Marketing & Sales Roundtable Pragmatic (Start-Up) Product Planning May 2004

1. Marketing & Sales RoundtablePragmatic (Start-Up) Product PlanningMay 2004

2. Agenda – Pragmatic Product Planning • Definitions • Benefits and Issues • Inputs • Top 10 List • Appendix • Sample MRD

3. Product Management Partner, Customer Research Sales Analysis, Forecasting, Pricing ProductLifecycle End-of-Life Planning Market, Competitive Analysis

4. NPP1 NPP2 NPPE1 NPS4 Product Planning Hierarchy Roadmap Product Plan Gate #1 Gate #2 Gate #3 Gate #4 MRD PRD EngineeringSpec Plan of Record (POR) Launch Plan Gatekeepers = Executive Committee

5. BOD, Executive TeamAlignment Clear Direction to Development Team Risk Analysis,Mitigation Product Planning Early CustomerBuy-in Lower CostDevelopment,Fewer Revs Faster Time to Market and Revenue Total Product Planning Issues

6. Product Planning Process Issues • How to instill structure and process in the product planning function without introducing bureaucracy? • How to get sales input without handing over control? • How to balance customer-specific requests with market and competitive input? • How to give the detail needed for product development without developing a full functional spec? • How to limit the number of releases to match development and marketing resource constraints? • How to mitigate product slips? • How to manage internal buy-in and approvals? How to reset expectations due to dynamic requirements/changes and slippage? • How to ensure product planning is part of strategic roadmap? • How to develop a product with an offshore team involved?

7. Research Sources and Uses Corporate Positioning Process New Product Planning Process Lifecycle Management (Financial Modeling) Product Strategy Marketing Product Management Subscription Market Research Custom Surveys Qualitative Feedback Competitive EmergingTechnologies • Market analysts (IDC, Gartner, etc.) • Financial analysts • International? • Customer Sat • Channel calls • Shows/Events • Reg base, key accounts • Lost accounts • Annual Summit • WW Channel, Customer Advisory Boards • Trade magazines • Lab analysis • Web • ‘Crush’ • Supplier visits • Technology Advisory Board

8. Product Planning: Top 10 List #10: Segmentation (market and customer) and product roadmap are the foundations of product planning • Becomes filter for all product concept and feature requests #9: Qualitative research with opinion-leading customers in target customer segment is most important research component • Once identified and tested, build relationships for alpha input, beta program and ongoing advisory #8: Market and competitive research complete the requirements, competitive and financial picture • Qualitative input from analysts, competitors, industry associations, customer councils, advisors, gurus, historical/analogue trends, etc. • Structured, time-limited process for input from sales, SEs/FAEs, executives

9. Product Planning: Top 10 List (cont’d) #7: Product manager, VP marketing own the product planning process • With ‘meeting of the minds’, and formal approval process with engineering and sales VPs, CEO, founders and a defined cross-functional team #6:Detailed financial model must substantiate business opportunity:BOM, development budget, sales forecasts by quarter, lifecycle pricing , discounts, marketing budget, etc. #5: Two major releases/new products annually • Develop a theme/concept/name for releases with feature groups that address/anticipate specific market needs – not ‘bug fixes’

10. Product Planning: Top 10 List (cont’d) #4: Establish ‘total product’ features as market requirements for release • Support plan, partner/channel strategies must be executed in parallel with development #3: Define clear executive (board?) review and approval process • Formal presentation and sign-off, with regular reviews as dictated by risk assessment, development progress and market dynamics #2: Include launch strategy, plan outline, budget to engage development team and reinforce delivery expectations • Go/no go dates for key launch expenditures and events

11. #1: Product Planning is a Contact Sport!

12. Summary • It’s not necessary to turn product planning into a bureaucratic process, but • It does need to be built upon customer segment requirements • Higher probability that you’ll get the product right, the first time

13. Appendix

14. Sample MRD Outline Preface - The development of a Market Requirements Document (MRD) is a critical first step in any new product planning effort. The MRD provides a business view of the market requirements and environment. It also serves as the foundation for the creation of detailed product requirements/engineering specifications, and the starting point for release and launch planning. The MRD in the Product Planning Process MRD PRD Engineering Spec Plan of Record (POR) Release (Launch) Plan

15. Sample MRD Outline When to Create/Refine an MRD • New product planning • Product enhancement or extension planning Objectives and Uses of an MRD • Confirm market/customer need and opportunity • Ensure product strategy development and refinement is market- and customer-driven • Evaluate potential business model options and opportunity for ROI • Identify potential partner categories and requirements in timely way • Understand barriers and risks • Product reviews (review and refine MRD assumptions on quarterly basis) • Allocate resources Risks of Not Producing an MRD • Technology risk • Technology won’t work as envisioned • Key component not available • Product risk • Wrong product • Wrong price point • Market risk • No market – ‘technology looking for problem’ • Established market – ‘me too product’ facing entrenched competition • Unattractive market – not big enough to be interesting • Business risk • Too expensive to develop (time and $$) • Not profitable to manufacture and sell

