product development articles

Switching Gears to an Organic Growth Strategy

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A little background…Virtually every department in an organization is touched by product development, meaning that multiple people, functions, processes and infrastructures must be coordinated. As a result, product development is complex and needs to be managed as a system. When consulting with our clients, Strategy 2 Market (s2m) treats product development as a system, integrating important elements: strategy, market understanding, process, teams and organization, portfolio management and metrics.

This takes us to the topic of switching gears from an acquisition strategy to an organic growth strategy

Notice below how the change from the old strategy of acquiring new products and technologies externally to the new strategy of developing them organically affects the product development system and increases the level and types of risks the system must handle.

For now, it is important to consider how the change in strategic direction requires a corresponding change in the other elements to make the whole product development system work. The table below offers a quick analysis of the important shifts in strategic activities.

 

s2m System Elements Acquisition Strategy Organic Strategy
Strategy
  • Acquire new products and technologies externally
  • Scouting/acquiring/integrating companies, products, technologies
  • Technology know-how[i]
  • Develop new products and technologies internally (organically)
  • Understanding customer needs/problems and translating into product requirements
  • Technology know-why[ii]
Portfolio Management
  • Emphasis on incremental improvements
  • Primary development borne by the external source
  • Balance of product development projects tends to be low-risk, low-investment
  • Emphasis on new products and new technologies
  • Balance of product development projects tends to be higher-risk, higher-investment
Market Understanding
  • Emphasis on keeping up with competition
  • Emphasis on finding new needs/problems to solve with new products
ProductDevelopment Process
  • Phased-and-gated and risk-driven processes are both suitable
  • Risk-driven process integrates and manages risks for all project types
  • Flexible, driven by unknowns and risks
Organization
  • Perception as a follower
  • Perception as a market leader/innovator
  • Higher profitability
Product Development Metrics[iii]
  • Growth in market share among target customers
  • Increased profitability of target customers
  • Maintain competitive advantage
  • Expand beyond current target customers
  • Expand beyond current product offerings
  • Expand beyond current revenue sources
  • Expand the intellectual-property portfolio

 

[i] Steven C. Wheelwright and Kim B. Clark, Revolutionizing Product Development, Quantum Leaps in Speed, Efficiency, and Quality. (New York: The Free Press, 1992). p. 36-37.

Wheelwright and Clark differentiate between know-how and know-why. Know-why is a deep understanding of ‘why’ a technology works as it do. Know-how is a practical knowledge of ‘how’ to apply the technology. Firms must identify the depth of knowledge needed for each technology.

[ii] Ibid.

[iii] Based on Abbie Griffin and Albert L. Page, “PDMA Success Measurement Project: Recommended Measure for Product Development Success and Failure,”Journal of Product Innovation Management 13 (1996): 478–96.

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