Who's driving your company?
Every company claims it wants to deliver value to its customers, be profitable, and establish leadership in its core markets. Such assertions seem only natural and one would expect to be presented with a corresponding corporate strategy that supports such goals. However, closer inspection reveals that many companies often employ product delivery strategies that lead these companies far away from their business objectives.
Delivering products is a process that begins with a combination of innovation, technology, and market sensing. Each of these driving elements contribute to the initial product concept and its development, but over time, and depending on the company, some driving elements will demonstrate a stronger and more lasting impact on the product concept and its roadmap. This is not necessarily due to merit or market forces, but more commonly is an outcome of the corporate culture and business perspectives which dominate the company.
Certain corporate functions that embody the aforementioned driving elements, take charge of directing the company's overall product delivery strategy. For example, in one U.S. software firm, a business unit manager noted, "Marketing has had a relatively limited role in the past; technology is what has driven this company. We're a technology-oriented firm." In contrast, in a U.S. packaged-goods firm, a marketing manager said, "Engineering has absolutely no sense of the consumer. They're a group of educated technology scientists who can do amazing things, but they need focus."
Corporate business goals and wants are relatively similar across diverse industries, but the methods they use to reach their goals vary greatly. Let us explore these different approaches to product delivery strategies, known as technology-driven, sales driven and market-driven
Take my road: technology-driven
Some companies believe they know what is best for the customer. They operate under the notion that they can develop technology; design products based on that technology, and have entire markets buy their products because they are 'technologically superior." These technology-driven companies, whose product delivery strategy is determined by their engineering departments, often create products without thoroughly researching the market and without fully understanding the prevailing market requirements.
This sounds somewhat detached from the end-user needs, and may very well be so, but a technology-driven approach has its advantages. It enables a company to rapidly deliver products to market since it skims/skips lengthy traditional market research, and consequently bases product design decisions on internal company expertise.
An example of a company who chose to strive forward with a plan to launch a new product in the market without having conducted market-research first is that of Sir Clive Sinclair, a British entrepreneur who was also a brilliant engineer and consummate salesman. Sinclair trusted his intuition for all his product decisions. At the time, he believed that the moment had arrived where the general public was sufficiently interested in electronic wizardry to provide for a completely new market of inexpensive and relatively simple-to-use computers. Without conducting any market research whatsoever, in 1980 he ordered 100,000 sets of parts so he could launch at high-volume his new ZX80 computer. By 1982, Sinclair's company revenue was £30 million, compared with £4.65million the previous year. Sinclair and his engineers had intuitively succeeded in assessing the combined potential of technological developments and changing consumer needs, as opposed to researching the market potential for an innovative product. Sinclair's business decisions proved enormously successful, yet very fortuitous.
Technology-driven products are often advanced and therefore appeal to early adopters and niche markets who seek the latest technological developments. Additionally, technology-driven products may also become a high-risk/high-reward venue to be favored by speculative investors. Such products await a triggering event that causes a dramatic surge in demand Those events may range from the hypothetical (for example, future governmental legislation that would promote vehicles with fuel cell engines) to the actual (sales of survival gear when people were confronted with the spectra of Y2K, or the tremendous demand for security equipment post 9/11).
But this is the problem with being technology-driven; it is a risky approach to delivering products. Adopting a technology-driven posture has, over time, proven low growth potential due to failure to implement proper marketing activities and because of the isolated manner in which products are managed. Many technology-driven products are characterized by having complex features or unnecessary features, and some technology-driven products are realistically unneeded.
In the 2004 Consumer Electronics Show (CES) in Las Vegas, Nevada, USA; Gerard Kleisterlee, the CEO of Philips, quoted data from a Yankee Group survey: "30 percent of all recently introduced home networking products sold today were returned because the consumer could not get them to work; and 48 percent of potential digital camera owners were delaying their purchase because they perceived the products to be too complicated."
The conclusion is quite obvious. Although some may succeed with a technology-driven approach to product development and management, there is a bigger chance that driving the best technology to customers will not yield a prosperous outcome. This is simply because the company and its product are focused on providing better technology; and not on closely matching customer needs and abilities with that technology.
