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Product Strategy I. T-109.410 Technology Management 21.10.2004 Eino Kivisaari Researcher, M.Sc. Technology Management & ICT Business . ”Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful.”

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Product strategy i l.jpg

Product Strategy I

T-109.410 Technology Management

21.10.2004

Eino Kivisaari

Researcher, M.Sc.

Technology Management & ICT Business


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”Product strategy begins with a strategic vision that states where a company wants to go, how it will get there, and why it will be successful.”

”Product strategy is like a roadmap, and like a roadmap it’s useful only when you know where you are and where you want to go.”

(McGrath 2001)


Slide3 l.jpg

Competitive Product Strategy states where a company wants to go, how it will get there, and why it will be successful.”

  • Competitive Strategy Fundamentals

    • Price-Based

    • Product Differentiation

  • ”Product differentiation strategy provides the primary source of competitive advantage for most high-technology products” (McGrath 2001)


Michael e mcgrath l.jpg
Michael E. McGrath: states where a company wants to go, how it will get there, and why it will be successful.”

  • Product Strategy

  • for High Technolgy Companies

  • Not available at HUT library

  • Amazon et al ~35 €


Topics of this lecture l.jpg
Topics of this lecture states where a company wants to go, how it will get there, and why it will be successful.”

  • Product Platform Strategy

  • Product Line Strategy

  • Leveraged Expansion

  • Sustained Differentiation

  • First-to-Market vs. Fast-Follower Strategy


What is product strategy l.jpg
What is states where a company wants to go, how it will get there, and why it will be successful.”Product Strategy??


Product platform strategy l.jpg
Product Platform Strategy states where a company wants to go, how it will get there, and why it will be successful.”

  • Platform is an architecture of the common elements implemented across a range of products

  • One element in the platform usually represents a defining technology

    • Dictates life cycle, capabilities, limitations

    • Important to understand the role of a defining technology

    • The choice if defining technology is perhaps the most critical strategic decision that a hi-tech company makes


Product platforms l.jpg

Product 1C states where a company wants to go, how it will get there, and why it will be successful.”

Product 1

Product 2

Product 3

Product 1B

Product 5

Product 1A

Product Platforms

Unique product elements and common channel elements of product line

Segment A

Segment B

Segment C

Element A

Common Platform

Elements

Element B

Element C

(McGrath 2001)


Benefits of platform strategy l.jpg
Benefits of Platform Strategy states where a company wants to go, how it will get there, and why it will be successful.”

  • Focuses management on key decisions at the right time

    • Simplifies the strategy processs, helps concentrating on critical decisions

  • Enables rapid & consistent product development

  • Encourages a long-term view on product strategy

  • Can leverage operational efficiencies

    • Manufacturing costs

    • Design costs

    • Makes marketing and support easier


Example of product platforms l.jpg
Example of Product Platforms: states where a company wants to go, how it will get there, and why it will be successful.”

  • Apple Computer Platform:

    • Mac OS

    • Motorola processors

    • Easy-to-use GUI

      Which are supporting, which are defining technologies?


Open interfaces in product platforms l.jpg
Open Interfaces states where a company wants to go, how it will get there, and why it will be successful.” in Product Platforms

  • A product portfolio based on open interfaces

  • Allows other manufacturers to participate

  • Gives the company a smaller portion of the entire market, but…

    …makes the market significantly biggerA piece of a big cake may well be a lot bigger than the small cake!


Examples of open interface strategy l.jpg
Examples of states where a company wants to go, how it will get there, and why it will be successful.”Open Interface Strategy

  • Sun Microsystems: Java

  • Nokia: Symbian

  • Intel: AGP

    Motivation in each case: to enlarge a market where you are a rather strong player yourself


Product line strategy l.jpg
Product Line Strategy states where a company wants to go, how it will get there, and why it will be successful.”

A time-phased plan for developing products from a common platform, each product targeting a specific market segment

  • The true potential of a platform strategy is extracted with an effective product line strategy


Product line strategy contd l.jpg
Product Line Strategy (contd.) states where a company wants to go, how it will get there, and why it will be successful.”

  • Covers all primary targeted market segments

  • Each product offering should be sufficiently focused

  • Time-phased scheduling / sequencing

    • all products cannot be released simultaneously

    • priorization

  • Similar products / product lines are coordinated

    • To avoid rework and confusion in marketing and among customers


  • Product line examples l.jpg
    Product Line Examples states where a company wants to go, how it will get there, and why it will be successful.”

    • Nokia Mobile Phones

      • Everybody knows what I’m talking about! 


