Strategic Growth

PLATFORM MINING©

Creating advantaged new product platforms

Background:

Most organizations in need of significant growth feel their development resources are underperforming. They feel that there are not enough "big ideas" coming to the market quickly enough. In response to the increasing focus and pressure the development resources start into a "grab anything / do everything" downward spiral. What are needed are:

1. A critical few attractive & big "New Idea Platforms", for enduring and deep mining of several new products.

2. The key processes to balance the "frequency of innovation with scale of innovation" paradox.

This module leads development resources through a proven new idea generation process based on 3 guiding principles:

1. Segregation of New Business Development work from Established Franchise Maintenance work.

2. The balanced pursuit of "Big Ideas" while scoring with some short term ones up front, resolving the “home runs” vs. singles” paradox.

3. Systematizing Big Idea platform development for broad & deep long term "mining”.

The desired end-state of this work is the identification of a critical few "Big Idea" Innovation Platforms suitable for enduring "mining”.

The Concepts:

1. Segregation of New Business Development work from Established Franchise Maintenance work.

The work and skills required to market a product are very different from those required to develop a product.

Also, the work and skills required to launch new products successfully are very different from the work and skills required to continuously improve the existing franchise.

Existing Franchise Maintenance Work (examples):

a. SKU rationalization/working capital reduction

b. Quality Assurance / waste elimination

c. Working cost out of existing products & services

d. Short term product enhancement/line extension work

e. Price realization

f. Target Marketing (finding customers) / volume & loyalty growth

g. Customer/Sales troubleshooting

Distinctive new product development (examples):

a. Unmet needs / distinctive technologies identification

b. Distinctive solutions development and valuation

c. Max market penetration strategies (the "Penetration Waterfall")

d. Channel "sell in" support

Many businesses and Marketing groups make the mistake of organizing resources and their work only by market or by category. They implicitly assume that the resources within each group have the skill sets to do both new and existing work in a balanced and professional manner. In most instances there is more similarity in the work required to launch a new product regardless of the product, than to manage a category of products with both development and franchise maintenance work within the category.

When left to their own choices regarding how to balance the work within their own plans, most resources will strongly lean to one side of the work or the other. They are in fact emphasizing whichever skill base they feel most comfortable with. This is why some categories or teams will never get to the task of building the business of the future because they are more focused on fighting the fires of today. And others may not achieve their existing short term business goals because they are too focused on the future.

Both existing franchise maintenance work and new product development work are equally important. In order to enable the organization to identify and "mine" big ideas however it is critical to clarify and segregate the work priorities between the two needs.

Don't misunderstand. This doesn't mean a complete segregation or reorganization of the reporting structures of the business or significant increases in redundant resource needs within teams. What must be done is to clarify which projects are "EFM" projects and which are "NPD" projects, and then make sure key resources are not confused in their objectives, standards, or allocation of resources for each.

Wherever possible, resources should not be asked to do both EFM and NPD work on "big idea" projects.

The process:

a. List all work that is consuming development resources currently.

b. Divide them into EFM and NPD "buckets"

c. Apply the Project Strategic Prioritization Matrix process to them all

d. Determine how to more effectively allocate this work in ways that minimize EFM / NPD resourcing paradoxes.

e. Then drive the NPD work and resources through the remaining task steps of this outline.

Final note:

After the critical few Innovation Platforms have been chosen, a core team of NPD resources should if possible be dedicated to each platform for rapid & deep initial mining; either as a 'Jump start" task force or If possible a permanent deep mining team.

2. The balanced pursuit of "Big Ideas" while scoring with some short term ones up front.

Many executives are not willing to allow their new product resources to focus on only a select few new ideas. They see it as too risky. There are many reasons for this, most of them understandable (but not necessarily acceptable):

a. Historic new product failure rates lead many executives to the conclusion that they can "beat the odds" by having a large number of diverse new product projects.

b. Marketing "accountability & autonomy" processes create many parochial new product requests / requirements.

c. Businesses in trouble usually are looking for lots of "quick" growth vehicles to rescue them.

d. Or, “few” infers “big”; and “big” infers “big risk”

Many Executives feel "safer' when reviewing a long list of ideas, hoping that a number of them will emerge as "winners”. This approach is most always doomed. The New Product Development resources soon find themselves churning up any and all ideas brought to them. They become reactors instead of drivers of innovation. As their output becomes less inspired they are challenged even more strongly to conceive of the breakthrough product that will rescue the entire corporation, without license to drop the immediate "small stuff'. Soon they lapse into a development paralysis. This prioritization and resourcing paradox must be resolved at the outset or there will continue to be a downward spiral of results.

