Profits, Products and PromisesProfitable Product Selection

April 12, 2023

Our talk today is about business fundamentals used to select products for development. It’s important to be objective about the products we choose to develop. They have a major impact on our company’s profitability.

We won’t talk about any one selection process or method. We’re going to stick to time-honored basics that are a part of good decision making.

Real Quick…

What do we mean by ‘business fundamentals’?

For our discussion it relates to how we identify new opportunities and product lines.

This talk is intended to get you thinking about the basics.

Have the business fundamentals been

observed?

What is the launch budget and timeline

Is the right infrastructure in place?

… and so on

Ask the Right Questions!

From Our Product Launch Discussion-

The Importance of Fundamentals

Increasedcompany

revenue and profitability

Increased Brand

Equity and Awareness

Incredible competition these days

Low barriers to entry

Step 1- Create a Map

Mission- How we

attain our Vision

Roadmap- The Plan

and Direction

Vision- Our

Corporate Aspiration

Roadmap Examples

www.nestle.com

Vision Example

“To connect People to what's important in their lives through friendly, reliable, and low-cost air travel.”

www.southwest.com

Mission Example

“The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.”www.southwest.com

The Corporate Map

Will the product make a profit?

ResourcesDo we have the time and budget?

KnowledgeDo we have domain knowledge?

ValuesDoes the product fit our vision/mission?

The Competitive Map

Competition

Do we have serious competition?

TrendsWho will buy it?

The MarketDo we have a potential product?

What Do People Say We Need?

What do our customers and sales/marketing people say we need?

› Listening vs. Hearing› Is a small group of people ‘shouting’?› Is there a legitimate need/requirement?› Is this an enhancement or new product?› Oh man, is this a pet project?

And while we’re on pet projects…Pets have been the undoing of many good PM’s, so,

› Have a visible corporate sponsor

› Have clearly defined goals

› Keep everyone informed of progress/pitfalls

› Be prepared for the worst

A Few Bigger Questions

Several things will impact our research:› Demographics› Society and Culture› Politics and Legal Issues› Technology› Economic› Global Business

The Market

Once you understand the bigger picture ask:› What will the product be?› What sort of features will it have› How big is the market?› And do you need special features for different markets?› Are there business and cultural barriers?› Can the market be reached?

Porter’s ‘Five Forces’

Competition

Threats from Substitute Products

Bargaining Power of Buyers

Threats from Direct

Competitors

Bargaining Power of Suppliers

A Couple of Quantitative Tools

SWOT Analysis› Strength, Weakness, Opportunities, Threats

› Strengths and Weakness- Refers to the product idea and your company (‘Internal’)

› Opps and Threats- Refers to your market and competitors (‘External’)

› Tells you how your company compares to the competition› Gives you an idea where you are today

Product Selection MatrixA product selection matrix will help narrow down your choices:

Criteria Weight Product A Product B Product C

Looks Good 3 2 (x3)= 6 5 (x3)= 15 1 (x3)= 3

Creates Value

5 5 (x5)= 25 5 (x4)= 20 4 (x5)= 20

Good Margins

4 1 (4)= 4 3 (x4)= 12 4 (x4)= 16

Total 35 47 39

Oh Yeah, How Much Will it Return?Net Present Value (NPV)Tells you how much dollar invested today will be worth at some point in the future

It’s a good way to compare multiple products

and whether to build, partner or buy

Excel function is =NPV

Return on Investment (ROI)Tells you in percentage terms how much a product has returned v. it’s initial investment

Requires accurate forecasting of both development costs and sales revenue

You can use ROI as a screening method to approve new product development

Excel function is =IRR

‘Build, Buy or Partner’Build› The product be built in-

house with existing resources

› Can go to market quickly› Maintains profitability› Maintains your company

reputation

Buy/Partner

› Product already exists› Product expertise is not in-

house› Teams up against a common

competitor› Maintains profitability› Enhances your reputation

And the really important question

Do you have the

TimePeopleResourcesKnow-How

To pull it off? Quality

Scope

CostTime

A Word About Disruptive Innovation

Do you have the opportunity to introduce a new product that:› “Addresses simple applications at bottom of your

market,› Moves relentlessly up the market› And dislodges established competitors?”1

1Clayton Christensen- “The Innovator’s Dilemma”

Disruptive Innovation- Computers

1960’s Mainframe 1970’s minicomputer 80’s/90’s Desktop Computer 00’s Smartphones

The Take Home MessageUnderstand your company aspiration- it gives you a better idea what to develop.

Understand your competitors- it gives you a better idea of what to develop and whether you’ll be successful.

Understand your customers- it gives you a better chance of success.

Understand your resources- it will keep you profitable

And now for a little inspiration…

“...decide...whether or not the goal is worth the risks involved. If it is, stop worrying....”

- Amelia Earhart

Must Reads

Michael Porter’s ‘Competitive Strategy’

Daniel Goleman’s ‘Emotional Intelligence’

Clayton Christensen’s ‘The Innovator’s Dilemma’

Thank You!

info@aperturepm.comwww.aperturepm.com