, new products, pricing, product design, product development, product innovation, product launch, product manager, Sales, sports car

Pricing is the moment of truth – all of marketing comes to focus in the pricing decision.

– Raymond Corey, Harvard Business School

Have I ever told you just how much I love pricing? In the world of product management, there are so many talented people that I always felt both jealous and just a little overwhelmed. I mean there are product managers who have an amazing depth of product knowledge, there are product mangers who know their markets inside and out, and of course there are those product managers who know how to get anything that they want done within their company done and done quickly. How the heck was I ever going to measure up to these gods of the field? It took quite sometime; however, I’m pleased to say that I found my niche – pricing.

I discovered pricing somewhat by accident while working for a large European telecommunications equipment provider. Once upon a time, when I had a brief moment to stick my head above the waters of daily product management activities, I realized that none of my peers wanted to touch anything to do with pricing. All pricing related activity was shoved off onto the finance department from which magical prices would reemerge. In a nutshell, nobody had any clue as to why we priced our products where we did. I didn’t take any action on this little nugget of information at the time; however, I started keeping my eyes open.

My next surprise came as I started to get some more insight into how the sales teams were selling the product. The first thing that seemed to go out the door was the list price. After that, it seemed to be a race to see how low we could drop the price in order to get the sale. I was seeing discounts as large as 50-60% on relatively new products. Without knowing any better, I assumed that whatever magic price the folks in finance had set was able to withstand this kind of massive discounting. It turns out that I was wrong.

Collectively as Product Managers, we spend our time on capturing a larger share of the market all the while increasing customer satisfaction. We’ve been taught that if we can do these things, then somehow big profits will somehow magically follow. Unfortunately, there never seems to be enough profit magic to go around in the world these days…

Most firms didn’t worry all that much about pricing in the past. As long as you knew how much a product cost to make, then you could tack a generous profit margin on top of that and you were set. However, this all changed in the 1980′s. This is when the long established market leaders started to get their clocks cleaned by new startups that didn’t seem to care about market share. Instead, these new competitors specifically targeted the larger firms most profitable customers (known in the biz as “cream skimming“). This was followed by a wave of companies being taken private, having their product prices raised even as market share dropped and yet still starting to rake in huge profits.

Just as a final confirmation of the importance of pricing and making a profit, need I remind you of the dot.com era? All those new companies went on a footrace to try to build the largest market share, profits be dammed. Ooops, when it all ended the quickest runners went bankrupt while the few that had actually still focused on profits were the last men standing.

I finally had a chance to sit down and talk with some of my friends in the finance department over lunch and I asked about the the magical process that they went through to set prices. You can imaging my surprise when I found out that all they were doing was taking the cost of the product, adding the current “company overhead” margin, and then adding a 35% profit margin on top of that with the expectation that it would be discounted no more than 10%. Ouch – talk about simplistic pricing! My friends pointed out to me that the company was more concerned about growing revenue than profits at this time and so that was why I was seeing some fantastic discounts being approved.

Needless to say, this was sorta like discovering that Santa wasn’t coming this year. The secret pricing knowledge that I thought that Finance had really wasn’t there – the emperor had no clothes! I spent much time after this focusing on learning as much about pricing as I could and that information has served me well over the years. In future posts, I’ll share my secrets so that you too can become a master of product pricing.

Do you set the prices for your products or is it handed off to another department to do? Does your company use a sophisticated pricing strategy or do you basically set it and forget it? Is company profitability something that you are under pressure to increase you product’s contribution to? Leave a comment and let me know what you think.

Tags: product manager, pricing, profit, revenue, new product development

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