The keys to resolution:

Though the Executive demands for immediate new products, as well as "big ideas" is flawed in its overall lack of actionable direction, it is not wrong in its intent. What is missing is clarity and specificity regarding:

a. What is a big and small idea (definition & prioritization)?

b. How many ideas are required to most likely deliver the desired result.

c. How big ideas will be resourced and measured differently than small ones.

d. Criteria for acceptance/resourcing each type of idea.

What’s needed is an understanding and a process for managing the Development resources through this apparent "no win" paradox.

Here is a simple yet very effective way of defining the resolution process:

"You gotta rob a few gas stations while planning the big bank heist!"

"Gas Stations":

Ø Are opportunistic/share maintenance/line extension type projects.

Ø Have significant probability of quick & high ROI (low invention & capital requirements).

Ø Have low "cost of being wrong"/failure impact (quick getaway plans).

Ø Have much lower resource requirements than "Bank heists".

"Banks':"

Ø Are strategic/core or new platform "mines"/business share enhancing.

Ø Have significant potential for large reinvestable returns

Ø Are tangibly differentiated / distinctive (defensible invention required).

Ø Are high impact / high visibility if they fail (difficult getaway).

Ø Have much higher resource requirements than "Gas Stations".

	High
Strategic		Back to the Drawing Board	Bank Heists
Value		Jail Bait	Gas Stations
	Low		High
Economic Value

It is critical to establish clear demarcation between Gas stations and Banks and the relevant resourcing of each. Gas stations are necessary but they should be low risk "no brainers", or incremental improvements from an established advantaged platform* Bank heists are what will really make you rich but they are more resource intense and risky.

A "gas station" project that requires significant investment risk and / or less than outstanding quick payback, is not a good bet. They must be easy to hit, requiring few resources, and involving almost no risk.

A "bank heist' that has little strategic synergy or only average payback is also risky. Big uses of resources require big payback with very well conceived "getaway" plans.

Refer to "Project Prioritization Tools" for a recommended process for "testing" and sorting projects into the right classifications.

Also refer to “Adding Value & Distinctiveness in Commodity Based Businesses” for examples of Advantaged Development Platforms (“Banks”).

How many Banks versus gas stations?

Work back from Customer "launch windows" / bottlenecks.

The goal is usually to want a continuous stream of new product launches. However most traditional Retail and Commercial "channels" have a limitation on the # of calendar slots they will allocate to a producer for new product launches. Also many retail channels charge substantial "stocking fees" for new products. And finally, many Marketers overestimate the # of new products that their own organization can successfully launch (i.e., maximizing the depth and breadth of retail penetration and consumer interest) in a relatively short period of time. Refer to "The Penetration Waterfall" for more details.

For example purposes only: Some historic rules of thumb can be established if no other information is available:

a. 3 new products per quarter per homogeneous channel (i.e., U.S.

Supermarkets), 12 per year.

b. 2 big "Bank Heist" products per year.

c. This leaves a net 10 "gas station" products per year per channel

Assuming a drop out rate from "idea" to "commercialization" one could develop the following "guesstimates" of the # of new ideas in the pipeline to meet the launch window calendars:

	# of New Product Projects:
Process stages:	Gas Stations	Bank Heists

Search for unmet needs	25	4
Explore potential solutions	75	12
Develop the "best" solution	25	4
Apply and learn in market	20	3
Maximize market penetration	10	2

In this modeling example one would maximize market access of new products if they staffed for 25 "gas stations" and 4 "bank heists" per year.

Assuming:

a. Each "gas station "requires 9 months X 20 days/mo. X 4 people

b. Each "bank heist" requires 24 months X 20 days/mo. X 8 people

Then:

a. Gas stations require 720 man-days X 25 projects: or 82 people per 220-day work year.

b. Bank heists require 3840 man-days X 4 projects; or 70 people per 220-day work year.

This exercise shows that in many cases corporations will never resource to maximize all launch windows (152 development resources required per homogeneous channel calendar), and that they must therefore be more clear in the expected output from a limited resource pool of development resources.

The keys to successful and rapid ramp up:

Some effective ways to expand the output per $ of NPD input is to:

a. "Outsource" or acquire a certain # of new products from others.

b. Understand the significant difference between "innovation" and "invention'; and exploit "innovation" more.

c. Develop and adhere to a strict "strategic & financial" project prioritization process (see "Project Prioritization Tools").

d. Develop and implement a "Rapid Fire Innovation" development process (see "Creating a Rapid Fire Innovation Organization')

In any case however this exercise must be completed and accepted by Management in order to resolve the development paralysis paradox!

