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The Product Manager's Handbook

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By LINDA GORCHELS

The McGraw-Hill Companies, Inc.

Copyright © 2006 The McGraw-Hill Companies, Inc.
All rights reserved.
ISBN: 978-0-07-177209-9

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Excerpt

CHAPTER 1

A Strategic Planning Framework for Product Managers

Why are you in product management? And why are you managing the specific product and services that you are? Hopefully, it's because you have a passion for your offerings and for the benefits these offerings give to customers. This chapter focuses on the characteristics of "heavyweight" product managers and provides a framework to turn their passion into business strategies.

Heavyweight Product Managers

Heavyweight product managers are business strategists as well as competent follow-through individuals. They have to achieve profit through superior customer satisfaction with their products. And they must do this through people over whom they have no direct authority.

During the 1980s, product managers began appearing on the staffs of more and more automotive companies. The motivation for this change was the growth in international competition, the increasing complexity of the products, and more demanding, sophisticated customers. Product managers (called "large product leaders" at Honda and "program managers" at Ford) were challenged to create not only functionally superior cars, but also cars that are distinctive and embody a certain personality or "feel" that would be consistent with future customer needs.

This last aspect, bringing the customer into the mix, is the product manager's most critical role. The auto companies previously had used matrix structures, coordinator committees, cross-functional teams, and other structural mechanisms to improve product development, but these were frequently inward-focused and did not anticipate future customer desires. External integration is an important and difficult task of the development process: Unless a company makes a deliberate effort to integrate customers into the development process, it is likely to create products that are technologically advanced and perhaps offer good value but fall short of the expectations of sophisticated customers.

Ford is one company that had early success with the external integration organizational concept. The Taurus, introduced in 1985, was designed to be a family vehicle with sophisticated European styling, handling, and ride. Its success was due to Team Taurus, the cross-functional group responsible for this product. The effectiveness of the team became the catalyst for organizational change at Ford. Shortly thereafter, it formalized the "program manager" concept that evolved out of the Taurus experience.

The external integration structure reinforced cross-functional integration at both the strategy and operational levels. In particular, marketing people (led by the program manager) began to meet directly with designers and engineers. Previously, their involvement had been through reports and memos. The program managers themselves were given greater responsibility for product planning and layout.

As this organizational structure continued to grow, the strength of the program manager's position increased, as did the effectiveness of the product- development process. Several products that were developed out of this structure followed the market success of the Taurus: the Lincoln Continental, the Thunderbird Super Coupe, the Probe, and the Explorer.

As time went on, Ford management discovered that integrated development required more than a cross-functional team. It became clear that simply assigning a project leader to a team did not guarantee product integrity. The effectiveness of the program manager was the missing link.

When markets were relatively stable, companies could achieve product integrity through strong functional organizations. Now, however, the ability to achieve superior product integrity depends on the leadership of the product manager. The product manager becomes the thread tying all the pieces together, filling in the gaps and ensuring that the final product is consistent with the original product–customer concept, with a special effort placed on understanding what customer wants will be at the time a new product is introduced, rather than what they are right now. This person must be able to understand:

• What the product does (performance and technical functions);

• What the product is (configuration, component technologies);

• Who the product serves (target market); and

• What the product means to customers (character, personality, image).

Characteristics of Heavyweight Product Managers

Of course, not all product managers provide the same level of effectiveness. Kim Clark and Takahiro Fujimoto, in their Harvard Business Review article "The Power of Product Integrity," differentiate between "heavyweight" product managers and "their lighter-weight counterparts." According to their research in the automotive industry, many product managers are functional workers, rather than cross-functional leaders. They lack influence outside their own functional area, have little or no contact with working-level engineers or with marketing, and act primarily as facilitators and coordinators. As a result, they spend much of their time going to meetings, reading reports, and writing memos.

