‘Product Strategy’ Category

Getting an ROI on New Product Innovation

Friday, July 7th, 2017

In research on what works and what does not in terms of product innovation. Some observations:

• Innovation Man, who leaps over tall buildings, overcoming roadblocks by going underground and fighting the system is more a myth than reality. Most likely he would be banned for being not in sync with the executive team. This is also not a repeatable approach you can emulate.

• Finding the BIG IDEA, while important, is not the end of the journey. It really does not pay off until you achieve commercial success.

• Encouraging all employees to innovate on their own initiative as does 3M and Google, has limited success as most people are too busy with their day job. This also assumes that there are processes and techniques in place that can leverage this time investment.

• Making innovation efficient and routine via process works ok for incremental innovation. Such an approach does not address the need for break-through or disruptive innovation.

The basic problem is that organizations are designed for on-going operations, good for today’s customers and defeating today’s competitors. Built for efficiency and accountability, they are performance engines.

We too often find from experience, that the brilliant new ideas and business opportunities derived in brain-storming sessions quickly lose momentum. The follow-through is usually relegated to too few people with too little investment. Lack of focus and commitment produces marginal results.

Innovation, which can create whole new product categories and lead to substantial change in market position, on other hand is non-routine and uncertain. Innovation in this sense needs more than ideas, it needs a special team, Innovation leaders and a plan of attack. Conceptually, the mindset is that of building a brand new company from the ground up.

Utilizing a dedicated team with a strong Project Leader that reports to Top Management has a great deal of merit. This can be carried to a separate organization as witnessed in the Aerospace Industry. Boeing Phantom Works and Lockheed Martin Skunkworks are examples of where the main focus is to investigate and prototype significant innovation and new product concepts. This dedicated team can then be supported by the performance engine or on-going operations. An acquisition in a new growth market segment could provide the dedicated team for innovation.

The process of Innovation can be supported by training, tools and methodologies used by the Innovation Team. Scenario Development, Market Segmentation, Blue Ocean Strategy can be combined with definition of Virtual Products, Dream Catalogues, Innovation Fairs and various means to introduce the Customer to truly innovative solutions to their problems. Strategic and Innovation consultants can support efforts to identify emerging growth markets, customer needs and product opportunities.

In the end, the commitment of the organization to the selection and support of a dedicated team will be the most important strategic move it will ever make to propel its new product engine.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2017. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

13 Reasons Why Your Marketing Isn’t Soaring With The Eagles – Part 1

Monday, July 11th, 2016

I’ll take it for granted that your product offering, price, and customer service, etc. are all at a standard which ensures your customers will be delighted with their purchases. However, before you can become an Elite Marketer dispensing Marketing Magic, there are two things you MUST do:

A) Resign yourself to the commercial reality that business is 90% marketing. As a business owner or manager, you must concentrate your efforts on getting your marketing tactics and implementation 100% right.

B) Know the basics of marketing. This is one area where rank amateurs abound, wallowing in blissful ignorance of the money they are needlessly squandering and the opportunities they are “burning.” Oh yes, the most dangerous animal in business is the amateur marketer.

Now to those 13 Reasons Why Your Marketing May Not Be Soaring With The Eagles – the first 3:

You don’t have a marketing plan

You must have a clear and very precise sales and profit objective – over any given period of time, but usually a year – for every one of your products and/or services.   Then you have to address the three specifics:

  • What are all the means available to you to reach your dollar objectives?
  • What marketing alternatives can you use, how can you use them, and how often should you use them?
  • How can you convert prospects to customers, and convince your existing customers to buy more, and/or more often?

You don’t know your customer

Hey, this violates the most fundamental rule of marketing: “Know Thy Customer”. You have to be customer-oriented.   Elite Marketers can give you chapter and verse on what their customer looks like. They have a mental image of the customers’ business, their age, sex, educational status, income levels, and other pertinent demographic information. They know their buying patterns, and they understand what makes them tick.   For now, ponder these two questions:

  • How does the successful marketer gather all this information about his/her customer?
  • Who is your customer? (If you can give an accurate answer to this question, congratulations… there are very few of your kind around.)