3. Systematizing Big Idea platform development for broad & deep "mining".

This shift deals with the issue that a corporation can have a rigorous development process and robust resource base, but without "big ideas" it will still wallow in "incrementalism" and mediocrity. There are many books and consultants specializing in how to reduce cycle time, or thoroughly develop a product once there is an idea or concept to be worked. However, what is most needed is a proven process to maximize the generation of "big ideas".

Identifying attractive unmet needs is the fundamental starting point of a successful "big ideas" development program. It's critical that this process is not left only to "divine inspiration". Though ideas come from many sources, many of them unsystematic and seemingly intuitive, the corporation cannot afford to bet only on such low probability processes.

The Keys to resolution:

Big ideas are ideas that yield significant financial rewards while redefining "the rules of the game" substantially to your advantage. They are significant enough that they are not based on beating a particular competitor at their game. Rather it is based on developing a select few "innovation platforms" that are deep and robust enough for continuous "mining" of many new products for an extended period; from an advantaged perspective.

This process requires a shift of development management planning processes to a more non-traditional form of strategic oversight of macro issues and opportunities (consistent with corporate "business focus" and “value proposition" work).

There are three proven process perspectives that have never failed to yield some big ideas when applied in various industries:

1. "Macro trends" analysis & interpretation

2. "Value received" modeling

3. Chooser / user Attitude & usage "logic streaming"

When deployed effectively these three "big idea development tools" have yielded more opportunities than most are capable of exploiting.

1. Macro Trends Analysis & Interpretation

How to identify them:

a. Read the newspapers! Reflect on the driving forces that are shaping the attitudes and behaviors of."

Ø Your Target Market "chooser/users" (more macro than their attitudes towards your products)

Ø Industry & Substitutes

Ø Relevant Emerging Technologies

b. Talk to industry "thought leaders" and / or non-traditional theoreticians such as cultural anthropologists or Faith Popcorn.

How to "test" them, shape them, & refine them in beneficial ways:

For each trend explore the following questions and their answers:

a. What is the driving force behind the trend? Why does it exist?

b. How enduring is it? What would it take for it to "go away"?

c. What's the scale of the macro market opportunity (see “Penetration Waterfall" process outline).

d. How does this trend manifest itself in your core focus areas? How could it be considered "core" to your business focus?

e. What product development platforms could be conceived to address this need? "Word pictures" of areas of focus, (vs. defined product ideas at this stage). All conceivable possibilities should be briefly explored.

f. Which of these can we develop a desirable, defensible, advantaged leadership position with?

(Refer to “Macro Trend Mining" Examples)

2. Value Received Modeling

There are only two truly enduring product-positioning options:

a. "Works Best!"

Ø Most effective in use

Ø "Tastes best'

Ø Tangible superiority/efficacy

Ø Can be works best for the same price point as well, but this weakens the opportunity for price realization premiums.

b. "Costs Less!"

Ø Either unit cost, or "cost in use" (total user economics)

Ø Tangible/measurable efficacy & economics

Ø Can be "costs less" for the same degree of performance (or taste), but this weakens the opportunity for price realization; a traditional Private Label position.

The traditional "Best Value" position is a "false trail". Its origins are in the thinking (of the 70's) that there were three primary consumer segments for all products:

Quality

Buyers

Value

Buyers

Price

Buyers

It evolved (in the 80's) to the realization that "Value" is not a position, but instead a continuum on a line between Price and Quality.

Price

Quality

The keys to resolution:

Today it is evident (to us) that that the term "Quality" is as flawed as the term "Value': If one wants to maximize the price/profit realization of their products, they should shift to their thinking to a new more effective paradigm:

Most

Effective

In Use

Lowest

Cost

In Use

Specific Target Market Segments

New product platforms can be identified from specific modeling of the economics and performance of current market leading products. Follow this with "what if” modeling of the elasticities of the "scores" based on shifts in each key element of the model.

The reasoning behind the important focus shift to Target Market Segmentation is best illustrated by the following example:

Kimberly Clark’s highly successful "AFH" division identified that the degree to which a product was directly involved in the cost or quality of a customers product determined the degree of leverage it had over pricing/profitability of the sale. A General Motors plant viewed washroom supplies as indirectly involved in the quality of their product so it was treated as a commodity and purchased as such on bid (price only decision-making). However when Scott developed a special "tack cloth" wiping material that was proven to remove all contamination from the metal before painting a car, they could charge almost anything for it. The cloth was directly involved in their product, and the economics of the cost savings due to minimizing repainting a car before it left the plant was substantial and measurable. Even though the customer was a primary target market for the wipers, it was not for the toilet paper. However, to complete the example, Marriott Hotels was a primary target market for the toilet paper because the product was now directly involved in the quality of their own product.

