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Product Strategy for High Technology Companies
Michael E. McGrath
How Today’s High-Tech Leaders—Microsoft, Intel, Motorola, and Others—Continue their Dominance in an Increasingly Competitive Marketplace.
Companies looking to make a mark in today’s crowded high-tech battlefield need two primary elements: a distinctive product and a powerful product strategy. Without both, they simply won’t survive.
Product Strategy for High Technology Companies, 2nd Edition, is today’s only book on product strategy written specifically for high-tech companies. Updated and revised to encompass everything from changing product strategies to Web-based technologies, this forward-thinking book provides page after page of market-tested strategies and techniques that include:
• An in-depth examination of the market-proven Core Strategic Vision (CSV) and Market Platform Plan (MPP) Frameworks
• Case studies examining 14 unique differentiation strategies—what worked, what didn’t, and why
• More than 250 examples of product strategy in action, from the success of Microsoft to the equally stunning—at the time—failure of Osborne
The opportunities in today’s wide-open technology marketplace are unparalleled in history. Benchmark yourself against the high-tech leaders—and discover techniques to carve out your own area of expertise and success—with Product Strategy for High Technology Companies.
Product Strategy for High Technology Companies
Michael E. McGrath
• How did Xerox, a dominant world leader in light-lens copying, change its strategic focus in time to secure a foothold in the emerging digital technologies arena?
• Which line strategies helped Tylenol leverage its single product—acetaminophen—into a broad-based platform that has sold nearly a quarter-trillion tablets?
• What innovative strategies did Dell Computer use to become a low-price leader in the notoriously razor-thin margin world of personal computers?
Continuous technological change…Short product life cycles…Fast-moving, innovative start-up competitors…
High-technology companies face a number of unique challenges not encountered by companies in other industries. And yet some—Microsoft, IBM, Apple, and Intel, to name just a few—consistently overcome the same obstacles faced by others, and continue to strengthen their competitive positions year after year.
How do they do it?
Product Strategy for High Technology Companies defines how high-tech companies have used product strategy and product platform strategy to achieve competitiveness, profitability, and continued expansion in the Internet age. Product strategists in high-tech companies will get the latest information on developing successful product policies—including technological change, product differentiation, timing and contingency planning, as well as marketing and financial considerations.
And far from offering a one-sided viewpoint of the marketplace, author Michael McGrath draws on his nearly quarter-century of experience to relate how product strategy works in the real world. McGrath discusses the strategies that allowed Amazon to create and launch numerous products in record time—and their plans for continuing this cycle of innovation and growth. He examines how companies such as Motorola were able to successfully leverage existing product lines, while others such as Wang quickly failed and disappeared.
Product Strategy for High Technology Companies is nothing less than a template for growth in the brutally competitive arena of high technology. Candid, comprehensive, and generous in its use of real-life examples to illustrate strategic realities, it shows today’s emerging technology challengers how to build a solid strategic foundation, leverage the strengths of that foundation, then build from it to assume and maintain a position of leadership—today and well into the 21st century.
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.
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.
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.
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...
|Pt. 1||Framework for Product Strategy||1|
|1||Strategy Requires Vision||3|
|2||Aligning Vision and Strategy||35|
|3||Building the Foundation: Product Platform Strategy||53|
|4||Defining the Offerings: Product Line Strategy||91|
|5||Addressing Market Realities: The MPP Framework||117|
|6||Successful Expansion Paths: The Leveraged Expansion Framework||133|
|Pt. 2||Competitive Strategy||155|
|7||Achieving Sustained Differentiation Using Vectors of Differentiation||157|
|8||Product Pricing Strategy||191|
|9||Taking Advantage of First-to-Market and Fast-Follower Strategies||219|
|10||Thinking Globally about Product Strategy||235|
|11||Understanding the Opportunities and Risks of Cannibalization||257|
|Pt. 3||Growth Strategies||273|
|12||Highways to Rapid Growth||275|
|13||Growth through Acquisitions||287|
|14||Growth through New Ventures||305|
|15||Growth through Innovation||321|
|Pt. 4||The Process of Product Strategy||335|
|16||Strategic Balance and Portfolio Management||337|
Posted April 10, 2002
In his richly illustrated Product Strategy for High Technology Companies, Michael E. McGrath rightly describes product strategy as a management process. Like any process, product strategy defines structure, timing, responsibilities, and skills. The process architecture reproduced on page 359 provides a practical framework starting with the definition of core strategic vision. Core strategic vision requires answering three questions: 1. Where do we want to go? 2. How will we get there? 3. And most critical Why will we be successful? Core strategic vision determines the criteria used for reaching a strategic balance in the product development process: Focus vs. diversification, short-term vs. long-term, current product platform vs. new product platform, business Alpha vs. business Beta, research vs. development, and high risk vs. low risk. Available resources influence the outlook of strategic balance.<p> Core strategic vision, strategic balance, core competencies, and competitive strategy are together the foundations on which the often-ignored product platform strategy is built. Product platform strategy is the lowest common denominator of relevant technology in a set of products or a product line. Product failures in high-tech companies frequently can be traced to an incomplete product platform strategy according to McGrath. Strategic balance, product platform strategy, and competitive strategy are together the foundations of product line strategy. Product line strategy is where specific product offerings are defined. <p> Core strategic vision also influences the competitive strategy that high technology companies must define. McGrath provides an in-depth, practical review of differentiation strategy, pricing strategy, and supporting strategies. Supporting strategies are first-to-market and fast-follower strategies, cannibalization, and global product strategy. McGrath¿s examination of both time-based strategies and cannibalization is particularly interesting because both subjects are rarely covered in such a luxury of detail. McGrath finally examines the optional expansion strategy and innovation strategy. High technology companies only need them if they want to invest in expansion or growth. <p> To summarize, Product Strategy for High Technology Companies is a practical guide to a management process from which even product managers from outside the high tech industry can draw useful lessons and more importantly apply them to their own product strategy.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.