Product Strategy for High Technology Companies / Edition 2

by Michael E. McGrath

Overview

One of the key determinants of success for today’s high-technology companies is product strategy—and this guide continues to be the only book on product strategy written specifically for the 21st century high-tech industry. More than 250 examples from technological leaders including IBM, Compaq, and Apple—plus a new focus on growth strategies and on Internet businesses—define how high-tech companies can use product strategy and product platform strategy for competitiveness, profitability, and growth in the Internet age.

Product Details

ISBN-13:	9780071362467
Publisher:	McGraw Hill LLC
Publication date:	10/12/2000
Edition description:	REV
Pages:	400
Sales rank:	463,247
Product dimensions:	6.30(w) x 9.30(h) x 1.22(d)

About the Author

Michael McGrath is a cofounder and managing director of Pittiglio Rabin Todd & McGrath (PRTM), a leader in helping technology-based companies develop agile, robust management processes and methodologies. In over two decades of management consulting, he has worked with more than 100 companies in the U.S., Europe, and Asia. McGrath initiated PACE“ (Product And Cycle-time Excellence), PRTM’s product-development consulting practice, and has directed many of PRTM’s projects in reducing time-to-market in a variety of high technology companies. He coauthored the books Product Development and Setting the PACE in Product Development, and has published numerous articles on international manufacturing, product development, and trends in the high-technology industry.

Read an Excerpt

Chapter 1: Strategy Requires Vision

Impaired Vision

There are many types of vision that companies employ to power their strategies, but most of them fall short of core strategic vision. Before examining the characteristics of a CSV, let's look at some of those other types of vision and why they fail to serve strategy as well.

Tunnel Vision

A company can take a very narrow view of the future and not see threats or opportunities outside of its narrow focus. This narrow focus can help the company excel where it is concentrating, but its peripheral vision may be diminished; as a result, it doesn't see the impact of a new technology with better potential, the possibility of a new industry standard that could change the market, or emerging competition coming at the market from a new perspective.

Tunnel vision is particularly fatal to high-technology companies. In the late 1970s, Adam Osborne was considered by many to be a visionary of the fledgling microcomputer industry He published his views on its technology and markets in books and magazine articles. In 1981, he introduced the Osborne 1, a portable computer with bundled software that sold for $1,795. His vision was a computer for the masses-not the best computer, but one that was adequate and priced to sell in volume. He saw himself as the Henry Ford of the new microcomputer industry.

The Osborne 1 proved to be a hit. Sales took off; in 1982 Osborne Computer was one of the fastest-growing companies in American history, and Osborne predicted that his company would reach $1 billion in sales by 1984. But Osborne's tunnel vision reinforced his self-perception that he could do no wrong, and he failed to seethe looming impact of changes taking place in the industry.

In 1981, IBM, which Osborne had repeatedly put down as an obsolete company, introduced its PC based on a 16-bit microprocessor that was faster than Osborne's 8-bit microprocessor. Osborne predicted that "IBM will soon be out of the business completely."' However, the DOS operating system developed by Microsoft made Osborne's CP/M operating system obsolete. IBM's computer screens and disk drives were superior to those of the Osborne 1. Other companies, such as Compaq Computer, improved on Osborne's original strategy by making portable computers that were IBM-compatible. Sales of Osborne computers dropped precipitously in 1983, and by September the company had to lay off almost all of its employees. Soon after, it filed for Chapter 11 bankruptcy.

IBM's Bill Lowe also suffered from tunnel vision when he maintained an IBM-centric view of the future. In 1985, he gave Microsoft the rights to sell the jointly developed DOS operating system to other manufacturers in return for IBM's free use of it on IBM PCs. IBM, after all, had 80 percent of the DOS market. Microsoft's Bill Gates saw that this would change. By 1992, IBM's share of the market dropped to 20 percent, and IBM had given away its share of a $2 billion market for PC operating systems .z It would spend over a billion dollars developing a competitive operating system, called OS/2 and later renamed WARP But this offering was too late to make a difference.

