Thursday, October 15, 2009

Managing Innovation & Product Management

As a product manager I have been driving innovation in my business group. Innovation is key for survival in software industry - where companies have to innovate or perish. In order to win in this brutally competitive industry, one needs to innovate faster, cheaper than the competition and most importantly implement the innovative ideas in the right way to win in the market place.

All this implies that in order to win, organization will need: A highly creative workforce which can come up with lots of creative ideas, architects who can translate creative ideas into innovation, and designers who can implement the innovative ideas in ways that delight the customers. This concept can be visualized as follows:

Ideas for all great products start with customer needs/wants. At the early stage of innovation - encourage ideas from all concerned people, especially from customers/users. This is the creative thinking part in the innovation chain.

In software business, innovation is the key to survival - but innovation does not guarantee success. Innovative companies can merely survive - but success is reserved for those who can design great products.

To illustrate this consider the case of WordStar & MS Word. Back in late 1980's WordStar was the leading word processor software, it led in innovations and had several useful features - but lost out on design. While Microsoft concentrated its efforts on ease of printing, user interface, and integration with office automation tools such as Visual Basic for user customization. In the end the customers opted for MS Word & Office. WordStar eventually perished when it stopped innovating.

Another example is that of Yahoo Inc. Yahoo started as a web search services by organizing Web into a directory. It was a breakthrough idea at that time. Eventually Yahoo expanded into various other web services and continued to grow exponentially. Yahoo continued to innovate with new offerings - My Yahoo, Yahoo Maps, Yahoo Finance, Yahoo Answers, Yahoo Mail, Yahoo Photos, etc. As time progressed, competition emerged in form of Google. Google was an innovation super engine, but Google also had an edge over Yahoo in terms of design. Google was a skillful follower of market leaders - but Google excelled in design. Google's search engine could give the same results as Yahoo in most cases - but Google presented it in a user friendly format to gain early market acceptance of its search engine. Soon Google's design of web crawling and web indexing technology - which is product of its design gained an edge over Yahoo and along with it Google won a huge market share. Today when comparing both Yahoo & Google search technologies, both the products are almost identical in terms of innovation - but it was the design/implementation which made the final difference.

Importance of Design

Software design plays a critical part in the success or failure of the product. Design is the phase where innovative ideas are translated into real useful functions for the end user. Today Added, Apple, Google & Microsoft are market leaders in their respective areas. These companies are also leaders of innovation - but most importantly they are leaders of design.

So what is design?

The term "Design" in general stands for several things depending on the context. In the world of software "Design" stands for:

  1. Usability of the product: This often means functions & features

  2. Ease of use - i.e., how easy it is to use the product

  3. Value for Money - how much does it cost to buy & use the product

  4. Timeliness - Does the software meet all my needs today?

Design of a product is always complex and involves tradeoffs. The four aspects of design are usually contradicting - i.e., one can improve one aspect of the design but at the cost of deteriorating another aspect of design. For example adding more functions and features makes the product expensive, delayed release to market and in most cases deteriorating the ease of use.

Getting the right mix of all the four components is the key to good design.

It is the job of the product management to control & drive the four parameters of design. Product management has to deal with all the contradictions of design & get the product out in time to ensure the success of the product.

The four components of design are contradictory and getting it right involves lots of conflict resolution.

Innovation Today for Competitive Advantage

There was a time when companies had sprawling R&D departments which focused on innovation & invention. Companies such as IBM, GE, Du Pont, Johnson & Johnson, P&G, Philips had established research labs with multi-billion dollar budgets. R&D was responsible for developing new products and the company manufactured & sold only those products that was developed by their R&D departments.

Developing new products through this process was slow & risky. So with the advent of globalization, innovation is now no longer the sole responsibility of R&D departments. The new economic forces are shaping how companies approach towards innovation.

As a product manager, I see a constant need innovate & keep the products relevant in the market place. There are four major trends that are shaping innovation today - and shaping products. It is prudent to take advantage of these trends to gain competitive advantage.
Successful developing new products requires mastery over four aspects of design:

  1. Functions & features of the product.

  2. Ease of use - i.e., how easy it is to use the product

  3. Value for Money - how much does it cost to buy & use the product

  4. Timeliness - Does the product meet all my needs today?

R&D departments may not have all the expertise to master all the four aspects of design. While R&D is good at developing functions and features of the product, R&D often falls short when it comes to the other three aspects of design.

