Before a commercialization plan can be developed and implemented, it must be driven by an overall commercialization strategy. By taking a strategic approach to your commercialization strategy, you will be better positioned to be successful with your new product launch.
The commercialization strategy should not contain a lot of financial detail or “how to,” but it must be consumer focused and customer centered and not technology focused. A key issue in a commercialization strategy is to set the direction to explore and understand the market. The commercialization strategy must focus on what satisfies the needs of the customer.
8 questions you need to answer in your commercialization strategy
1. What’s the Offering? (What are we trying to provide or create?)
At a high level, clearly state what products and services are being offered to the market.
Identify what other products/services may need to be provided to be a credible supplier to the customer and the channel. Identify, at a high level the anticipated pricing strategy at the end-user level and for the expected distribution channels.
2. What is the Adjacency Assessment of the product or service? (How does the product or service align with the core business areas?)
Chris Zook in, Beyond the Core, addresses the concept of Adjacency or the relationship of an opportunity to your core business and competencies. Zook defines several things when looking at an opportunity:
1) Core – Known business strengths and competencies
2) Adjacency – Relationship to the Core ranked from 0 (identical to the core) to Diversification (a completely new area).
3) Shared Economics – There are five dimensions that when evaluated and measure the distance from the core and can be used to determine the degree of relationship to the core:
- Customers – Are they the same as, or different from, customers currently served?
- Competitors – Are they the same as, or different from, competitors currently encountered?
- Cost Structure – Is the cost structure (infrastructure) the same or different?
- Channels of distribution –Are these the same or different?
- Singular capability/technology – If there is a singular capability (brand, asset, technology) that gives the core business its uniqueness, then is this relevant in the new opportunity?
3. Who is (are) the Targeted Customer(s)? (Who do we really think will want the product/service and Why?)
Identify who is (are) the targeted customer(s) – end-user, big box retailer, distributor, internal business unit, etc. Who are we trying to sell this product or service? Keep in mind that the targeted customer(s) may change as more marketing and Voice of the Customer data is collected.
Why is this customer believed to be the real customer? It is toward this customer that the Business Proposition will be initially oriented. It is toward this customer that the Business Plan will be structured.
4. State the “Business Proposition”
The business proposition describes what the product or service offers that no other product can.
It is important that the Business Proposition be benefit focused. For example, Coke quenches thirst. Coke is also a good rust remover but it will NEVER advertised as such.
The Business Proposition should take caution not to over advertise advantages – in other words, DON’T clutter the message. The more focused the message, the more likely to clearly communicate it.
Have a single Value Proposition – Keep It Simple – the KISS principle.
When developing a business proposition think of what people are buying.
Customers are not buying a product – they are buying what that product does for them. Customers don’t typically buy a product because they fall in love with the technology. Customers buy the SATISFACTION OF NEEDS. The Business Proposition MUST clearly state how that need will be satisfied.
Doug Hall, in his book, Jump Start Your Business Brain, addresses three key elements to Stating Value:
1) Overt Benefit to the Customer – What is the real benefit to be realized? Engineers love to talk specifications – “This car will go from zero to 60 in 3.2 seconds.” Buyers want to feel the wind in their hair and the thrill of feeling the force of their heads being pushed against the back of the seat.
2) Dynamic Difference – What makes our product/service any different that what is now available? Unless this product is for a total new and untapped market, customers have choices.
3) Real Reason to Believe – What gives the customer confidence that we can deliver the product or service we are offering? For example, “We have had Z years of 100% customer satisfaction as measured by JD Powers.”
5. State the “VALUE CHAIN”
The Value Chain relates to the business processes of the company selling the product.
Questions to be answered are:
- Who will sell the product? Whoever has sales responsibility must be aligned with the Value Proposition – they must care that the product/service really does meet the customer’s real need.
- Where will the product be sold? This may need to be clarified in later, but initially, choose the logical area(s) that fits in with your Value Proposition.
- How do you distribute your product? What is (are) the expected distribution channel(s)?
The Value Chain and Business Processes must be aligned as close as possible to the Value Proposition. The closer the alignment, the greater the probability of success.
6. How will the product/service be Marketed?
At a high level, what is the basic marketing approach? Consider the following:
- Who will provide the marketing activities?
- Who internally will oversee that the marketing activities are done correctly?
- Identify logical points to test assumptions, validate alignment with the Value Chain and/or Business Proposition, and logical changes/adjustments to the marketing approach, the Value Chain, or the Business Proposition.
- What is the overall Communication Strategy for getting the message out to potential customers?
7. Provide a rough-order-of-magnitude Business Plan
Given the information available, give a high-level assessment of the business potential for the three years after commercial launch. Try to be realistic, meaning not overly optimistic nor overly conservative.
Items to consider are:
- Gross Margin and Gross Margin as a percent of Sales
- Operating Income and Operating Income as a percent of Sales
8. Major Commercialization Risks/Issues/Obstacles/Support Requirements?
What significant commercialization items can keep this effort from being successful? What support is needed from management, gatekeepers, resource managers, etc.
Write out what the risks are and rate them High, Medium or Low. Put a few ideas down on how you can mitigate these risk.
Don’t use a Ready, Fire, Aim commercialization strategy
To maximize your chances for success, you need to be thoughtful in developing the strategies behind your new products. Innovations can happen in the commercialization of a product as easily as in the product itself. Think about all the ways you can build upon and leverage your commercialization strategy and you might find your sales teams more engaged in the product launch, your customers understanding what’s in it for them, and ultimately your new product goals being achieved.
A special thanks to Lowell Dye for his help in better understanding the product development process and in writing this post.