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The product development newsletter no 2 |
| Topic: What makes for success, part 1 |
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| The key factors that make firms’
product developments successful |
| Before we start to discuss how to do it in detail, it’s interesting to
reflect on the results of our initial research. We found that unless certain
factors are in place in a company, the system produces poor results even if
you have the best internal systems and processes in the world. If the
culture won’t support them, they corrupt and get operated in a way that was
never intended. We found that ‘soft’ issues determined the success of the
‘hard’ issues. |
| When we researched what made the difference between the good, the bad
and the ugly, we came up with two complementary sets of data. We found that
the topic had been researched several times over during preceding decades
and (surprise) the answer came out the same every time. It illustrated the
definition that: ‘History is that man doesn’t learn history’. |
| Fist, a set of factors needs to be in place in order that your product
development process succeeds in meeting its aims. These are controlled from
the top and, if they’re not in place, staff at lower levels are hard pressed
to do much about it. |
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| Factor 1: Unless the chief exec is passionately interested in the
product rather than just in being a leader (or a 'company trader'), product
development efforts tend to be mediocre. |
| Often, the leader (a 'company trader') concentrates on growing by
acquisition. If a company doesn’t perform, let’s just divest and acquire
another that does. Unfortunately 70% of mergers and acquisitions turn in
poorer financial results than before the two organizations merged, sometimes
forever. (Good recent example - Daimler Benz and Chrysler.) |
| And we found that firms concentrating on M&A activity tended to be less
interested in improving their own internal operations. The attitude was,
"... if my managers don’t operate well, I’m just going to sell the whole
operation and buy another with good managers that producing results." |
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It's hard enough to get an organisation to run really well; it's even
harder to discover why the one you think you'll buy is running well. Often,
upon purchase, it ceases to run as well as you thought; for reasons that
make another fascinating story. |
| By contrast, if the chief were passionately interested in the product,
the company would usually grow organically. Profitability would remain
steady and gross profit increase with controlled, manageable, steady growth. |
| And the same interest nurtured the lieutenants and encouraged continual
improvements to how it operated. Usually an open no-blame culture went with
this. Result: good financial growth by the company’s own efforts - far
better than the M&A enthusiasts. And sometimes a higher spend on product
development that rivals. Or more usually, more effective use of the budget
to produce far better results than rivals. |
| This first factor set the scene to achieve the next three. |
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Factor 2: The most successful have excellent detail knowledge of
their markets and customers. |
| They know exactly why their customers buy their products and therefore
what new products they should develop. They realise which market sectors
will produce the best returns and concentrate their efforts to tackle them
first (like Signor Pareto). |
| They also understand which customers provide the bulk of their profits
and nurture them. They spend less time on the here-today-gone-tomorrow or
opportunistic bargain seekers - they still sell to them but realise it’s not
profitable to devote a lot of resource to nurture them. Why? Because they
may never be the main source of wealth. |
| The best even know why their competitors do not buy from them, so they
keep their own market share under control. |
| Interestingly, the Chartered Institute of Marketing research indicates
that only 1 manufacturer in 20 knows how to direct its effort to get this
market and customer knowledge. Most look to see what others do then try to
make a cheaper copy (often unsuccessfully). Or they have their own
hare-brained schemes that few want to buy. Sometimes it works (e.g. the
Range Rover) but usually it doesn’t (e.g. the Sinclair C5). |
| Next month we’ll continue this set of factors that are required for
success. These are really the ‘soft’ cultural issues. Unless these are in
place, the detail process invariably goes wrong. |