You don’t know what compels your customers to buy something

People don’t buy things because you want them to. They need their own reasons – very good reasons – to buy.   And you and your staff have to understand fully what these reasons and their motivations are, and then cater to them – as many of them as possible – in every marketing and selling situation… in every customer or potential customer contact … in everything you do.   People don’t buy products or services:

  • They buy benefits … benefits … benefits!
  • They buy solutions to their problems
  • They buy other people’s opinions of you, your business and your products
  • They buy credibility and believability
  • They buy your promises and guarantees (don’t ever let them down)
  • They buy your business and product “reliability”
  • They buy “value”… and, please, don’t confuse value with price
  • They buy certainty, honesty, convenience, and timeliness
  • They buy hope, comfort, success, wealth, security, love, and acceptance
  • They buy expectations of being pleased
  • They buy product selection options
  • They buy freedom from making a wrong buying decision
  • How many from this list can you line up against your product or service?

Let me ask you this simple question:   Why should I buy your product or service?   Come on … can you tell me right here and now why I should buy from you? (More on this next time)

Combining Vision and Innovation to Create the Future

Begin here to accelerate your success: http://www.ignition-pathway2growth.com/

© Rich Kohler 2016. All rights reserved. For copies, please contact Rich at rich@rich-kohler

Has Your Strategy Become – Too Predictable?

Monday, March 2nd, 2015

Business Strategy can take two forms: (1) the direct approach and (2) the indirect approach. The former consists of a direct advance to the competition, culminating in a powerful marketing frontal attack designed to overpower them. The indirect approach involves coming at the opponent from a round-about direction that he is not totally prepared to resist. Business history also reveals the advantages of the indirect approach. Marketing failures have often resulted from head-on attacks against the entrenched positions of stronger marketing rivals. Even brute force and having sheer resources are often not enough to insure the right outcome.

Throughout history, most great generals have consistently chosen the indirect approach, risking almost anything to catch the enemy with his guard down. Hannibal led an army of 50,000 Carthaginian infantry and 9,000 cavalry on his famous march across the Pyrenees and Alps. He emerged in Northern Italy to defeat the great Roman commander Saipio’s troops on the bank of the river Ticinus. In a snowstorm, he crushed two Roman armies along the river Trebia. Two more armies under Roman consuls Flaminius and Geminus were raised to block Hannibal’s path to Rome.

Hannibal followed a shorter, but more dangerous route through treacherous marshes to come out on Flaminius’s unprotected flank. Hannibal chose to face the most hazardous conditions, rather than the certainty of meeting his opponents in a position of their choosing. He followed this by hiding his light and heavy infantry and cavalry in gulleys near the road, so they could not be seen, and then taunted Flamininus into a foolish attack by making camp a short distance down the road from his army. As the unsuspecting Romans marched into battle, the Carthaginians poured out of their hiding places and attacked from all sides, decimating them.

Surprise has been called “any commander’s greatest tactical weapon.” Confederate General Stonewall Jackson’s maxim: “Mystify, mislead, surprise your enemy.” Clausewitz, the Prussian General maintained that to one degree or another, surprise is, without exception, the foundation of all military undertakings.

Surprise follows the course of least resistance. The most stunning surprises are the result of a novel, creative idea. Creativity many times consists of merely connecting two or more heretofore unrelated ideas or things. Napoleon gained a decisive surprise by connecting cannon and manure. He ordered a rocky mountain road covered with horse droppings to muffle the sound of the wheels of his artillery carriages. This allowed him to move under the cover of night and to surprise his opponent by being in a completely new position in the morning.

In warfare, a preliminary bombardment might weaken the enemy’s lines, but also eliminates any advantage you might have gained by surprise. The use of intensive market surveys and market tests practically give away any hope of sneaking up on the competition. Choosing the element of surprise, a company may quickly enter a market, with the intent of a decisive victory. The idea is to strike quickly and adjust the marketing strategy and tactics as you learn from your encounter.

Guerilla warfare advocates a sudden assault, ferocious fighting, and then an instantaneous break of contact before the larger opponent can exploit his strength – substantial resources, technology and power – and bring the weight of his material and numbers to bear. It builds upon the element of surprise.

