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June 23, 2010
Business model innovation
8.00 – 9.00 am
University of San Diego
July 23, 2010
Free
webinar: Agile Strategy for New Ventures
An introduction to applying the principles of agile strategy to maximize new
venture success.
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The third and final stage of the Product Innovation Life Cycle is Evolution. The first two stages of our framework, Ideation and Commercialization, begin with idea generation and end with product launch. Having achieved initial market traction and breakeven operating results at the end of Commercialization, the Evolution stage includes the growth, maturity and decline stages of the classic product lifecycle. Evolution is about navigating these stages of the product lifecycle to create and extract the maximum value from your innovation over its lifetime.
Your overall product road map balancing existing products and the next generation of products will have been outlined in the business plan you developed in Ideation and refined in Commercialization. During Evolution, you will continue to update the product road map as needed to reflect the latest plans for existing products.
Key Evolution issues
Once a new product has reached commercial viability, many companies prematurely shift their attention and resources back to new product development. In so doing, they fail to continue to manage existing products with a cross-functional team. As a result, the key activities that enabled their new product development and launch success are not applied to the current portfolio. Product issues arise because of functional silos with little cross-functional communication.
In addition, companies that are ineffective in the Evolution stage fail to adequately adjust their product offerings to deal with rapidly evolving markets. Once you have "crossed the chasm" your product will repeatedly be exposed to shifting customer segment preferences and competitive attacks in the form of new products, feature enhancements or pricing actions. During this time you also have to adjust to internal changes in your overall product portfolio and performance.
Evolution core processes
The Evolution stage comprises three core processes: measure, refine and exit.
Measure
The first step is to develop and put in place a series of key internal and external metrics to track performance as well as the product's demand and competitive environment. Your goal is to continually monitor and opportunities or threats that may require improvements or modifications to your product strategy.
Customer metrics
Your customer metrics should cover both current customers and target customers. For current customers, study adoption rates and patterns, together with the overall customer experience for the product offering. Assemble information on customer satisfaction through comments, feedback, and support interactions, to understand if your customers are deriving maximum benefits and value from your offering. For target customers, track marketing communications reach and response rates for the product, together with sales cycles and sales conversion rates.
Competitor metrics
During the ideation stage, you spent time mapping out your ecosystem to identify your competitors. Using this information, track your competitors' market penetration, product offering changes and competitive actions. Beyond your direct competitors, keep an eye on companies occupying "upstream" and "downstream" positions on the value chain as well as complementors - those companies that make owning your product more (or less) attractive.
Internal metrics
Continually monitor key financial and operational metrics for the product, particularly revenue, pricing, margins and sales and marketing costs.
Metrics should be reported and reviewed regularly. At least once per quarter, the cross-functional product team should meet to review these metrics and identify issues and opportunities that need attention.
Refine
Once a potential problem or opportunity is identified, clearly define the issue, identify the underlying cause and explore available courses of action. As always, use a fact-based approach to problem-solving that minimizes guesswork.
Successful companies see these issues as a chance to further innovate. Market conditions change continually, and your product offering will need continual refinement. You goal is to remain nimble and dynamic, but at the same time to act wisely and with a long-term view. Some refinements will be minor adjustments, whereas others may be more significant adjustments in product focus or positioning.
As in previous stages, the main "project tracks" are product, market and process (operations). In a similar fashion, once an issue has been identified, follow a systematic "develop, test and launch" mini-process. Potential refinements may include:
Product
- Product offering / feature enhancements / design improvements
- Pricing / promotions
- Positioning
- Bundling
- Ancillary services
Market
- Market focus
- Sales and marketing programs
- Partnership opportunities
Process
- Operational processes
- Customer experience
- Cost reduction.
Normally the longest phase of the product lifecycle is this measure / refine phase. Done well, your products can be continually refined and deliver value for years, going through multiple revisions and continually finding "new life".