This is Part I of our Maximizing the Impact of Market Intel series. Here, we'll explain how insights can help OEMs detect signals of change, understand who may win and why those winners are set up for success, and make strategic choices based on these findings. You can read Part II here.
Introducing a new product into a market is one of the toughest tasks a company can tackle. The risks—and the costs—are enormous before selling even one unit. Even low-risk med device development cycles require an average of $30 million of investment, and higher-risk devices take three times as much money to move from concept to market. And history shows the odds are long that the new product launch will be a success. Most companies address the challenges of new product development by instituting some version of a product development lifecycle framework, which guides ideation, design, engineering, regulatory compliance, and product launch and support.
These product development frameworks are rigorous, process-driven approaches that form the “operating system” of most product-centric organizations. A key component of any OS is the periodic updates that improve functionality and mitigate the risks. But too often, OEMs will make crucial decisions about new ideas without "installing" the latest intelligence updates into their decision criteria. By incorporating insights, discoveries and intelligence “updates” throughout the product development process, a company improves its odds of launching a product whose functionality pleases your customer base and whose robust sales offset your pre-launch risk.
Though the stage names and details of firms’ internal product development and lifecycle structures may vary, the core ideas of the framework remain the same at most companies: Roadmapping, Development, and Fulfillment. While each stage has its own unique requirements, it has never been more important to keep the end-user in mind during each of these stages. The time and effort required to develop insights are often seen as merely an additional and unnecessary cost, but the tactical analysis and fresh insights intelligence professionals provide within each phase should be seen as an opportunity to generate additional value and significantly decrease risk.
Determining What to Build in the Roadmapping Phase
The Roadmapping phase is where a viable concept forms among your front-end, R&D, and prototyping groups. The goal for these teams is to incorporate the three lenses of user-centered design to create a concept that satisfies the expectations of users, technical, and business-focused audiences. During this phase, executive stakeholders review customer feedback, prototypes, and plan for next steps in the process.
Differentiation from existing designs and potential substitutes is key to a successful product launch, and answering several tactical questions will help fulfill those expectations. Chief among them: What are competitors doing in the space right now? OEMs often lack a clear understanding of their competitors’ current product lines. By analyzing the competitive alternatives and doing product teardowns, conducting user interviews, and looking at regulatory and patent submissions—the block and tackle data points – product developers will get the information they need to unveil a differentiated, market-ready device.
Additional value is created by looking beyond the present-day competitive environment and considering what competitors are likely to do in the future. Several sources can be used for this information, including formal disclosures and investor calls, as well as more informal sources, such as information gathered at trade shows and conferences. Regardless of how the information is gathered, the goal here is to know enough about the competition to create a roadmap of their likely development.
Understanding a product’s future prospects and its likely competition is critical for decision-making at all levels. A “build versus buy” analysis of whether it makes more sense to acquire a competitor instead of investing in a new version of a product is but one example. By incorporating this level of analysis at this phase, a broader frame of reference can be achieved within the Roadmapping phase. The strategic value of an OEM’s R&D capabilities can also be increased by keeping them grounded in the realities of the market.
Ensuring the Product Remains Viable in the Development Phase
The realized, commercial-ready product is defined and validated by the workers in the Development phase. This phase entails what may be the toughest part of product development process: Understanding the value of the inevitable trade-offs that must be made during complex development programs.
Innovators work to conceive useful solutions in the Roadmapping phase, but ensuring that profit potential is maximized often falls to the workers within the Development phase. Without strong reminders of the competitive frame and a close eye on the shifts taking place during the development cycle, organizational inertia comes into play, leading an OEM to lunge forward when they should be looping back.
How can insights help steer the process and ensure that OEMs avoid making the wrong trade-offs? They can provide the answers to these three questions:
- What are competitors doing during your development process? The market isn’t standing still as a product is being developed, and the business case for the product will likely change while being developed. Staying on top of shifts in market preference and user sentiment is crucial.
- Does the product being developed still match the value proposition and capably meet the user need? At what point does the combination of trade-offs necessary to get the product to market become a detriment to its profitability?
- How can the sunk cost fallacy be avoided and criteria established to help management pull the plug on development when it’s going poorly or when too many market forces have converged and torpedoed the product’s viability?
Answers to these questions can help resolve internal conflicts about “need to haves” versus what’s merely “nice to have” in the final product. They can also save OEMs from the revenue and profitability plunge of a failed launch. Those gathering these insights can be seen as naysayers to their co-workers in this phase, but helping to set “kill criteria” and keeping stakeholders accountable is a key element in the product development lifecycle.
Scenario Planning and Positioning in the Fulfillment Phase
A product spends most of its life in the Fulfillment phase, where it is launched, commercialized, maintained, and managed. And the risk within the product development process peaks as the product transitions out of development toward market introduction. Insights play a vital role during the periods of peak risk and continue to be essential throughout the entire phase, from product introduction to end-of-life as customers are transitioned to new—or competitive—versions.
The role of insights in the Fulfillment stage starts with continuing to examine the points of differentiation and parity between the product and the alternatives already in the market. In this phase, the information can be used by sales and marketing to generate interest and desire for the product, as well as responses to the likely claims competitors will make about the new offering.
Insights pros also use that competitive positioning info to suggest incremental improvements that can help get the product to market more quickly, more cheaply, or in a more desirable form.
Insights can also impact this phase by helping stakeholders think differently about the product’s competitive position and a differentiated market strategy. For example, with its airplane engine business General Electric didn’t think of other engine manufacturers as its main competitors so much as high airplane usage and utilization variability within its customer base. GE thought about other positioning options and determined that better aligning customer’s investment in the engine with the cost of running it would allow for a market solution of charging for “power by the hour.” Turning engines into a variable expense for which customers paid only for each hour of flying was a better investment for GE’s customers than the previous framing of engines as a hefty capital investment.
This fundamental re-framing of the competitive field helped change how GE went to market and generated an additional competitive advantage for its engine business. The lesson: Don’t assume inflexibility in the current realities of a new product’s market. While OEMs should constantly scan for the emergence of disruptive competition, they also shouldn’t ignore the opportunities for disruption inherent in their new product’s introduction.
The Human Component
To summarize, OEMs need to detect signals of change, understand who may win and why those winners are set up for success, and make strategic choices based on these findings. Insights can shine light into a murky situation to help guide OEMs on the specifics of their competitive situation and make decisions that maximize their market potential. Insights empower decision-makers with the knowledge they need to act strategically and stay on a path that leads to success, even if insights find that the optimal path has shifted over time.