What is the effect of today's economy on launching new products?

In economic times such as these, we must focus on speed and profit. Speed, because companies must get to market faster to remain competitive or even survive. Profit, because companies need to reach the target market using the strategy, messages, business models and timing that will maximize revenues and minimize costs. Not only does this apply to the launch phase, but to the entire new product cycle. My new book, "From Idea to Launch at Internet Speed: How to Identify and Develop Profitable Opportunities" contains the latest new product management strategies and techniques - to reach your market faster, and to reap greater profit. This issue of The Launch Forum features key highlights from the book.

On the new product cycle and new product ideas (from Chapter 1):
The “Internet Era” refers to the business cycle that began in the late 1990s, when the Internet and related technologies started to be used on a widespread basis in the corporate world. We are still at the very beginning of this era, but Internet technology has already started a great shift in how businesses operate, collaborate, and conduct commerce. However, in order to be profitable in today’s economy, it is still necessary to employ solid business basics: controlling expenditures, serving customers, and generating demand. In the Internet Era, we still have the same product cycle to deal with, but the whole cycle is very compressed.

Innovation and new product development have always been essential parts of the life cycle of companies; when innovation stops, companies die. Before the Internet Era, companies typically followed a formal or informal procedure for defining and screening new product ideas, followed by an often-lengthy product development phase. When the new product was sufficiently developed, a promotional plan was prepared and the product was deemed ready for launch. This sequence of events lasted from 18 to 24 months – an eternity in Internet terms. Today we don’t have the luxury of that much time, nor do we have the resources to sustain an effort for that long. Everything is compressed; in some companies the idea-to-launch process happens in as little as six months.

How can companies do this; must they sacrifice any semblance of process in order to do all of this challenging work in just a few months? That’s not a desirable scenario. When companies don’t follow a process, and instead select ideas based on the gut feel of the CEO, the VP of Marketing, or the VP of engineering, ideas quickly land in the development organization, often without any market research to justify the product specifications. During development, a marketing executive then puts together some quick promotional plans, and then the product is launched – to a market that often is unmatched to the product attributes. Everyone is in a hurry. What happens? Sometimes companies get lucky, and the product takes on a life of its own. More often, the company incurs added expense and loses time because they have to modify or completely redesign the product or a marketing campaign, or in the worst case, start over from scratch. This can be very confusing to the marketplace. Additionally, because of the time lost, competitors may enter the market and eliminate any competitive advantage the company may have had.

The only way for companies to succeed at new products in the Internet Era is to use an effective process and get to market quickly. The process must be simplified and streamlined, and must be driven by the business criteria that will generate profit for the company. Speed and profitability are the keys for survival and success for the Internet Era.

On criteria for selecting the best new product ideas (from Chapter 2):
The best criteria are those that fit your company’s strategic objectives and that will help generate revenue and profit. You need to find the right specific criteria that will enable you to select the ideas that measure up to your standards. There are a wide variety of business criteria that can be applied in evaluating new product and venture ideas. I believe there should be at least three major measures of a new idea: financial, marketing-related, and strategic. Will the idea generate revenue and profit for the company? Does the idea address a real customer need and is the market ready for the idea? Does the idea fit the way you do business, and do you have the ability to take it to market?

In this book, I have described six major criteria that relate to these major measures, and there is a chapter on each one that explains why it is important and how to apply it to your situation (Chapters 3-8).

THE SIX MAJOR CRITERIA
--Strategic Fit – does the idea fit your company’s culture, core competencies and business objectives?
--Customer – who is the customer? what is their problem and value proposition? what is the customer profit value to your company?
--Competition – what are the alternatives and substitutes? what are the competing companies and products? what is the competitive environment for your idea?
--Market – what are the key market trends? what is your target market size?
--Resources – what is the impact of the idea on existing technology and people resources?
--Profit – what are the profit goals and metrics? what revenues are possible? what costs are required to take the idea through to launch and beyond?

On choosing market strategies (from Chapter 9):
A market strategy provides the high-level, overall framework for how you will get to market and how you will position your company and product in the market environment. Developing effective market strategies in the Internet Era is a matter of learning from strategies of the past to identify what worked and what didn’t, especially the strategies implemented by dot-com companies in the last few years. Today, it may be a matter of combining the best elements of what has worked before with newer elements to formulate ‘hybrid’ strategies. It is also important to be willing to change strategies as external conditions change.

During the idea and validation phases for a new product, the preliminary market strategy should be formulated at a high level, using generalized information gathered about the customer, market, and competitive environment. The market strategy should be further expanded and refined while the new product is in the development phase, in response to changes that occur in the external market environment. In the month before product launch, the market strategy should be finalized, so it can be included in the marketing plan that is written prior to launch. The market strategy then forms the basis of the marketing plan for the product and contains the specifics of the customer, market environment, and competition, positioning, and marketing programs to be used in launching the product. All of the elements of the marketing plan should support the implementation of the finalized market strategy. Later on during launch or after the product is already being sold in the marketplace, the market strategy may change. If that occurs, it will likely require changes in the marketing plan as well. The market strategy always drives the marketing plan.

