Improving competitiveness with agile product development and strong-form product management

Jan. 19, 2012
New product design and product-management methods can speed time to market, ave money, and better serve customers

Barry Jaruzelski
Partner & Global Leader, Engineered Products & Services Practice
Richard Holman
Principal, Innovation Practice
Booz & Company
New York, N.Y.

This is a perfect time for industrial companies — the companies that design and manufacture heavy machinery, construction equipment, energy products such as turbines and windmills, and similar capital equipment — to invest in developing the distinctive capabilities to ensure their future success.

One of the most critical capabilities is improved product management. Product life cycles are decreasing as competitive pressures and technology breakthroughs drive more-frequent product upgrades, if not entirely new offerings. The challenge is that nearly 50% of all products launched fail to live up to expectations because product design too often proves to be a rigid, linear process in which customer inputs and preferences, technology, materials, and features are virtually locked in stone up front, and then an excessively long planning and development cycle ensues. By the time the product comes out, customers may have moved on to other interests or purchased another company’s product. Moreover, numerous design, specification, and materials changes have probably added to manufacturing costs, eroding margin potential.

To overcome these obstacles and radically improve the chances that product launches succeed, agile product development is critical. Long a staple of the software industry, this approach focuses on getting more feedback from customers up front through mechanisms like crowdsourcing and beta versions; making numerous design iterations in the early phases; and having a clear idea about the product’s core attributes and how it should be made, before the back-end development stages actually begin.

This focus on core requirements ensures that customer preferences are met and technology and materials decisions are made more intelligently in the initial stages, thus driving down uncertainty, inefficiency, and cost in the more resource-intense latter part of product development. Considering the role that communications technology, networking, and software play in virtually every industrial product, borrowing a set of efficient development techniques from high-tech industries is a logical evolution.

But agile product development will be for naught if product management is given short shrift. And this is the case at far too many manufacturing companies, where core product-management decisions are fragmented across a variety of functions: Sales may decide which products to maintain or kill; R&D may determine when an enhanced version of a product is ready for release; and operations may have the final say in choosing suppliers. Meanwhile, product managers are little more than administrators without real decision-making authority; their main roles involve managing channel decisions, overseeing changes, and taking account of customer needs and preferences to tweak products and services over the course of their revenue-producing lifetimes. This siloed approach often fails to leverage customer insights, slows innovation, and results in disappointing product revenue and profitability.

A better course is something we call strong-form product management. Under this approach, product managers are elevated to a cross-functional role with the authority to make decisions about the timing of innovations, pricing, channel strategy, and everything else that affects the product’s overall success. At its best, strong-form product management is an accountability model — a way of assigning responsibility for results to a single individual who can take a full portfolio and life-cycle view, rather than to a series of people lacking a holistic perspective. At a time when competition and customer demands have both intensified, it can be a differentiating capability, fortifying connections to customers and increasing the odds that a company will make the right trade-offs.

Strong-form product management also is a way of ensuring that high-level strategy makes its way into the products and services that a company sells. The product manager’s job at a low-cost manufacturer is to nix new, too-costly features developed by R&D that are nice but unnecessary. At a company that distinguishes itself through exceptional customer interaction, a strong-form product manager resists lifetime cost-savings initiatives proposed by operations if they erode customer satisfaction.

At a time when competition and customer demands have both intensified, strong-form product management can be a differentiating capability, fortifying connections to customers and increasing the odds that a company will make the right trade-offs.

Booz & Company is a leading global management consulting firm.

© 2012 Penton Media, Inc.

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