"Value" was in the eye of the beholder, and based on tangible economics. "Quality" was actually never an issue, relative to performance (i.e., Achievement of a specific customer need). "Price" was established based on "User value received" versus the standard "cost plus" trap many marketers fail into.

How to identify & refine development platforms:

a. Specifically identify target customers for your core businesses (can't be the traditional "female heads of households 25+ years old").

b. Model the "cradle to grave task streams" (example: "keeping kitchen floors clean" versus "mopping kitchen floors').

c. Look for performance sub optimization, cost adders, and/or savings opportunities in the entire task stream. (Example: lack of synergy between the mop the bucket and the cleaning agent).

d. Systematize the models for easy and rapid modeling of several scenarios:

Ø Market leading products (Johnson's Wax)

Ø Other "substitutes" (vacuums)

Ø Your current products

e. Play "what if games" with each of the model variables to determine key leverage areas and their elasticities.

f. Develop hypotheses (product concept "word pictures') of potential "breakthrough" product solutions that could significantly outscore others in the model (a mop that doesn't require a bucket, water or cleaning post use).

Most always a few new "innovation platforms" will emerge from this work for significant "mining". Note also that platforms that are derived from this process are usually very enduring because the specific system has been established with which to drive continuous improvement processes with real "teeth".

3. Chooser / User Attitude & Usage "Logic Streaming"

Sometimes "big ideas" are hidden within “little" ones!

As companies struggle to have robust lists of new product ideas, each Brand Management team may reach intuitively and reactively for ways to freshen or extend the results of their existing products. These "line extension" opportunities can be quite narrowly defined (i.e. "let's add more vitamin C to our product"), and potentially "lost” in fragmented project work. When viewed from a more strategic and organized vantage point many times a bigger idea is uncovered that was a hidden "driving force" behind the smaller project.

Also, if every product team is working to make similar product upgrades on their own, they are not deploying scarce resources effectively. If similar work is "globbed" together development effectiveness and leverage almost always improves, regardless of how "breakthrough/big" the glob is.

How to identify and refine new "Innovation Platforms';"

The process flow is one that takes user and non-user feedback on current products or tasks and systematically / logically builds a step by step interpretation sequence of the feedback through to product attributes and technologies to be developed.

NEEDS

It looks like this:

U S E R / n o n u s e r	f e e d b a c k

ATTRIBUTES

ò

TECHNOLOGIES

Although there is one process for this work, there are two starting points.

1. Current "user' & "non user" attitude and usage study output.

2. Current product development project lists.

The first pass is the more traditional path, and in many cases has already been followed to some degree by many NPD organizations.

The second pass is the one that many times yields very stimulating results!

In this step each of the "small idea" projects are reversed through the process. What may have started as a non-differentiated "catch-up idea (we need to make Rice Crispy Treats"), when worked back, yields a bigger idea/platform from which to mine many more potentially bigger ideas from ("families are looking for ways to squeeze breakfast into an already hectic lifestyle').

Ø Look for voids/misses in the matrices

Ø Look for better ways/ideas for meeting primary needs

Ø Look for primary needs that are really misunderstood or unmet by current alternatives.

Before "small" projects are put at risk of cutting during the Project Strategic “Prioritization & Resourcing" work, they should be reverse engineered through this process to look for bigger ideas and aggregating opportunities.

Final Notes on systematizing “Big idea” platform development:

As said at the outset; many good ideas come from intuitive / divine inspiration. This can be great at times, and should not be discounted. However, businesses cannot afford to accept this as the only process. The three work outlines we have discussed in this module have proven themselves to be effective systematic vehicles for generating big ideas as well, and should be used to ensure a robust idea pool for continuous idea generation regardless of other more intuitive approaches.

When a development organization has successfully completed this work, it should have the following characteristics:

1. There should be a critical few Innovation Platforms

a. Consistent with the "Business Focus" and existing / achievable capabilities

b. Not too many or too few (4 - 6 Platforms)

c. Based on exploring all 3 "big idea" development processes

d. "Platforms" for product developments versus individual "Products" themselves.

2. These Platforms should have an innately "attractive" context

a. Stimulating internally and externally

b. Believable/marketable

c. Empowering versus confining

d. Globally convergent/supported e. Deep, rich, and actionable "diamond mines"

3. They should be resourced effectively to achieve building the business of the future while, maximizing short-term results (i.e. "profitable growth").