BASIC STRATEGY GUIDE: STEP 17
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Activity Two (Steps 13-18):
Develop new products and services to gain share with Core customer segments.
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Step 17: Develop a program for new products and services and confirm its value for customers.
What:
Use current customer costs related to today’s products and services to develop potential new products and services to meet core customer needs more cost effectively. To get a quick overview of approaches to meeting customer needs, please see our Perspective, “Patterns of Product and Service Innovation.” Conduct this step by finding innovations in product and services:
Pick a customer type, either Intermediary or Final
Review this customer type’s life cycle cost of your product.
Identify potential product and service innovations that might reduce core customers’ current life cycle costs of the product by adding knowledge.
Identify potential product and service innovations that might reduce core customers’ current life cycle costs of the product by reducing resources
Identify potential product and service innovations that might reduce core customers’ current life cycle costs of the product by improving customer experience.
Estimate the net savings to the customer from each innovation
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Conduct a series of innovation meetings to develop and refine these innovation ideas
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Rank order all remaining innovations by their net savings for the customer
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Repeat this series of steps for the other type of customer, if there are both Intermediary and Final customers
Why:
No market stands still for long. It is important that the Company correct its short-comings in order to avoid all forms of Negative Volatility. At the same time, the Company will inevitably fall behind its marketplace peers unless it develops new benefits for its Core customers.
What to Watch For:
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The key customer for your innovation evaluation is one of the largest Core customers you serve. An innovation that does not help this customer will produce little sales volume.
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The more comprehensive your understanding of the Core customer’s cost, the more effective the innovation program.
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Developing and Stable industries with high prices see many successful innovations for the Final customer. In Hostile industries, the majority of innovations will often be directed to the Intermediary customer, if there is one.
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In developing product and service innovations for Core customers, place particular emphasis on the areas of highest cost to the customer. Improvements in these areas are likely to offer the most benefit for the customers, provided the Company can offer the innovation at a reasonable price to the customer.
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The Core customer should clearly see that the innovation saves costs in his system..
Action:
Develop a set of potential product and service innovations. Use the outlines and examples in Improve/Products and Services to create these ideas both comprehensively and creatively.
More Information on the Reasons for Positive Volatility on the Advanced Site>>
More Information on the Customer Cost System on the Advanced Site>>
More Information on Price Point or Benefit Change on the Advanced Site>>
More Information on Change Within Price Points on the Advanced Site>>
See Improve Products and Services for many innovation ideas and examples
For helpful context on this step:
Videos:
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Video #56: Design to Value as an Approach to Cost Management
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Video #70: Overview of Products and Services Part 2: What to Expect
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Video #71: Overview of Products and Services Part 3: What to Do
Perspectives:
Symptoms and Implications:
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