Tien Anh Nguyen leads the OpenView Research and Analytics team as Director of Market Insights. He is focused on leading market and product strategy engagements in areas such as target segmentation, marketing operations management, and marketing channels research with portfolio...
6 Ways to Reinvent Your Product Strategy
6 Ways to Reinvent Your Product Strategy
At the expansion stage, companies are often full of rightful excitement as they continue to grow and build momentum. But that growth often comes with a few bumps that companies need to address to maintain their skyward trajectory.
One of the biggest issues that I’ve noticed is some companies’ inability to adjust product strategy adroitly as market conditions change. Typically, as an expansion stage business grows outside of the limited market it served as a startup, it can be difficult to continue growing in the more mature, crowded markets it needs to target, or to figure out new market niches that it can dominate.
Central Desktop (disclaimer: an OpenView portfolio company), an expansion stage company that delivers a cloud-based social collaboration platform, is a great example of the need to reinvent product strategy in a stagnant market. The company competes in the extremely competitive market and, in recent years, has faced rapid price erosion and commoditization of typical feature sets because of the maturation of that market. That’s forced competitors to find new markets or niches that allow them to differentiate by some degree of specialization.
So, the question becomes how can those new startups and growth stage companies reinvent their product to address new markets or expand its existing market enough to attain the rapid growth their venture capital investors are always urging?
The challenge for expansion stage companies is much more unique and sometimes more difficult to overcome. But there is a systematic framework for refreshing the product strategy, using “value innovation,” opening doors to new markets or niches that most companies typically do not see or only stumble upon by accident. It will help prevent the market stagnation that many expansion stage businesses face and continue to promote the rapid growth.
W. Chan Kim and Renee Mauborgne’s 2005 book Blue Ocean Strategy is a good introduction to this framework. In it, the authors list six “frontiers” or “perspectives” into which innovations can be directed to create new markets or regenerate existing ones. According to Kim and Mauborgne, they are:
1. Substitute Industries
Look beyond direct competitors and see the market as the aggregate of both direct competitors and substitutes. For example, the most potent competitor to all project management tools is Microsoft Excel — a substitute of those companies’ products, not a competitor. So, rather than simply considering the competing products that your potential customers could buy instead, also think about the solutions that they could substitute as an alternative to buying anything at all.
2. Strategic Groups Within Industries
That is to say, redefine market segments within an existing market. By doing that, your company can deliver outstanding, differentiated value to each of those segments, and grow the market from within.
My colleague, Firas Raouf, wrote a great blog post early last year about market segmentation and why it can be a particularly effective means to profitable growth.
3. The Chain of Buyers
Most companies only focus on the immediate buyers, neglecting the need to address influencers and users who might ultimately become buyers. For example, Research in Motion (RIM) dominated the smartphone market for years because the company excelled at serving the needs of corporate IT departments (immediate buyers).
Apple, on the other hand, does not have great corporate email on the iPhone. But that product’s outstanding form factor, user friendliness, and versatility has allowed it to appeal directly to a new wave of corporate users who are flocking in droves to the iPhone, in spite of its IT department misgivings. RIM missed an opportunity by neglecting the chain of buyers.
In September, iPhones outsold Blackberry’s (RIM’s product) for the first time and Apple is setting its sights on gaining even more market share among corporate smart phone users.
4. Complementary Product and Service Offerings
Expand a product horizontally by integrating it with other products and services that serve the same market segment. Web-based collaboration application company 37signals does this really well, integrating its service with many other web-based software tools that form the backbone of small business software systems.
5. Functional or Emotional Appeal to Buyers
Sometimes, the way to differentiate is to go against the industry norm. Again, Apple has written the book on this frontier. The company keeps coming out with beautifully designed, expensive looking laptops that are priced at a premium to the market and the strategy has worked, even as other PC manufacturers try to soup up their offerings with more powerful processors.
6. Take Control of Time
This is perhaps the most subtle of perspectives in Kim and Mauborgne’s book. Essentially, they identify “shakers and movers” across industries who, instead of waiting for external forces to shape their markets, participate fully in the development of the market. That may be through internal innovation, strategic investment, or regulatory changes. Regardless, they become the headliners and the frontiers moving vanguard that ultimately define brand new markets altogether.
If you’re a senior manager at an expansion stage company that feels like it needs to revisit its product strategy, keep those six “frontiers” in mind.
Keep in mind that reinventing your product strategy doesn’t necessarily mean that you need to reinvent your business. But as the company grows and the number of its competitors increase, it’s important to stay fluid and keep your mind open to new ways to differentiate your product from an otherwise crowded and competitive market.
Photo by: Beverley Goodwin