    Leveraged expansion l.jpg
    Leveraged Expansion states where a company wants to go, how it will get there, and why it will be successful.”

    Case studies show that:

    The success of expansions to new product markets depends highly onability to leverage:

    • Existing market knowledge

    • Technical skills


    Slide18 l.jpg

    Maidique & Zirger (Stanford University, 1984): states where a company wants to go, how it will get there, and why it will be successful.”

    A study on 158 product launches (50% failed, 50% succeeded)

    The result: 8 Principal Factors of Product Success:

    • The developing organization, through in-depth understanding of the customers and the marketplace, introduces a product with a high performance-to-cost ratio.

    • The create, make, and market functions are well coordinated and interfaced.

    • The product provides a high contribution margin to the firm.

    • The new product benefits significantly from the existing technological and marketing strengths of the developing business units.

    • The developing organization is proficient in marketing and commits a significant amount of its resources to selling and promoting the product.

    • The R&D process is well planned and coordinated.

    • There is a high level of management support for the product from the product conception stage to its launch into the market.

    • The product is an early entrant.


    Examples of leveraged expansion l.jpg
    Examples of Leveraged Expansion states where a company wants to go, how it will get there, and why it will be successful.”

    • Texas Instruments: The Little Professor

    • Apple: PowerBook

    • Adobe: Acrobat

    • Microsoft

      • DOS  Windows

      • Windows + Internet  Internet Explorer & MSN


    Sustained differentiation l.jpg
    Sustained Differentiation states where a company wants to go, how it will get there, and why it will be successful.”

    …is achieved with vectors of differentiation that are significant to the customer

    • One very prominent featureor

    • An appealing combination


    High tech differentiation l.jpg
    High-Tech Differentiation states where a company wants to go, how it will get there, and why it will be successful.”

    • Unique features

    • Measurable benefits

    • Ease of use

    • Improved productivity

    • Unique fundamental characteristics

    • Design


    Unique features l.jpg
    Unique features states where a company wants to go, how it will get there, and why it will be successful.”

    • most commonly used

    • an ”easy” strategy

    • endlessly adding new features does not give sustained differentiation

    • can contradict ease of use


    Measurable benefits l.jpg
    Measurable benefits states where a company wants to go, how it will get there, and why it will be successful.”

    • reduced eletricity bill

    • longer recording time

    • faster Internet access


    Ease of use l.jpg
    Ease of use states where a company wants to go, how it will get there, and why it will be successful.”

    • A very important vector of differentiation

    • Sometimes technology advances do not deliver enhanced productivity, because of usability problems

    • A big challenge in an era when everything is integrated in a single device (mobile phone)


    Improved productivity l.jpg
    Improved Productivity states where a company wants to go, how it will get there, and why it will be successful.”

    • Longer battery life

    • Better quality (of voice communications)

    • More responsive UI

    • Technology advances complemented with good usability

    • Often a crucial factor in buyer’s decision making process


    Unique fundamental characteristics l.jpg
    Unique Fundamental Characteristics states where a company wants to go, how it will get there, and why it will be successful.”

    • Example: The imaging method of Polaroid cameras

    • Often protected by patents

      • If based on a special technology

    • Not so common in ICT where interoperability is a fundament


    Design l.jpg
    Design states where a company wants to go, how it will get there, and why it will be successful.”

    • More and more important in maturing markets…

      …such as mobile phones!

    • Hardware Design & User Interface Design


    First to market strategy l.jpg
    First-to-Market Strategy states where a company wants to go, how it will get there, and why it will be successful.”

    • Market share advantage

    • Earlier market & customer experience

    • Influence on markets and standards

    • Possibility to build entry barriers

    • Image benefits, a glamorous strategy

    • Big risks!

    • Somewhat problematic in ICT: as interconnectivity is the rule, market dominance can seldom be achieved

      • An exception: Cisco


    Fast follower strategy l.jpg
    Fast-Follower Strategy states where a company wants to go, how it will get there, and why it will be successful.”

    • Wait until market is clarified

    • Avoid market education costs

    • Nearer in time to eventual market, easier to predict

    • Ability to use newer technology

    • Fast means fast! The name of the strategy is not just ”Follower Strategy” 

    • Advantages of being fast: Jump ahead and stay ahead


    Slide31 l.jpg
    “Fast product development abilities states where a company wants to go, how it will get there, and why it will be successful.”enable sustained competitive advantage and ability to stay ahead competition”(McGrath 2001)


    Slide32 l.jpg

    See you next week! states where a company wants to go, how it will get there, and why it will be successful.”


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