All corporations, are trying to fight wars of quick decision – get to the marketplace first and avoid costly, protracted warfare with competitors. Small guerilla firms, more so than their larger competitors, need to make certain they win quickly. They cannot afford not to.

The element of surprise helps one to achieve a quick and favorable decision. Meticulous preplanning and preparation is the first condition of a quick win as Israel exhibited in its successful, lightning-quick six-day war.

Five guidelines for a quick guerilla attack:

• Seize the opportune moment

• Concentrate superior forces in a segment or area of expertise where you are the leader – act with your entire army

• Outflank the competition

• Operate on favorable terrain – ground of your own choosing where a relatively few determined people can stall an army (remember the 300 Spartans)

• Attack the competition where it has not established its position

The element of surprise has worked successfully throughout history, regardless of the field of play. As the mighty Goliath, in his battle array, lay on his back after being hit between the eyes by a small smooth stone launched in a sling by a shepherd boy named David, he no doubt wondered what hit him. By then it was all over, he had lost the battle and the war.

Combining Vision and Innovation to Create the Future

Start here to gain that competitive edge: http://www.ignition-pathway2growth.com/

© Rich Kohler 2015. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

New Product Innovation – More than just a Good Idea

Friday, December 17th, 2010

In their new book, The Other Side of Innovation, Chris Trimble and Vijay Govindarajan, discuss their research on what works and what does not in terms of product innovation. Some observations:

• Finding the BIG IDEA, while important, is not the end of the journey. It really does not pay off until you achieve commercial success.

• Encouraging all employees to innovate on their own initiative as does 3M and Google, has limited success as most people are too busy with their day job. This also assumes that there are processes and techniques in place that can leverage this time investment.

• Making innovation efficient and routine via process works ok for incremental innovation. Such an approach does not address the need for break-through or disruptive innovation.

• Innovation Man, who leaps over tall buildings, overcoming roadblocks by going underground and fighting the system is more a myth than reality. Most likely he would be banned for being not in sync with the executive team. This is also not a repeatable approach you can emulate.

The basic problem is that organizations are designed for on-going operations, good for today’s customers and defeating today’s competitors. Built for efficiency and accountability, they are performance engines.

We too often find from experience, that the brilliant new ideas and business opportunities derived in brain-storming sessions quickly lose momentum. The follow-through is usually relegated to too few people with too little investment. Lack of focus and commitment produces marginal results.

Innovation, which can create whole new product categories and lead to substantial change in market position, on other hand is non-routine and uncertain. Innovation in this sense needs more than ideas, it needs a special team, Innovation leaders and a plan of attack. Conceptually, the mindset is that of building a brand new company from the ground up.

Utilizing a dedicated team with a strong Project Leader that reports to Top Management has a great deal of merit. This can be carried to a separate organization as witnessed in the Aerospace Industry. Boeing Phantom Works, Lockheed Martin Skunkworks and UTC’s Sikorsky Innovations, main focus is to investigate and prototype significant innovation and new product concepts. This dedicated team can then be supported by the performance engine or on-going operations. An acquisition in a new growth market segment could provide the dedicated team for innovation.

The process of Innovation can be supported by training, tools and methodologies used by the Innovation Team. Scenario Development, Market Segmentation, Blue Ocean Strategy can be combined with definition of Virtual Products, Dream Catalogues, Innovation Fairs and various means to introduce the Customer to truly innovative solutions to their problems. Strategic and Innovation consultants can support efforts to identify emerging growth markets, customer needs and product opportunities.

In the end, the commitment of the organization to the selection and support of a dedicated team will be the most important strategic move it will ever make to propel its new product engine.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2010. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

The Element of Surprise – Following the Course of Least Resistance

Wednesday, December 15th, 2010

Business Strategy can take two forms: (1) the direct approach and (2) the indirect approach. The former consists of a direct advance to the competition, culminating in a powerful marketing frontal attack designed to overpower them. The indirect approach involves coming at the opponent from a round-about direction that he is not totally prepared to resist. Throughout history, most great generals have consistently chosen the indirect approach, risking almost anything to catch the enemy with his guard down.

