Defining your (digital) product innovation strategy
Your product strategy describes (at a high level) what you hope to achieve with your products, who your products are for, and how they will benefit by using your products (and services).
Thinking about the product’s lifecycle is key!
“Knowing is half the battle.” GI Joe
The other half is doing something about it; it’s time to make a plan and getting it done!
Just as you need to define an overall strategy for your business that helps you achieve your Purpose and Aims, so too must your product strategy.
Product strategies answer questions like;
- Who will buy our products, and why will they do so (value/outcomes/jobs)?
- How will we position and differentiate our products, or what is our unique selling proposition?
- The company’s business aim with the product?
- How will we address gaps in our product portfolio to ensure the organization achieves its Aims?
With the last item on the list, organizations can harness their imagination to take the organization into the digital age.
The product innovation strategy described here should eventually become an integrated part of your product strategy. Still, because it’s a new concept, some organizations only use it as part of their product strategy. This part, however, will and should have a significant impact on all your product strategies if you want to transform your organization digitally.
Using your mapped products on the product lifecycle chart (see previous articles) becomes a handy tool when defining the product innovation strategy.
But before we do that, let us have another look at the product lifecycle (chart) in general.
The product lifecycle, as you know, it represents sales volume over time. It is never as pristine as we (or Rogers & Moore) showed it, and the shape can be substantially different. However, if you average the cycle for all products, it is likely to look like the theoretical curve in Roger’s original work.
I have not met any executive or manager that do not attempt to change the curve of their product lifecycles. Organizational product strategies devote most of their time to achieve this — but what do we mean?
I think all will agree that the longer the demand curve continues, the better for the organization. The upward slope in the product lifecycle represents the ideal situation.
Strategies to maintain this part of the product lifecycle are a significant focus when developing product strategies.
If you think about the automotive industry as a perfect example for achieving this — let’s look at what they do.
A company launches a new model — it may have the same name as a previous product sold. Still, new models tend to be redesigned from the ground up, quite often revolutionary, and if not, that offers a significant improvement on the previous model.
Two to four years in — the company announces the NEW CAR, which in reality is nothing new; there are a few improvements, the model got a facelift, and some power and paint. However, the difference is enough for customers to notice and has vanity appeal (I don’t want to be seen in an old model). The facelift may be enough to help the company to compete with making a relatively small investment in improvement and giving the model a facelift.
Most manufacturers can do this two or three times before they once again need to release an entirely new model re-engineered from the ground up.
Don’t assume this happens by accident — motor manufacturers are masters at the technique we propose you start using.
Now, in the context of this article — giving your products a facelift MUST focus on enabling a digital and social experience of your products. These are often bolt-on’s that works perfectly at the user side (and it must work perfectly from a user experience perspective), but maybe the back-end is not that slick.
Don’t get us wrong, if you can do slick on the front and back end, do that by all means, but if you have to choose where you get it slick because of resource limitation — always select the customer experience!
You can do this most probably twice before you really need to replace your product with a newly — digitally designed and ‘built from the ground up’ product.
The innovation techniques you should use to get this right are SUSTAINING INNOVATION techniques. (We will, in a later article, zoom in on which innovation techniques work best where and when).
If you get that right, the curve will look something like this!
You will most probably see a much steeper decline in sales once you have crested the wave, and it’s logical — there are just so many better offerings out there for the price!
But is there something you can do to make the tail longer?
Absolutely, the easiest is the price, and you will inevitably have to cut your sales price, but there is another alternative; reduce your cost of production and support. The types of innovation techniques best used here are EFFICIENCY INNOVATION.
Because efficiency innovation links closely with operational improvement and techniques used to achieve efficiencies as scale, we will only cover efficiency innovation techniques later in the series in more detail!
There are two other interesting phenomena on the downward tail; the first is a small group of customers that don’t want to change. The second is a small group because they cannot change, your product has a unique feature (normally not part of the main features) that no one else has, or the alternative is just too expensive.
This group of customers brings unique opportunities. It is relatively easy to switch users to reduced functionality or a SAAS offering in the software world. But when identifying those with a particular need, it’s an ideal opportunity to create an entirely new product that serves their requirements and, as far as possible, enables them to do all of their jobs using your product!
We have mentioned before that entirely new products usually will have a small enthusiastic following, but most don’t seem to make it across the chasm.
Moore advised to focus on a pragmatist with a burning need and solve their specific problems with your product.
You have just identified such a customer. They are not conservatives or laggards by choice. All of their other behavior would most portably indicate that they are indeed a pragmatist!
We are talking about strategy here, but we will deal with the HOW to get this done in a future article!
There are other ways also to find pragmatists with problems (pain).
In the article ‘Insights from simple data analysis, we showed an example of collecting data about customer jobs, and using that technique, we identified two underserved markets with unique needs.
By focusing on these groups of customers, you will often find that because they are using your product (which was not designed for them) to solve problems, they have other problems for which no product can help them do the related jobs! What a golden opportunity! A customer with needs no competitor serves!
No specific technique was defined for dealing with these customers (other than Moore’s guidance) by Rogers and Christiansen. Often, sustaining innovation techniques were (punted) used to try and serve these unmet needs. In our experience, these usually did not work.
The alternative was using disruptive techniques, but that constitutes a culture clash — even though these customers were are in pain — they are pragmatists first!
Before his death, in early 2020, Clayton Christensen started using a new term in public talks, ‘potential innovation.’ This seems to fit the bill, but we could not find a definitive explanation of what potential innovation really is. We like the term and concept, though, and we will use this name for what we do in this space (even though it may not be what Christensen intended).
So in this article, we have given you three things so far that you can choose as a strategic approach for products and services innovation projects:
- Improve the functionality of your current products, and digitize where possible. Focus on creating new digital experiences for your products, even if it’s messy in the background. You will find ways to deal with it! Make sure, however, that if there is a mess in the background, it NEVER impacts the customer!
- Focus on efficiency and improvement initiatives — mostly in the operations and back-office space. Find things that do not matter and kill them! In these circumstances, techniques like Lean or Six Sigma works wonders!
- Find people with unique problems that preferably already use your products and develop a unique offering for them specifically. Because they are already on the other side of the chasm, your chances of failing are virtually zero — that is provided that you listen, do the work and find a real solution!
The fourth category was sort of mentioned — we said that while motor manufacturers are extending the life of current models, with facelifts — in the background, these companies invest billions in R&D in coming up with the next best thing!
We as consumers don’t even think of breakthroughs in the auto industry as disruptive anymore (except maybe for Tesla because they were first to take electric vehicles seriously and went big with their production). However, many inventions in that industry were groundbreaking but truly disruptive as they changed the cost of competing and consumer behavior forever!
Organizations need to identify when to start working on the product that will replace their most profitable product while still growing and the most profitable! This is a tough thing to do!
It is the most difficult decision because the organizational immune system is programmed to reject this notion with everything in it!
Of the four categories of innovation, disruptive innovation is the hardest!
Disruption is not new; it has happened in all three previous industrial revolutions.
Disruptor — The Toyota Corona (T20) — the car that changed the automotive industry forever! For the first time in 1960 — everyone could own a car!
This article is part of a series exploring the use of Agile ADapT™, a Digital Transformation Method for incumbent organizations struggling to compete in the digital age.