In this chapter are four hybrid market strategies for you to consider; they include: -Divide and conquer through partnering -Niche differentiation -Incremental personalization -Viral evolution: growth through referrals
These strategies contain elements of some past and current strategies that apply to today’s environment. All four have an element of customer focus, as well as consideration for the whole product.

On business models (Chapters 10 and 11):
A business model is a framework that describes how your company does business and how you get your product to your customer. A business model map is a diagram of this framework that shows your company, your customer, your suppliers, and other partners involved in getting your product to your market.

Creating a business model and thinking it through forces you to find the gaps where you will need to establish new business relationships with partners or suppliers. Business model mapping helps to refine your overall market strategy, so that you can readily identify the path of how you will get to the market and who will be needed to get to market. It’s also a good way to compare different distribution channels, in order to choose the partner that will be of greatest economic benefit to your company. Later on, when the product is launched and the business model is being followed, the business model map can be used to evaluate channel performance in order to decide the optimum mix of partners for profitability. Business model mapping is a key planning tool for the entire new product cycle.

Several decades ago, there was only one basic business model that every company followed. No company dared to experiment with creative and innovative ways to get their products to their customers; after all, if it wasn’t broken, why fix it? In the last few years, the beginning of the Internet Era, there has been a dramatic increase in the variety of business models that companies have chosen to use – some successfully and some not so successfully. The business models of the post-boom Internet Era are an interesting blend of the old and the new. Supply chains are still with us, but today suppliers might link directly with your company over a network, or they might participate in a global online exchange. Distributors and other channel partners still resell products, but with many new business models the role of channel partners has been curtailed or eliminated, as companies instead sell directly to customers online. In many cases, distributors have stayed in business only by becoming more creative and offering value-added services such as inventory management or customer support. Companies still sell directly to customers and also through indirect sales channels, just as they have in the past, but they may be changing their mix of sales channels by selling more products directly to customers online.

Every new product needs its own business model. During the idea validation phase of the new product cycle, research done to characterize the customer, market, and competition will provide valuable clues as to which business model would be most effective for the new product. When the new product enters the development phase, the business model needs to be chosen, and all relationships with external entities should be established. Sometimes an existing business model used by the company will work for a new product, and if it does, great. However, companies should view a new product as an opportunity to examine the current business model to see if there are ways to introduce efficiencies and provide more value to the customer.

On marketing programs and leveraging the web: (Chapters 16 and 17):
In the Internet Era, a speedy time to market is essential for survival and competitive advantage. The marketing programs that are fast to implement and most effective in building awareness and moving customers through the entire buying cycle are the best ones to use today. Building awareness requires that the right promotional message be delivered to the right customer at the right time. Marketing programs must be targeted and must deliver messages consistent with the customers’ value proposition - down to the level of the individual customer. Other constituencies who influence the buying cycle must also receive a consistent message, which means that the appropriate venues must be used to deliver the messages.

The chief lesson from the dot-com boom and bust was the need to focus on profitability, especially when planning marketing programs. Spending millions of venture capital dollars on expensive ads, with no solid business model in place to make money, just does not work in today’s economic environment. Each marketing program must be examined in terms of its cost to implement, its effectiveness in reaching the target customer, and the likelihood that it will result in revenues. One way to start the evaluation is to review the marketing effectiveness of previous marketing programs for similar products. If a program doesn’t get the right message to the right audience, it’s not going to generate revenues, or ultimately, profit.

Using the web as a marketing venue today is no longer an experiment, it’s a requirement. Marketing programs that are deployed via the web are less expensive to produce and update, and web content can be deployed much more quickly than print media. That translates to faster time to market and greater profitability. That doesn’t mean that you should abandon printed marketing materials, because they still serve important functions in the overall marketing program portfolio. However, the company website and intranet should be viewed as marketing assets of the company, and they should be leveraged extensively during the launch phase of a new product.

Marketing collateral for the new product that is intended for the external marketplace should be placed on the company website. This collateral may also be printed later, to be used by the sales force and given to customers. If the company has e-commerce capability, sales and ordering information also must be added to the website, so that customers can order and purchase the new product. Press releases and other public relations material should also be posted on the website and sent out via online press and media networks. The company’s intranet should be used before launch to help train sales people and channel partners about the new product. The launch manager and launch team can also use the intranet as a centralized workspace for all launch deliverables and monitoring of status.

Look for more articles based on my new book in future issues of The Launch Forum.

In the meantime, may all your launches be speedy and profitable!

Catherine Kitcho
The Launch Doctor