An effective product portfolio strategy will guide the company in (a) improving its products to better serve the unmet needs of customers in each targeted outcome-based segment, and (b) will offer a solution that eventually gets the entire job done on a single platform.
Once the underserved outcome-based customer segments are uncovered and prioritized, the company can take the seven courses of action shown in the figure below for each segment:
- Borrow features from other company offerings.
- Accelerate offerings in the product pipeline and R&D.
- Partner with or license from other firms.
- Acquire another firm to fill a gap.
- Devise a new feature set.
- Devise new subsystems and/or ancillary services.
- Conceptualize the ultimate solution.
Formulating the product strategy
Let’s look at how each activity is enhanced when it is informed by outcome-based market research.
1. Borrow features from other company offerings
Why reinvent the wheel? Innovation does not necessarily require invention. Innovation is the ability to use technology (existing or new) to address an unmet customer need. Knowing exactly what outcomes are underserved in a target segment, a company can analyze its product portfolio to see if any of its current products or services possesses a feature that addresses one or more of those outcomes. This can save significant development time and effort.
When we helped Microsoft discover opportunities to improve its software assurance offering, it turned out that many of those opportunities could be addressed with tools the company used internally to get the job done. Instead of starting from scratch, the assurance teams were able to package internal products for commercial use.
A catalog of product features and the desired outcomes they address could be a valuable asset for any company, but especially for big company with hundreds or even thousands of offerings. Such a tool makes it possible for product teams across the company to leverage what the company has already invented.
2. Accelerate offerings in the product pipeline and R&D
When we helped Cordis discover opportunities in the angioplasty balloon market, one underserved outcome rose to the top of the list: “minimize the likelihood of restenosis”—that is, the recurrence of the blockage. Upon receiving this insight, my contacts at the company told me that the R&D team was working on a device, called a stent, which had the potential to address this unmet outcome. Recognizing the size of the opportunity and the importance of being first to market, the R&D team put additional resources on the project and was the first to market with a product that generated $1 billion dollars in revenue over the next few years.
The stent had already been in the works, but it was just one of about 40 initiatives in total. It was only when the company gathered and prioritized its customers’ underserved desired outcomes that it realized that the stent deserved more funds and attention. Other initiatives were less lucky: those that did not speak to customers’ needs were defunded altogether.
Leveraging efforts that are all ready under way can save time and effort when creating products and services that will get the job done better.
3. Partner with or license from other firms
We have often worked with hardware manufacturers that discover many of the underserved outcomes remaining in the market cannot be addressed with a hardware solution: a software or service offering is required. At that point, it makes sense to partner with or license from a firm that has expertise in that area.
Knowing precisely what needs are underserved makes choosing a partner easier. For example, we worked with an automobile manufacturer that discovered it did not have the capabilities it needed to address the underserved outcomes in a market of interest. With the list of prioritized underserved outcomes in hand, we evaluated over 100 possible partners. The goal was to look at the potential partners and determine how well they could address each of the underserved outcomes. Through this analysis, we found the three firms that held the most promise. The company interviewed management from the three firms and eventually picked an effective partner.
A prioritized list of underserved outcomes makes the perfect scorecard against which to evaluate firms that will help you get more of a job done and/or get the job done better.
4. Acquire another firm to fill a gap
Arm & Hammer’s Animal Nutrition Group acquired a business, Vi-COR, that provided it with a complimentary product to use in its dairy business. The framework they used to help justify the acquisition was grounded in ODI-based research: the group was able to demonstrate that its current offering failed to get the entire job done and showed that Vi-COR’s products were going to help address some high-priority underserved outcomes.
Vi-COR also provided a service component that helped address other top opportunities identified in dairies. Company management determined that Vi-COR was operating in a very important niche, providing a very important solution to dairy producers. Without the ODI prioritized list of underserved outcomes, the company might have overlooked this important potential acquisition.
5. Devise a new feature set
Knowing what features to add to a product to help customers get more of the job done and/or get the job done better is the key to success in product innovation. Adding the right features is dependent on knowing what needs are underserved. Knowing, for example, which 15 of the customer’s 100 desired outcomes are underserved lets a company focus its efforts on those 15, thereby ending wasted effort and increasing the chances of success to a dramatic 86%.
Companies do not lack ideas. They often have thousands of ideas. What they need is insight into the customer’s underserved outcomes. This is what the ODI process provides. Once everybody in the organization knows precisely what the customer’s unmet outcomes are, all company resources can be aligned to address them—resulting in the systematic and predictable creation of customer value.
6. Devise new subsystems and/or ancillary services
Hardware and technology-based companies often stunt their growth potential because they resist adding a necessary service component. When the entire job-to-be-done is defined and the underserved outcomes are revealed, however, a company comes face to face with the fact that the only way to satisfy the remaining underserved outcomes is by adding an ancillary service offering. With a list of underserved outcomes in hand, a company can define exactly what value the service offering must deliver.
Advanced Medical Optics followed this approach when it added a service offering to complement its sale of lenses, insertion systems, laser vision correction systems, and other devices for cataract and refractive surgical procedures. Offering this service had immediate positive results on its Net Promoter score, the perception of its overall business practices, and its customer loyalty index. Two years later, AMO was awarded the prestigious Omega Management NorthFace Award, which recognizes world-class customer satisfaction.
7. Conceptualize the ultimate solution
A company’s ultimate goal should be to provide an offering that gets the entire job done on a single platform. Such a platform often requires hardware, software, and service subsystems or components. Conceptualizing this ultimate solution provides a company with a long-term vision of where it needs to go and what will be necessary to secure or maintain a market leadership position.
With the ultimate solution in mind, a company is in a position to make the decisions that will allow it to stay on track, stay focused, and not let a competitor own the ultimate platform-level solution.
For example, the ultimate solution we presented to an agricultural company we were working with required skills and capabilities that went far beyond the company’s capabilities at that time. As the years went by, the company watched a competitor make the acquisitions that were required to create, build, and own this platform-level solution. This got management’s attention. With no time to waste and clarity in where the market was heading, the company worked to make its own acquisitions so it could remain relevant in the market.
Taking the seven steps outlined above, a company can systematically create solutions that will get a job done better and/or more cheaply. Defining the actions it will take is the essence of an effective product strategy.