Strategic Execution Part 3.5: New Product / Market Extensions
This blog is part of a series of blog posts on the 6 stages of corporate development with the overview here. In previous blog posts, I explained what strategy is, why it is needed, and how it is developed and executed. In this post, I will outline the fifth of six stages of strategic corporate development for growth from inception to Exit; mastering the highly differing and even contradictory demands and focuses of each of these independent stages is the key to successfully navigating the entire journey.
The New Product / Market Extension stage will actually spur a repeat of several previous stages with a specific focus on the New Product / Market. The company will take a New Product / Market Extension concept and either bring it to reality, pivot it, or kill it. This stage generally shouldn’t be activated until the company has entered Product / Market Growth with its primary product portfolio and also established a process to identify and initially vet the New Product / Market Extensions; a common approach here is to implement a stage-gate maturation process to determine whether and which opportunities to purse. With more agile management methodologies, the iterative facets of the approach can be built into the New Product / Market Extension and integrated with the over-arching strategic assessment process as will be explained below.
The specific New Product / Market Extension process is most akin to the Company Launch (Customer Development activities). The differences are that the company doesn’t need to form and the runway management processes are based on established budgets and resource allocations from the company, the pivot-to product / market may be defined by the overarching strategic assessment process, and whatever product / market / operational coherencies with the company’s existing product portfolio is levied on the team as a requirement. These differences must be carefully applied in order to maintain the innovation capacity of the company; teams perform very differently when they are making a personal bet of their resources and livelihoods on the success of an endeavor versus when they are taking home a comfortable paycheck.
As with the core Company Launch stage, the same criteria can be applied to graduating a product / market match to a version of Product / Market Validation.
The version of Product / Market Validation for a Product / Market Extension should be very similar to the core Product / Market Validation. The exceptions are the same as when comparing the New Product / Market Extension stage to the Company Launch Stage. The exit criteria for entering a version of the Business Model Validation stage for the new product / market set are the same as a core Product / Market Validation Stage.
The version of Business Model Validation for the new product / market set should be very similar to the core Business Model Validation stage, the exceptions have already been noted though in this stage; whatever product / market / operational coherencies with the company’s existing product portfolio that were levied as requirements will start coming to fruition and operation during this stage. The exit criteria for this stage are the same as for the core Business Model Validation Stage.
Once the new Product / Market set is graduated into Product / Market Growth it is introduced into the operational product / service portfolio and subject to its own growth maturation efforts. The degree to which the new is integrated with the old will vary across operating models; there is obviously an efficiency opportunity in deeper integration, but there is also the risk of product / service homogenization and unproductive compromises in value delivery and market perception. It is generally important to recognize that the market penetration and growth curves will be different and the product / service should be managed independently within the portfolio.
There are many potential pitfalls to this facet of executing growth, one of the greatest is failing to recognize the important difference between sales and business development, and that the introduction of sales must be deferred until later Business Model Validation. As before, the reason for this is that sales has the mindset and incentives to turn the crank on selling existing product to identified market with the lead generation engine (marketing) up and running. Business Development is about the type of market and value proposition mapping, experimentation, and product / service realization required to perform the first three stages. Mixing the two up results in very frustrated people, missed goals, and product / service development chasing ever-changing preferences and requirements.
In the next blog post, Exit.
What stage of corporate development are you currently in and what challenges are you facing?
For most companies, the usage of external parties to facilitate the strategic planning and execution process produces superior results. The process typically involves a great deal of information processing that isn’t core to running the business on a daily basis and a facilitator in planning sessions frees up the team to focus on the critical questions rather than the process and can inject highly productive objectivity into the discussion and decisions. If you would like to discuss where your company is in the evolution of strategic planning and execution or would like some assistance in setting up or performing this critical process or just have a question please contact us.