Value-driven product management is a repeatable process based on industry best practices that uses subjective and objective criteria to deliver successful products. This paper explains how assessment, alignment, achievability, accessibility, agility and accountability, the six key concepts of value-driven product management, can be applied to create a repeatable process for developing successful products.
Process and product managementWhite paper June 2009
Value-driven product management.
Six keys to product success
Michael Lester, Senior Product Marketing Manager, Product & Portfolio Management, IBMProcess and product managementPage 2
Executive summary Contents How do we make product success more predictable? Few things are more critical to the success of a company than its new product Contents launches. For example, an Aberdeen Group report indicates that the majority 3 Introduction of companies command at least 11 percent higher margins on products that 3 Six keys to being value-driven have been on the market for less than two years, with almost a quarter real-3 Assessment izing margin advantages of 50 percent or higher for new products. Yet product 4 Alignment success is difficult to achieve. Several analyst surveys have determined that 4 Achievability between 50 and 70 percent of new product launches fail. 5 Accessibility 5 Agility A successful product delivers value to its customers and revenue to the busi-6 Accountability ness that creates it. But to ensure value and revenue, product managers must 7 Benefits of product management define their target customer segment and understand its needs. To develop 8 Conclusion a product that delivers value in relation to the cost of development, product managers must also understand the value of different product features to different customers. By providing the right features to the right group of cus-tomers at the right time, a product can create value and revenue.
Value-driven product management is a repeatable process based on industry best practices that uses subjective and objective criteria to deliver successful products. This paper explains how assessment, alignment, achievability, acces-sibility, agility and accountability, the six key concepts of value-driven product management, can be applied to create a repeatable process for developing successful products. Process and product managementPage 3
Six keys to being value-driven Highlights Assessment Clearly understanding the needs and requirements of customers is critical to developing successful products. The first step in product marketing is usually Once you've defined your to define the market served by your company or product lines. The market company's or product's market, should then be divided into segments of customers with similar requirements. divide the market segments by The next step is to analyze the value that the various segments place on differ-requirements and analyze the value ent product properties in order to define a product that will meet their needs. of each segment. Stakeholders such as customers, prospects, sales, product marketing and engi-neering should be asked to provide input, such as requests for enhancements, defect reports, market analysis, warranty data and call reports, to help better define the target market's needs. Wherever possible, this information should be converted into metrics that will answer questions such as:
. What type of customer is asking for this particular feature? . How large is this customer segment?
As you define potential products, you should quantify the benefits to the customer, such as improvements in the performance of the customer's own product, and cost and time savings. Then look at the value each potential product can provide to your business in the form of revenues, profits and market share among others. By netting the value of future cash flows with the investment needed to develop a new product, financial analysis using dis-counted cash flows can provide insight into whether or not you should proceed with the new product. Process and product managementPage 4
The price point of the product and time at which it is introduced contribute Highlights to its value. For example, you may be able to identify a substantial market for a product that delivers 80 percent of competitive products' capabilities at 50 percent of their price. Or perhaps there is a market for a product that delivers 120 percent of competitive product's capabilities at 150 percent of the price. A product that satisfies fewer customers than a competitive product but is released earlier can also be successful in certain situations.
Financial analysis using discounted Finally, you should try to estimate the risks involved in each potential ini-cash flows can provide insight into tiative. Risk fact... [download for more]