Hannibal led an army of 50,000 Carthaginian infantry and 9,000 cavalry on his famous march across the Pyrenees and Alps. He emerged in Northern Italy to defeat the great Roman commander Saipio’s troops on the bank of the river Ticinus. In a snowstorm, he crushed two Roman armies along the river Trebia. Two more armies under Roman consuls Flaminius and Geminus were raised to block Hannibal’s path to Rome.

Hannibal followed a shorter, but more dangerous route through treacherous marshes to come out on Flaminius’s unprotected flank. Hannibal chose to face the most hazardous conditions, rather than the certainty of meeting his opponents in a position of their choosing. He followed this by hiding his light and heavy infantry and cavalry in gulleys near the road, so they could not be seen, and then taunted Flamininus into a foolish attack by making camp a short distance down the road from his army. As the unsuspecting Romans marched into battle, the Carthaginians poured out of their hiding places and attacked from all sides, decimating them.

Business history also reveals the advantages of the indirect approach. Marketing failures have often resulted from head-on attacks against the entrenched positions of stronger marketing rivals. Even brute force and having sheer resources are often not enough to insure the right outcome.

Surprise has been called “any commander’s greatest tactical weapon.” Confederate General Stonewall Jackson’s maxim: “Mystify, mislead, surprise your enemy.” Clausewitz, the Prussian General maintained that to one degree or another, surprise is, without exception, the foundation of all military undertakings.

Surprise follows a course of least resistance. The most stunning surprises are the result of a novel, creative idea. Creativity many times consists of merely connecting two or more heretofore unrelated ideas or things. Napoleon gained a decisive surprise by connecting cannon and manure. He ordered a rocky mountain road covered with horse droppings to muffle the sound of the wheels of his artillery carriages. This allowed him to move under the cover of night and to surprise his opponent by being in a completely new position in the morning.

In warfare, a preliminary bombardment might weaken the enemy’s lines, but also eliminates any advantage you might have gained by surprise. The use of intensive market surveys and market tests practically give away any hope of sneaking up on the competition. Choosing the element of surprise, a company may quickly enter a market, with the intent of a decisive victory. The idea is to strike quickly and adjust the marketing strategy and tactics as you learn from your encounter.

Guerilla warfare advocates a sudden assault, ferocious fighting, and then an instantaneous break of contact before the larger opponent can exploit his strength – substantial resources, technology and power – and bring the weight of his material and numbers to bear. It builds upon the element of surprise.

All corporations, are trying to fight wars of quick decision – get to the marketplace first and avoid costly, protracted warfare with competitors. Small guerilla firms, more so than their larger competitors, need to make certain they win quickly. They cannot afford not to.

The element of surprise helps one to achieve a quick and favorable decision. Meticulous preplanning and preparation is the first condition of a quick win as Israel exhibited in its successful, lightning-quick six-day war.

Five guidelines for a quick guerilla attack:

• Seize the opportune moment

• Concentrate superior forces in a segment or area of expertise where you are the leader – act with your entire army

• Outflank the competition

• Operate on favorable terrain – ground of your own choosing where a relatively few determined people can stall an army (remember the 300 Spartans)

• Attack the competition where it has not established its position

The element of surprise has worked successfully throughout history, regardless of the field of play. As the mighty Goliath, in his battle array, lay on his back after being hit between the eyes by a small smooth stone launched in a sling by a shepherd boy named David, he no doubt wondered what hit him. By then it was all over, he had lost the battle and the war.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2010. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

Mergers & Acquisitions within Aerospace and Defense – Reshaping the Industry

Monday, November 8th, 2010

Mergers and Acquisitions within the Aerospace and Defense market have had a large part in shaping the industry. Some organizations have flourished like Northrop and L-3, venerable names McDonnell Douglas and Grumman have gone away, others have changed their stripes and retooled their businesses like General Dynamics and Finmecannica. What has not changed is how this strategy helps increase the speed of change in capability and market position that an organic strategy cannot match.

