With products beyond refrigerators, differentiators need not be physically visible — nor even consistent among competitors and market segments. The suspension and powertrain performance serve as differentiators in high-end sports cars like BMWs or Porsches. Conversely, these features clearly fall behind the green line in most family sedans. Family car buyers put more emphasis on practical features like interior seating configuration, fuel efficiency, and safety systems. A sports car enthusiast may be satisfied with a minimalist interior as long as the vehicle accelerates quickly and handles well at high speeds.
The green line concept applies equally well in a service company. Differentiated reservation services provided to frequent flyers by major airlines offer the most valuable travelers a special toll-free reservation number. Call center staff greet the preferred customers by name and route them to the front of the queue. Unknown to most customers, a single call center — situated well behind the green line — provides service to all callers, creating staffing efficiencies without forcing the most important customers to wait longer than necessary for a higher level of service.
Bringing the Pieces Together
In its oversight role, senior management can ensure the integration of the various advanced technology projects, product creation projects, and product portfolios through annual product strategy reviews. Although rare even among leading companies, such reviews rank as high in importance as the more common processes of strategic planning and annual budgeting. Many companies conduct a multiyear strategic review at the beginning of the fiscal year and then finalize the next year’s operating budgets near the end of the fiscal year. An annual product review held between these two planning events can focus attention on the real lifeblood of any growing business: the ongoing nurturing of the product or service portfolio.
Building on the company’s understanding of customer trends and the anticipated strategic moves of major competitors, the annual product review allows management to set priorities and to integrate development efforts across the full spectrum of project and product portfolios. These priorities then inform the annual operating plan, which allocates expense and capital budgets on the basis of product creation commitments.
Product strategy reviews differ significantly from corporate strategy reviews. The latter tend to focus on strategic direction, new lines of business, revenue and profit goals, and opportunities such as mergers and acquisitions. A product strategy review, in contrast, forces senior management and the product management teams to assess the total product offering both as it exists and as it will evolve in the years ahead.
Preparation for the product strategy review serves as a good forcing function for all product areas, requiring them to communicate their plans and rationale comprehensively without the distraction of other business issues. The reviews typically expose gaps and opportunities in the product portfolio. They also serve as a forum for ensuring that there is a common understanding of key customer trends and answering key questions that cross product creation boundaries. Should one product type be expanded more rapidly than another? Are the technology concepts being prioritized to the best consumer applications? How are competitive product portfolios changing?
Senior management can use the product strategy review to tighten the linkages among the advanced technology groups in research and development and the various product management teams. The process forces everyone to look outside their group to calibrate the typically internal focus on the next “new new thing” or the most recent minor product upgrade. The review starts with an outside-in marketplace perspective on customers and competitors and then works market-back. Starting with that same outside-in perspective, the review assesses the entire portfolio in a technology-forward way as well. This systematic analysis typically identifies areas where senior management will clarify and often alter its product portfolio objectives.