January 31, 2006

Where are the Turnaround Products?

Back on the 25th, Bill Waddell of Evolving Excellence's published an article called "Our Lesson to Be Learned". I've been engaged in a project so it's taken me a couple of days to process this great article.

Wadell says: "The Detroit fixation on new products as their salvation - and their fixation on new products as the key to restoring profitability using "product development" and "turnaround" as though they are synonymous - is their ruin."

The conventional wisdom in product development is that the investment value of a company is linked to its ability to generate new products. Said another way, companies must have new products in their product-pipeline to increase revenues. Clearly Detroit and many other companies subscribes to this approach.

The twist that Waddell adds is: "What none of them understand, however, is that superstar new products are not sustainable. Every product has its life. As a result, they do not drive any permanent business turnaround."

Bill is so right. There are a lot a great new products out there. But very few superstar new products that actually turnaround a company. Two that instantly came to mind were iPod and Blackberry. Both are examples of new products that established new product categories, in fact they are "category killers". For example - Apple now has a larger market cap than Dell the PC Leader and Blackberry has been largely responsible for the sale of mobile devices surpassing that of PC's.

But I couldn't think of any other examples. So I called around to my network of product development gurus to ask if they could think of more Superstar Turnaround New Products. We came up with a couple more.

One is a great new product that's not of the turnaround type. However it did spawn a new hotel category - Starwood's W Hotels. The other example is still in development - Voice Over IP (VoIP) renewing the future of Cable Companies. That's all we could come up with.

I'm sure there's more, but in a way that's the bottom line of this article...there's not many superstar products out there. So if you're thinking of turning your company around through new product development "Detroit style", you may want to think again.

Instead create a turnaround strategy that reinvents the entire company:

  1. Connect with your customer to find ways to improve current products/services;
  2. Structure a business model with a recurring revenue stream;
  3. Make sure the technology under-pinning your product or service has a long lifecycle;
  4. Launch products that have differentiated features and benefits;
  5. Build for a market not just for one customer;
  6. Manage each customer relationship from a P&L basis;
  7. Make sure that your people manage at most 4 projects at the same time;
  8. Connect with your employees for improvement & new product ideas;
  9. Make sure your people are paid for performance and share in your profits;
  10. Challenge your top performers and reinvent the bottom performers;

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1 comment:

  1. Turnaround products may be rare today, but that is mainly because of the inherent conservativeness of the typical business director these days.

    Very few are the directors who will approve a product without a positive endorsement from their marketting analysts. The problem with turnaround products is that they CREATE new markets and so usually fail to pass the standard marketers test for having real potential in an existing market.

    At one time, Sony produced turnaround product after product. These included the consumer tape recorder, the transister radio, and the walkman. That was back when Akio Morita had the final word in what got built. If he thought something had potential, he backed it, with or without a positive marketting analysis.

    Now that Sony has a conservative group of directors with the final say, the fount of market-changing innovation seems to have dried up.

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