16. Sample MRD Outline MRD Outline • Product Overview This section of the MRD introduces the product concept and structure. Also outlined here are assumptions regarding key requirements, release schedule and potential risks and dependencies. • Product description (high-level) • Market category • What is it (Component/SW/HW/System, usage)? • Where does it fit in the market (per industry/market analysts’ schema)? • Product category name (e.g. PC, PDA, Infrastructure SW) • Architecture/Core structure • Component – block diagram • HW – processor, OS, storage, NW, etc. • SW - server, client, modules • System – HW, SW, NW, etc. • Key features and capabilities • Problem addressed and benefits provided by the product (prioritized in order of importance to customers) • Value proposition • Other market requirements identified but not essential to this rev • Product release schedule • Alpha • Beta • Release (general availability) • Risks and dependencies • Technology – development feasibility, component availability • Product - performance • Market – timing, competition, etc.

17. Sample MRD Outline • Product Strategy • Strategic goals/objectives for the product • Role of product in the company’s strategy • Financial goals • Market vision • Why is this product important to potential customers now and in the future? Why can it be the basis for a sustainable company versus just a point product? • Market trends/drivers • Technology enablers • Market segment problem being addressed by the product • Targeted market(s) • Market segment – Who has the problem being addressed (broadly), and the most critical need to get it fixed? • Market segment development roadmap – potential customer segments (prioritized to the extent possible) • Critical need drivers – ‘must-haves’ versus ‘nice to haves’ • Sample usage scenarios • Current solution(s) to the problem outlined in B-3 and their deficiencies • Priority requirements - table stakes – e.g. standards support, integrate-ability, performance, etc.) • Barriers to adoption – for all participants in the product category, and those specific to company • Market size and growth rates (3-5 year CAGRs) – See Appendix A for definitions • Total Available Market (TAM) • Served Available Market (SAM) • Competitive Landscape • Primary competitor categories (direct/indirect, current/future) – strengths and weaknesses • Company/product differentiation against each competitor category

18. Sample MRD Outline • Product Strategy - Cont’d • Partnership strategy by category type • Technology • Product • Marketing • Sales/distribution • Other? • Marketing Planning Assumptions • Communications strategy • High-level message model - key points related to market, technology, product, company • Market leverage model – categorization of market influencers and strategy for reaching them • Beta program • Objectives • Criteria to select beta customers • How many and what type • Duration and management of program • Launch strategy (Objectives and key milestone - detailed plan comes later) • Sales channel strategy (role of direct versus indirect) • International strategy – what, if any markets will be addressed in the first release

19. Sample MRD Outline • Product Requirements This section outlines product development priorities in more detail, and includes preliminary assumptions regarding future releases and/or product extensions. In the event that the company’s product planning process does not include the creation of a PRD, this section is used as the foundation for the development of engineering specifications. • Priority 1 features and capabilities (identify which are mandatory for first release) *See Appendix B for sample list of key elements to be addressed in core product and in support of the product. • Priority 2 features and capabilities (highly desirable but may not be committed to yet) • Future requirements (may be included in future releases but not committed to at this point) • Features that will not be implemented (with explanation of why) • End-of-life strategy/plan • Financials This section should demonstrate that the company has thought through the key financial considerations and include an Excel model demonstrating an attractive business opportunity given estimated (best guess) revenue assumptions and development, manufacturing, sales and marketing costs. • Bill of materials (preliminary make or buy assumptions for key components) • Development budget • Customer adoption scenarios (how many, over what period of time) • Business model/pricing assumptions (over time) • License versus subscription/hosted pricing • System versus component (HW/SW/Service) pricing • Sales process • Revenue targets and discount structures by channel • Sales cycles • Marketing budget

20. Sample MRD Outline • Cross-Functional Project Team (Roles, Responsibilities, Timeframe, Point Person) The product planning process should involve representatives of most functional areas/departments. This section should outline the roles and responsibilities of each department, identify a departmental point person and highlight the points at which his or her input/involvement are required. • Development/Engineering • Marketing • Support • Operations • Sales • Legal • International Approvals and Certifications

21. Sample MRD Outline Appendix A - Glossary of New Product Planning Terms

22. Sample MRD Outline • Appendix B – Sample List of Features/Capabilities * Sample list of elements to be addressed and prioritized in development and communications plans (What are table stakes/must haves? What are differentiators?) • Core product features/functions • Product performance metrics (relative improvements), dependencies • Uptime and QoS • Regulatory certifications and adherence to standards (e.g. platforms and protocols supported) • Compatibility/interoperability (backward and forward) requirements and testing • Bugs/fix requirements • Internationalization (e.g. Unicode-enabled) • Documentation requirements and plan (users, developers, etc.) • Next generation architectural changes • Environmental (e.g. ISO 1400, recycling, etc) • Maintenance and technical support requirements

23. Presenters • Liz Arrington, Consultant Market Focus 650-329-0823 liz@mktfocus.net • Patty Burke, Consultant Market Focus patty@mktfocus.net 408-398-4921 • Rosemary Remacle, Consultant Market Focus 408-244-0412 rosemary@mktfocus.net