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Find Value in the Forest, Not the Trees

October 12, 2016 By Bill Kline

Developing and delivering successful products and services is a monumental task requiring precise planning and execution plus an element of good fortune.  Product managers and designers often focus on packing the new product full of the latest, best, and most desirable features only to have the product fall short of expectations in the marketplace.  Market success is elusive.  Failure is often attributed to poor product specification, poor product design, poor implementation or competition.  While these may all be contributing factors, failure is always due to a lack of meaningful demand for the product or service produced.

Find Value in the Forest, Not the Trees

While there are many tips and tricks for undertaking a structured approach to developing, producing and commercializing a successful product, our work at IOI Partners suggests there are three main elements common to all successful products:

  • the right product design including the right set of features,
  • a great business model, and
  • a capable organization mobilized to take the product to market.

While there are numerous examples of flawed products that have realized success in the marketplace, a gap in any of these areas generally leads to failure.  Having the right product design and the right set of features means you truly understand the Customer Value Proposition (CVP).  A great business model focuses on the CVP and exciting a customer base to buy and buy more of the product.  A good CVP describes why customers will buy or use your product or solution—not why you want them to purchase or use it.  Far too often product managers and designers focus on the internal view of why we want customers to love our products versus understanding what really motivates customers to buy and use our products.

A well designed and engineered product can be derailed by a flawed business model.  The Internal Value Proposition (IVP) ensures that the organization is aligned and benefits from delivering the product to market.  In many cases, an unsupportive organization doesn’t embrace a viable IVP resulting in the organization itself standing between an exciting new product and the marketplace.   The most common reason a good product fails in the market is the lack of alignment within an organization around how to deliver and capture value.  This is often the result of conflicting priorities within the organization with different functions having alternate views and metrics for how value is created for the business.

Success comes from focusing on developing the alignment and synergies among the three areas and not focusing too narrowly in any one of them.

There are numerous examples of colossal product failures or missed opportunities: Kodak’s digital camera, Apple’s Newton, “New Coke”, McDonald’s Arch Deluxe, Sony’s Betamax, etc.  In many of these cases, another competitor captured significant value for the same or similar product.  In every case, failure can be attributed to either not understanding the value of the product to customers (CVP) or to the business (IVP).

The Keurig Kold is one of the latest case studies of a new product destined to be a blockbuster hit that ceased production and offered customers refunds after nine unsuccessful months in the market.   The Keurig Kold was designed to be an extension of the successful Keurig concept of the convenience of home-made, single serving coffee drinks.  The Keurig Kold seemed destined to be a hit—it built upon the strong Keurig brand and partnered with the biggest drink brands to provide fresh, single serving soft drinks to consumers.

So what went wrong?  An overly ambitious focus on the on-demand single serving drink segment at a time when the market is shifting away from soft drink consumption and a major miss with the higher level alignment of product features and price.  In hindsight, it would seem the product specifications were suspect and the design was lacking.  Clearly the CVP from a customer viewpoint was missed and it isn’t entirely obvious what the IVP was, if one existed at all?

Creating and delivering value in new product development is a delicate and difficult assignment. While value to customers is comprehensively studied within academia and industry alike, rarely is the impact of corporate culture and capability considered as a significant contributor to product failure in the marketplace.  In our experience successful companies undertake exhaustive efforts to understand the customer value proposition but do not apply the same rigor to understanding or acknowledging the internal value of an innovation.  This knowledge gap is often the primary contributor to failures in the marketplace. If you find your business overly focused on ensuring you’ve got the right product elements or features, it’s time to step back and take a broader look at the product, business model, and organizational factors that may ultimately determine success.

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Filed Under: Innovation, Product Design & Development, Strategy & Business Development Tagged With: Corporate Strategy, Delivering Innovation, Portfolio Management, Value Creation

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About Bill Kline

Bill Kline is the Associate Dean of Innovation and Professor of Engineering Management at Rose-Hulman.

Full Bio | Articles by Bill

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