Product development

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

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.


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.


Predictable marketing requires an understanding of the circumstances in which customers buy or use things.


Milk Shakes


Alternatives & PainsMorning breakfast

Bagels/ egg sandwich/ coffee/ doughnuts/ banana/ …

Crumbs/ greasy/ hungry/ makes hungry/ too fast to eat/ ..

Snack for child

Pick-me-up while shopping

….


Customers “hire” products to do specific “jobs” – this “job-to-be-done” approach to segmentation is called “circumstance-based” segmentation.


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.


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

MarketDefinition

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, …

Key to Success for an entrepreneur is creating a

Product/Service


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


Whole Product ModelWhole Product includes anything else you would need around your product/service to fulfill your compelling reason to buy…

GENERICPRODUCT(tornado)

EXPECTEDPRODUCT

AUGMENTEDPRODUCT

POTENTIALPRODUCT


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


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?


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


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…


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!


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


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).


Segment 1Application 1

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TORNADO......................................................

Bowling Alley Market Development


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)

2. Secondary goal: Develop a compelling reason to buy.


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.


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.


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.


Show Evidence - Visionaries: Benchmarks Product Reviews Design Wins Initial Sales Volumes Trade Press Coverage Endorsements


Show Evidence – Pragmatists: Market Share Partners and Allies (quality &

number) Third Party Support Standards Certifications Applications Proliferations Vertical Press Coverage Industry Analyst Endorsements


Strategy for Approaching theEconomic 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.


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.


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.


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.


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)


Side Bar:

Product Road Map

Revolutionizing Product Development, Wheelwright & Clark


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


Side Bar:

Objective Specification PlanOSP

“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…


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


Start-ups need to win on TTM


Typical OSP Process1. Team must include customer expert, business expert,

implementation expert, and others as needed.2. Obtain customer requirements including target price3. Survey substitute products on market4. Survey competition’s capabilities/likely responses5. Review alternative solutions that can meet requirements6. Analyze differentiators, and level of change versus risks7. Converge on solution and write spec sheet8. Document execution plans, by each team member & key

department in detail (commitments)9. Time-line10. Cost analysis11. Sales & profit forecast, including target customer info12. Signature page13. Execute plan (manage project)


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.


What Some Product Development Pipelines Look Like


What an Organized Product Development Pipeline Looks Like

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5Intro Checklist

OSP Checklist

Small Business & Entrepreneurship

Product development