Blindness

Some companies appear to be blind or at least sleepwalking. They just keep moving along contentedly until they hit a wall without ever seeing it coming. Because they lacked a vision to show them what was ahead, they were blind to what would or could happen. Companies can be strategically blind for different reasons. Some companies just don't seem to have any strategic vision. Maybe they think it isn't very important, or perhaps they just forget about it. Actually, this is not as outlandish as it seems. Without any deliberate process for evaluating a core strategic vision, it's all too easy for executives in a company to neglect it. They may have the best intentions and know that it's something they need to get to, but other things keep getting in the way. As we discuss throughout this book, a company needs to have a deliberate process to give creation of strategic vision sufficient priority.

Other strategically blind companies may think they have a strategic vision, but what they really have is a statement of how they would like to feel, not where they are going. It's as if someone said he or she wanted to be where it is warm and the sun always shines, instead of figuring out where that is and how to plan to get there.

Prime Computer is a classic example. It stated in 1988 that it had a "clear goal: to make money for its customers, and through that, for its owners." That "clear" goal was too vague and too general. Some within Prime may have had a more specific vision of where they thought the company should go, but theirs was not the company's vision. Prime was a cash-starved company with few core competencies in a market that was deteriorating. If any company needed a core strategic vision it was Prime. Eventually, it went bankrupt and spun off its only real technology of value, the Computervision business it had previously acquired.

A company may have a vision of its future, but this vision might have a blind spot-typically an issue or assumption about which it is markedly ignorant. For example, one company making advanced composite materials failed to acknowledge the advantages of an alternative technology. A competitor was able to see those advantages and won in the market.

Bachman Information Systems is an example of a company with a blind spot. It achieved meteoric growth and went public through the success of its mainframe-oriented software. Ranked nineteenth among Inc. magazine's fastest-growing companies in 1992, it grew from $13 million in 1990 to $48 million in 1992. Bachman failed to see the changes that were taking place in the mainframe market, though. Revenue collapsed in 1993 as PC-based client-server computing began to replace mainframe computing.

The trend had been visible to others for several years, but Bachman didn't see it. "I should have had my periscope up faster and seen this happen," was how CEO Arnold Kraft acknowledged his lack of vision. Former employees believed that the company's close ties to IBM, which was a stockholder and joint developer, blinded the company to the shift to distributed computing. This example illustrates how easily a company can develop a blind spot by unconsciously assuming that a critical factor that determines its success is unchangeable.

Some companies are virtually blind because they see things in so many different ways that their vision is blurred. Dozens of incompatible visions may be scattered throughout the company. Individuals may have beliefs about where they think the company should go, but there is no collective vision. There is no visionary leadership. One major electronics conglomerate gave up on developing a strategic vision, and its CEO stated that it was going to be "customer led." This resulted in each business unit and division working on so many different products that repetition, duplication, and wasted development dollars became a way of life. It doesn't take long to get in trouble when leadership lacks a sharply focused vision.

Since they don't know where to go, blind companies typically try to go in multiple directions. They launch many initiatives but are unable to make the tough decisions necessary to select a strategy and set priorities. As a result, resources are overallocated, and product development activities tend to drift. Frustration results, but this is just a symptom of the malaise: The cause is lack of strategic vision.

Shortsightedness

Some companies, on the other hand, tend to be too shortsighted, not seeing far enough into the future. They may be very good at the immediate tactical issues of management, but they don't see opportunities in time to take advantage of them, or threats in time to defend against them. Technological leaders are most vulnerable to shortsightedness. They are so tied to their own technological advantages that they underestimate those of others. Ironically, some of the biggest success stories in history happened when industry leaders were too shortsighted to see future...

Table of Contents

Part I: Framework for Product Strategy.

1. Strategy Requires Vision.

2. Aligning Vision and Strategy.

3. Building the Foundation: Product Platform Strategy.

4. Defining the Offerings: Product Line Strategy.

5. Addressing Market Realities: the MPP Framework.

6. Successful Expansion Paths: The Leveraged Expansion Framework.

Part II: Competitive Strategy.

7. Achieving Sustained Differentiation Using Vectors of Differentiation.

8. Product Pricing Strategy.

9. Taking Advantage of First-to-Market and Fast-Follower Strategies.

10. Thinking Globally About Product Strategy.

11. Understanding the Opportunities and Risks of Cannibalization.

Part III: Growth Strategies.

12. Highways to Rapid Growth.

13. Growth Through Acquisitions.

14. Growth Through New Ventures.

15. Growth Through Innovation.

Part IV: The Process of Product Strategy.

16. Strategic Balance and Portfolio Management.

17. Process Elements.