Rockwell, once an Aerospace company, remade itself into an Industrial Automation company through the acquisition of Allen-Bradley and divestment of its aerospace assets to include Rockwell-Collins. Goodrich, once an Automotive company, has remade itself into a leading Aerospace supplier. BAE Systems (BAES) moved from being primarily a UK-Based company to one with its largest base of operation within the US. The acquisition of Alvis (2004), United Defense (2005) and Armor Holdings (2007) were key to BAES establishing a global land business that reached $12 B by 2008. This part of its product portfolio achieved significant benefit from the conflicts in Iraq and Afghanistan. L-3 under the direction and deal-making of Frank Lanza, grew from a Loral spin-off to a $10 B broad-based Product, Subsystem and System Integrator.

Large US Defense Prime Contractors – Boeing, Lockheed Martin, General Dynamics and Northrop have and continue to employ acquisitions to move into adjacent and new market segments. These include Electronic and Information Systems, Command and Control, Intelligence, Surveillance and Reconnaissance, Sensing, Data Mining and Fusion, Homeland and Cyber Security, IT Services, Cyber Security and Unmanned Systems, Mission Readiness and Sustainment. Lockheed Martin has evolved from building aircraft (now 25% of sales) to a broad array of capabilities to include Maritime and Land Vehicles.

One need not be a market giant to successfully employ an M&A growth business strategy as has been employed by US firms like Moog, Curtis-Wright and Transdigm. Such a strategy can also be used to execute a global marketing strategy, and build a new position on foreign soil to become one of the “in-country” suppliers as has UK-based BAES, Smiths PLC, Cobham, Qinetic and Chemring PLC. A modern day British invasion. Italy’s Finmecannica utilized acquisition of DRS to overcome high barriers to US procurement policy witnessed by foreign companies. Additional benefits also included allowing the broader Finmecannica Group to increase its presence in the US market while creating a strategic marketing opportunity for DRS to expand in global markets overseas.

M&A activity ties closely to the direction of the industry as it relates to market growth or decline in Commercial aircraft sales and Defense expenditures. In the current economic environment, as the Commercial market segment turns up and the Defense market turns down, M&A activity in both segments of the market has increased with a related increased in EBITDA multiples. During a cycle one always hears that companies are getting too expensive, multiples are getting out of hand. However, this is not always looked at in the context of missed opportunities and time to market. How much does it cost to have your strategic plan stymied? As a market consolidates, how many more moves on the chessboard are out there?

As in a chess game, M&A strategy can provide market and product positioning moves, allowing your opponent to move you methodically into a corner – and then, checkmate. It was not always clear from witnessing L-3’s acquisitions, which direction they were going. It did not make sense until perhaps 3 or 4 were made, the first as a beachhead and the others to build breadth and depth. Rockwell’s acquisition of Teldec in Germany was not about technology, it was about market access to European defense programs.

In the end, Mergers and Acquisitions follow strategy, not lead it. Opportunities can come up that you have wished for, but now, are not prepared for. There is seldom a perfect time. Ready or not, you need to get in the game, and help create the future. Otherwise it may define you.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2010. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

Niche Marketing Strategy – Going against conventional wisdom

Saturday, November 6th, 2010

As with all industries, the Aerospace and Defense market has its cycles, whether it be sales growth and contraction or operating philosophies and business strategies. During the early part of the decade, the Aerospace market trend seemed to be pointing in the direction of Customers desiring more integrated subsystems and systems vs. products. Not unlike that which I experienced earlier within the Automotive industry, this was somewhat different depending upon market segment. The Commercial Aerospace market was requesting more than the Defense segment, and the Regional and Business Jet segment more than the large Commercial Transport market.

In order to successfully compete, the general belief, or the strategy being proposed by leading Management Consulting firms, was to move from being a product level supplier up the value chain to a system integrator. This looked to be a plausible strategy, and large global competitors, some with greater product breadth and depth, were employing it. However, one fact was somewhat unclear –  could you prosper and make money at it? Studies done within the Automotive market had shown that the higher firms moved up the value chain in serving the Automotive OEM’s, they actually became less, not more, profitable. Broad-line system integrator or focused niche product firm, which way to go?

