What is a product strategy? Differentiation opens up an ocean of opportunities

What is a product strategy? Differentiation opens up an ocean of opportunities

“I will have the beef and vegetable please and a glass of chardonnay”

…where did I put my bag? oh yes here it is…

“You need to excuse me, I need the bathroom”

…syringe, cap, insulin vial… this stupid sect, the rubber is not tight! Need to open a new one…

Oooh this bathroom is filthy! Nowhere to put my stuff… ok the dose… 20mL… can’t see anything here, too dark! mmmh… all right, damn needle! ok done. Now, cap on the syringe, vial, all back in the bag. Need to bring this damn bag with me all the time! Back to the table… 

 

This is exactly what someone at Novo Nordisk was thinking about in the mid 80’s.

At the time all the other insulin manufacturers were focusing their efforts on product’s purity strategically looking at winning with doctors, the key influencers.

At that time technology progress started making production of high quality insulin very easy for major manufacturers. Competition was shifting to price, with shrinking margins and threatened growth despite favourable market drivers. So that’s why Novo Nordisk in the pursuit of diversification took a disruptive route.

The attention moved from the doctor to the patient. While focusing on patients, they found that insulin, which was supplied to diabetes patients in vials, presented significant challenges in administering.

What if we could change the experience of the patient? What if we can make it easier, quicker, less embarrassing?

 

“Can you excuse me for a second?”

…my compact pre-filled NovoPen is in the pocket. Just need a second. Oh it’s dark here… and filthy… never mind, I just need a moment! Done. Let’s enjoy the food now!

 

What did Novo Nordisk do?

They looked across the chain of buyers, identified a problem and developed a new solution. In doing so they changed the product’s focus from insulin itself to the administration device. This simplification for the user added complexity to the product, costs and a re-designed supply chain. Nevertheless, the attractiveness of the new offer justified a price premium and took Novo Nordisk out of the price war. This was pure product differentiation. Furthermore it was smart differentiation as it was solving an annoying problem for the users.

In other words, Novo Nordisk did not try to be the best at every aspect of their product. To beat the competition they just created uniqueness and relegated price and insulin purity to the background. The innovation came at a cost, but one that users where mostly happy to pay for the added convenience.

What is a product strategy?

This is product strategy at its best. Strategy is about choices. Choices imply risks. However, rewards can be huge.

In this successful example, the innovator pursued a Blue Ocean Strategy, shifting the industry landscape and reinventing themselves from an insulin producer to a diabetes care company.

Today pre-filled devices account for most of the insulin market.

Product strategy is a complex subject that cannot be developed in a short article. However I find that the simple Blue Ocean’s Four Action Framework is the best way to start.

  • Eliminate
  • Raise
  • Reduce
  • Create

The approach is based on acting on product “factors” or features and postulates that a proper strategy should be based on all four actions in the framework. What this means is that the product design should identify the factors to be eliminated, the ones to be raised above industry standards, to reduce below industry standards, and newly created factors that the industry never offered.

Resisting the temptation to try to respond to all possible demands from the market is key. Adding all possible features, focusing on all possible aspects, trying to build the universal product responding to every possible scenario is the contrary of strategy. It is in fact about not making choices.

The NovoPen created a completely new easy to use drug administration device. It increased the attention to the patient’s needs, reduced the attention to insulin’s and eliminated the attempts to market it to doctors. It also moved away from using price as the main attractive parameter in an ocean of comparable products from competition. Pure Blue Ocean.

I will dedicate more attention to these concepts in future posts, for now I can only recommend W. Chan Kim and Renée Mauborgne’s book.

Where does the Product come from?

It is possible to distill the many product design processes in two broad categories:
  • purpose-specific designs
  • technology implementations 
Purpose-Specific Designs are typical of the engineering world.
Technology Implementations start from a very different scenario.

 

Purpose-Specific Designs are typical of the engineering world. Think about a screwdriver: it fits a very specific purpose, its shape is optimised to the hand and the action of screwing. Their modern version, electric screwdrivers, are a technological evolution of the design. Its value is reducing the physical effort during the product utilisation. In this case we are completely focusing on the problem to solve (screwing) and technology progress leads to a design upgrade (less effort). The customer base of this kind of product is huge, everyone has used a screwdriver at least a few times in life! The product is an obvious response to a specific problem everyone has.  Competition is fought on price and perceived quality/features/design.

 

Technology Implementations stem from a very different scenario. Scientific research finds new concepts and product design becomes an exercise to monetise them. The creative utilisation of new technologies often creates new markets and disrupt old ones.  
This is quite a typical situation in the chemical industry, as an example. A scientist discovers a new chemical reaction that happens in the presence of some specific components. She studies as many applications as possible and someone starts noticing potential value in this new reaction.
The coordination of these special components which enable the new chemical reaction (laboratory equipment, chemical compounds, catalysts) is a typical solution looking for a problem.
Is the new chemical reaction useful enough to enough people to generate a new market?
There isn’t a market out there (yet), can you launch the product?
How to create a new market without a speculative (and expensive) product launch?