A cruising taxi: sales-driven
A technology-driven company is focused on its technology; and a sales-driven company is focused on maximizing short-term return on investment. Accordingly, the prime responsibility of most corporate departments in a sales-driven company is to help the sales channels with knowledge, ways to sell, and sales support.
Like a taxi driver cruising city streets looking for passengers who are heading to different locations, sales-driven companies cruise their markets seeking deals with customers who very often have different needs. Such as with the proverbial taxi driver who will deviate out of his way to accommodate the passenger going in the opposite direction, so will these companies alter their product's features in order to accommodate the particular wishes of a specific customer.
There is nothing fundamentally wrong with being sales-driven and providing custom work. Generations of tailors have sewn fitted clothes to people of different shapes and sizes; and scores of taxi drivers worldwide transport passengers to their varied destinations. The advantage of being sales-driven is less risk because there are always unique business opportunities and individual needs to satisfy. A sales-driven product strategy can be a lifesaver and used as a survival mode tactic if market segments start deteriorating or are in a chaotic phase which precludes targeted marketing programs.
The downside is that a sales-driven product strategy is a short-term approach that does not build highly sustainable product lines. Without those sustainable product lines it is very hard to build market leadership and promote company growth.
The eventual outcome of a sales-driven approach in high-tech companies is a plethora of product variants (produced via modification of core products) which are sold to different customers. These product variants are full of individualized custom features that are developed, tested, documented and supported. This situation invariably leads to resource duplication, wasted effort, loss of distinctive competence and great difficulty in implementing product road maps.
Due to market dynamics, the majority of sales-driven companies struggle in the long run because there is nothing much to differentiate them from the competition, other than price which becomes their primary marketing tool.
Driven to success: market-driven
To gain a status of being market-driven, a company has to engage its customers and listen to their needs. It is all a matter of timing since asking customers what they want during the sales-process is not considered actually listening to the market. Only by taking a long hard look at end-markets and paying attention to customers' demands before proceeding to develop a technology platform or products, can be regarded as a market-driven approach to product development and management.
A case of sales-driven culture posing as market-driven happened to Big Blue. IBM was the dominant force in the technology industry and synonymous with innovation and cutting-edge technology. IBM achieved its leadership position through a market-driven approach by using its massive sales force to determine customer needs. However, the company ran into trouble when it stopped listening for needs and began telling customers about its latest new product or technology.
Applying a market-driven approach demands commitment and discipline as it is a very procedural approach. Companies with an informal work culture and loose organizational structures fail at applying this methodology and so do companies eager to rush into the market because of the time involved in executing all phases of the market-driven process. But when properly applied, the result is a product that will solve a pervasive market problem in an established market segment, and for which customers are willing to pay. Experience has shown that rewards do come for those who patiently follow the course.
Market-driven companies produce sustainable products with visibly notable targeted value. The biggest reward is that a market-driven product helps establish market leadership and revenue-growth potential.
A study conducted several years ago by querying top marketing executives working at one-hundred leading U.S. technology companies, showed that despite all the talk about being market-driven and customer-focused, 54% of respondents viewed their company as actually being technology-driven. Companies do understand which approach they should follow and publicly declare it, but indeed it is hard to mend ways and transition because becoming market-driven will demand a painful shift in corporate culture and business practices.
For those who take the path, success is lasting. In the high-tech world (e.g. Microsoft) and consumer goods industry (e.g. Proctor and Gamble), a leadership position can be established and maintained by being a very effective market-driven organization that has superior skills in understanding, attracting, and keeping valuable customers with products that deliver real value. This is not just a cliché, but a formula for success.
What ultimately prevails in companies is the understanding that product value is always determined by the customer, not by the company or its technology. This understating in turn leads to the realization that finding technology that solves known market problems is easier and more profitable than finding or catering to buyers of that technology.
Looking for the latest in product management news, articles, webinars, podcasts and more?