TransDigm Group is a good example of an Aerospace & Defense market participant who has followed a disciplined and quite successful niche marketing strategy. As the industry goes, the products, which include ignition systems, pumps, valves, motors, actuators and controls, batteries and power conditioning, cockpit security, audio systems, lighting and displays, are not that visible or on the leading edge. However, the strategy is more about products that are proprietary and sole source in nature that create barriers to entry and stable recurring revenue, can be used across all market segments and aircraft types, and that not only create an Original Equipment (OE) position, but also a large Aftermarket. Transdigm states that 60% of sales come from the Aftermarket which can be quite profitable. For Transdigm, Aftermarket revenues can generate 20-50 times, or more, OE revenue.

This niche market strategy has also been utilized in its acquisition strategy as Transdigm has built its business through a series of almost 30 acquisitions since its inception in 1993. Once acquired, the organization works to quickly focus Product Management on profitable new business development, implement value-based pricing, productivity and cost improvements. While typically paying 6-10 X EBITDA, the recent acquisition of McKechnie Aerospace Holdings was purchased for $1.27 B and 12 X EBITDA.

Employing its niche business strategy has enabled Transdigm to grow through all phases of the market cycle within the Aerospace industry. It has grown from $48 M in 1993, to over $1 B in 2010, with an average sales and EBITDA growth rate of 19% and 25% per year, respectively.

It turned out in the Automotive market, as it does in the Aerospace market, that a strong proprietary technical position and differentiated product offering that creates high levels of Customer Value helps drive sales growth and profitability. And while many firms believe that the only path to market, and route to success, is to be a system integrator, it might be instructive to take a look at one who played to a different drummer.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2010. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.

Does your Product Portfolio need a tune-up?

Tuesday, October 26th, 2010

Solomon, the thought leader and visionary of his time, pointed out that “without a vision, the people perish.” A recent article citing Ford’s plan to cut its product lineup, reminded me that this concept cited some years ago still rings true as a solid strategy. Has Ford got a better idea? I think so.

Ford began to remake itself with the appointment of Alan Mulally, former Boeing executive who understood the need for new products and enticing customers. People wondered whether an individual from Aerospace could run an automobile company. Under Mulally’s direction Ford moved quickly to shore up its balance sheet and reinvent itself before the steep downturn giving it more latitude to define its future. He has focused on that which makes a company a winner, a laser-sharp focus on product quality, differentiated products and innovative, appealing designs.

GM and Chrysler were slower to react to the perfect storm that hit the auto industry, leaving it up to government policy to bail them out. GM’s Rick Wagoner tried in vain to hang on to the old GM business strategy of multiple brands and price points put in place by Alfred Sloan roughly 70 years ago. Venerable brands Oldsmobile, Pontiac, Saturn and Hummer fell to the wayside as this slow moving monolith tried to hang on to an outdated strategy. Lackluster design, high costs and a plethora of look-alike products limited GM’s ability to invest and keep its product line fresh and appealing.

I personally watched with anguish as the Big 3 nose-dived towards oblivion. But with every defeat comes the opportunity to rise from the ashes.

Jacques Nasser’s vision for Ford was to mimic GM, a model for every price point. When Mulally came to Ford in 2006, there were 97 models. “It was absolutely clear that we had to simplify Ford dramatically. We are on our way to 20 to 25 models. Fewer brands mean you can put more focus into improving the quality of engineering.”Some products have been terminated along with selling luxury brands Volvo, Jaguar, Land Rover and Aston Martin. Ford will discontinue its Mercury product line to put more resources into its upscale Lincoln brand.

Mulally has proven the skeptics wrong. He did it by focusing his organization on what really matters: products that delight the customer. He combined vision and innovation to create Ford’s future. The Ford Fusion has surpassed long-time leaders Honda Accord and Toyota Camry. The 2011 Mustang has performance that rivals a BMW M5 at half the cost, and with the new 2011 Ford Fiesta and Explorer, Ford appears to be clicking on all cylinders.

Ford and GM are more nimble today with both building world-class automobiles once again. Bob Lutz, before departing GM, led a revival in its product lineup that has well-positioned Cadillac, Buick and Chevrolet for the future.  Both have taken a new approach to building their brands with creative and appealing advertising.

I am excited about the future of these legendary industry icons given my passion for rebuilding American industry.

Combining Vision and Innovation to Create the Future

© Rich Kohler 2010. All rights reserved. For copies, please contact Rich at rich@rich-kohler.com.