 

These situations are very common and a often a chicken-and-the-egg conundrum. The capacity to work with the customers and a robust dose of business intuition are key.
The main job of the Product Manager in these cases is to ensure the definition of a proper value proposition, rather than focusing on features and design.

 

The NUDE Product

What is really a Product?

There is a ton of literature about it and many definitions.

A nice way to start is the problem.

If there is no problem there is no need for a product.

 

A solution that is truly necessary (N), unique (U) and doable (D), that solves the problem effectively (E), is what defines a N-U-D-E Product.

 

In a nutshell, a product is a solution to a problem. Good solutions are reasonable and effective.

And what if the problem has already a solution?

The majority of products fail in this case. There is certainly value in alternatives, particularly when the market is big and diverse, but most products lacking uniqueness struggle to find a convincing value proposition. It becomes a matter of price (the exact opposite of the Blue Ocean Strategy)

Is the product reasonably easy to make, develop or implement? Can it be sold at a sensible price? In other words, is it really doable? Can I address and ideally solve the problem with it?

A solution that is truly necessary (N), unique (U) and doable (D), that solves the problem effectively (E), is what I define a N-U-D-E Product.

The NUDE Product is the ideal scenario for an new product introduction (NPI) and what every Product Manager should aim at.

Is that enough?

No, it is not. If I were the only one in the world experiencing the problem I would certainly be a potential customer, but why should anyone care? So the problem must be experienced by enough people to have a market. The NUDE product must make business sense to pay for the Product Manager’s salary, at least…

Leading with No Reporting Lines

What is the most important skill for an effective Product Manager?

We are indeed talking about world class professionals with outstanding technical skills, solid business understanding, competences in project management, organisational skills, marketing. So the list of minimum requirements is long and it goes on much further: capacity to communicate effectively across the company organisation, from the most junior technician to senior management, ability to clearly define value propositions and convey them through powerful marketing communication. A good grasp of finance is necessary most of the time and an absolute requirement is the capacity to think strategically.

Does any such individual even exist? And we haven’t started discussing the most important skill: being able to persuade people to do what you need them to. I am using the verb “to persuade” purposefully. Because the CEO of the Product usually have no direct report. A CEO with no employees!

Leading without formally managing anyone requires a strong personality. It also requires capacity to “read” people, influencing and negotiation skills together with a good dose of charisma. All must be part of the Product Manager’s toolbox.

 

Product Managers live in the core of the matrix management  concept, “commonly used to describe managing cross functional, cross business group and other forms of working that cross the traditional vertical business units – often silos – of function and geography” (from Wikipedia).

 

I recommend reading the good post 3 Key Concepts for Product Management in a Matrix Organization by Michael Swan on LinkedIn.

Michael speaks about a clear communication of the Why, the What and the How. A clear plan and an effective communication across business functions is indeed the key to success.

So what is the most important skill for a Product Manager? There isn’t such a thing as a single dominant skill but surely the capacity to bond with and inspire people is more important than technical knowledge.

The Product CEO

Product Managers live in a complex world at the interface of several different disciplines. They must be able to understand business and markets, but also be technology savvy, have strong project management skills and be able to communicate effectively to the multiple diverse roles they interact with on a daily basis.
The role of Product Management in the IT industry is well established and recognised. It is often divided into Product Marketing Management and Product Development Management. The areas of influence of the two roles are well defined:

  • Product Development Manager: the leader of the product design (implementation of features, project management of coding, product roadmap and lifecycle management)
  • Product Marketing Manager: the leader of the product marketing in the broadest sense of the term (definition of value proposition, product placement, pricing, marketing communication and execution, sales support and direction, “voice of the customer”)

Very often the Development and Marketing Domains converge in a single bigger role and that is the reason why the Product Manager is commonly defined as the “Product CEO”.

Product management in manufacturing industries (every business that produces physical goods) assumes a more complex connotation with the addition of two further Domains: Manufacturing and Supply Chain.
Converging four different Domains in a single role makes it extremely challenging. While Product Managers should have above all, in my opinion, a business focused remit, the role they play with internal operations, external suppliers and R&D is key.

The four domains of Product Management
The Four domains of Product Management

The best product idea means nothing if the product cannot be manufactured (at the right cost) because of the intrinsic complexity of the process or the lack of key parts/materials.
Product Managers in manufacturing businesses need to juggle with Development concepts and execution, the definition of how the product will be made, where the raw materials will come from, how scalable the whole process will be, all in relations the targeted market and value proposition.