In today's competitive age, companies cannot afford to invest huge sums of money on R&D and take a chance in the market place. Shareholders are demanding higher returns on the R&D investments - and that translates to minimizing risks in new product development. It is the role of product management to develop strategies to minimize this risks. As a result, product managers are at the fore front of the new trend in product development.

The four major trends shaping innovation are:

1. Outside-In Innovation
2. Cross Functional Innovation teams
3. War Games
4. Social Networking & Web 2.0

1. Outside - In Innovation

In the new paradigm, innovation is no longer the sole responsibility of the R&D group. In the current times, companies are inviting customers to help their innovation efforts. Customers often have several ideas/suggestions on how to improve the current product. Initially, this process starts as taking inputs/suggestions from customers to improve current products, and as the level of comfort and maturity improves, customers become partners in development - where customers provide design details and take part in testing the new product. At the next level, companies invite customers to become partners in a co-development of the product - especially when it comes to developing new products. Co-Development reduces the risk as there is already a committed customer for the product.

2. Innovation needs cross functional teams

R&D departments may not have all the expertise to master all the four aspects of design. While R&D is good at developing functions and features of the product, R&D often falls short when it comes to the other three aspects of design - This is where cross-functional teams add value to product design & development.

Having members from finance, sales, customer support giving inputs to new product development is the first level of developing cross functional teams. To be very effective, the cross functional team must be involved in all stages of product development.
One example is designing a new product with product serviceability in mind. This helps customer support teams carry out routine service & repairs with ease & thus enable faster turn around on customer complaints. In software world we call it as "Design for Debug". Having specific product features which can explicitly tell the customer/customer support the nature of the problem will help in a quicker time to resolution. A faster turnaround will enhance customer satisfaction.

Having an accountant review the product design and development will help in maintaining the cost of development under control and also reduce the cost of manufacturing/servicing the product, this translates to higher profits and lower risks. Accountants also help in developing pricing model for the product & thus one can achieve the optimum price for the product. (Often times companies get the pricing wrong See: )

3. War Games
War games are often used in business operations to develop Business continuity plans in case of contingencies. Marketing teams also use war games to develop response strategies to competitors discounts. Similarly war games can be used in new product development.
The best way to use war games as tool for product development is to have the entire product development team - i.e., cross functional team for a 2-3 day brain storming session and ask them to develop ideas for:

a. How can we develop a new product that will make our current product obsolete?
b. Face the 10X challenge:
How can we sell a similar product at 1/10th of the current price?
How can we make our product 10 times more effecient/faster than today?
c. What the competitor product will be 5 years from now?
d. What if Scenarios:
What if our raw material costs increases exponentially?
What if our partner (supply chain) goes out of business?

One can frame the questions based on the industry, and ask such pointed questions to the team and let the team brainstorm for ideas. Capture those ideas as creative ideas as inputs for innovation prospects.
This exercise must be done regularly - atleast once a year and this helps in developing new products & getting a radical ideas for product development.

4. Social Networking & Web 2.0

New product development cannot be done in isolation. Innovation has always occurred in areas where there was talent and a cluster of similar industries - Detroit for Automotive, Silicon Valley for electronics & software etc. This cluster provided several advantages in terms of ideas, talent, feedback, etc

With the advent of Web 2.0 technologies it is possible for members in product development team to interact with others and solve complex problems - without divulging secrets. Social Networking sites allows users to interact with each other and with product development groups to get instant feedback. Engineers can understand customer perspective and develop better products.

As a product manager, I use the social network to interact with users, customers & other product managers to understand different perspectives & this helps me develop better products.

Today several companies use Wiki's & Blogs for company employees & customers in different groups to interact. This platform helps accelerate new product development.

Closing thoughts

In today's hyper competitive age innovation management requires a newer approach. Product managers need to drive innovation to keep their product relevant to the times - by controlling all four aspects of product design: Functions & features, Usability, cost, & timeliness - and to do that product managers must embrace the four trends of innovation: Outside-In Innovation, Cross functional teams, War Games & Social networking. Product managers must drive this change in the organization.

1 comment:

daniel john said...

Very well explained. I would like to say that it is very interesting to read your blog.

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