Heavyweight product managers, on the other hand, function as the product's general manager. Clark and Fujimoto explain:

In addition to concept-related duties, the responsibilities that come with the job include: coordinating production and sales as well as engineering; coordinating the entire project from concept to market; signing off on specification, cost-target, layout and major component choices; and maintaining direct contact with existing and potential customers. Heavyweight product managers have a broad knowledge of the product and process engineering required to develop an entire vehicle. Years of experience with the companies give their words weight and increase their influence with people over whom they have no formal authority.

Honda's "large product leader" is such a position. It combines the generation of a strong product concept with the ability to carry it through development to the final product experience for the end-customer. When the product manager for the Honda Accord began the third-generation design, he was challenged with maintaining the concept "man maximum, machine minimum" throughout the development process, while still repositioning the Accord to fit future customer expectations. Starting with a series of small-group brainstorming sessions, the product leader and his team decided to personify the car's message to consumers with the image of "a rugby player in a business suit." The next step was to break this image down into specific attributes of a car. Five sets of key words were chosen: open-minded, friendly communication, tough spirit, stress-free, and love forever. Tough spirit was translated into maneuverability in difficult conditions. Love forever translated into long-term customer satisfaction. Stress-free led to efforts in noise and vibration reduction.

To capture all these elements was a challenge for the Accord design team. In an effort to allow maximum space and visibility for the occupants, a low engine hood and a larger-than-usual front window were part of the design. Unfortunately, the large window meant that the car could get uncomfortably hot in the summer unless a large air conditioner was added, which required a large engine. And the large engine was contrary to the desire for a low engine hood.

Rather than allowing this to develop into an either-or decision, the product leader reminded the team to look at their work through future customers' eyes and to maintain the integrity of the initial concept. The result was the development of a new engine that was both compact and powerful.

As the Honda example shows, being market-oriented is a critical role for the talented product manager. However, as Clark and Fujimoto also point out, it requires more than that:

It begins with customers, to be sure, since the best concept developers invariably supplement the cooked information they get from marketing specialists with raw data they gather themselves. But strong product concepts also include a healthy measure of what we call "market imagination": they encompass what customers say they want and what the concept's creators imagine customers will want three or more years into the future. Remembering that customers know only existing products and existing technologies, they avoid the trap of being too close to customers and of designing products that will be out-of-date before they are even manufactured.

The product manager must juggle numerous details and ensure that the subtleties of a product concept are not lost in development and marketing. Although creating product and marketing plans is part of this effort, an essential task is the interpersonal communication of these somewhat intangible ideas. Daily communication with functional engineering departments during the design phase, and with plant personnel during the development phase, is a necessary role of the product manager. Similarly, product managers test-drive the vehicles and continually strive to attain strong product integrity:

The product manager's job touches every part of the new product process. Indeed, heavyweight product managers have to be "multilingual," fluent in the languages of customers, marketers, engineers, and designers. On one side, this means being able to translate an evocative concept like the pocket rocket into specific targets like "maximum speed 250 kilometers per hour" and "drag coefficient less than 0.3" that detail-oriented engineers can easily grasp. On the other side, it means being able to assess and communicate what a "0.3 drag coefficient" will mean to the customers.

Outstanding product-management organizations depend on consistency between the formal and informal organizational structure. Honda demonstrated this consistency in some important ways. Communication lines were open and direct, rather than indirect. Functional specialists were respected, but not put on a pedestal. And the product concept was infused throughout the product team.

Heavyweight product managers in other industries have some of the same characteristics as those in the automotive industry. As Jean LeGrand states, in her article in Bankers Magazine, "A Product in Need of Management," a successful product manager in the banking industry "must be a senior-level professional, widely regarded in the profession." This individual must understand "complex portfolio management programs and such quantitative models as cost accounting and return on equity (ROE) computations." And, as in the automotive industry, the position requires market knowledge and the ability to translate technical concepts into customer-appropriate terms.

In fast-moving consumer goods (FMCG) companies, product managers (frequently called "brand managers") are less likely to have industry experience, but rather, to have strong management and marketing skills, typically requiring an MBA. They are expected to create strong brand recognition for their products through their ability to command respect, maintain momentum throughout a product-related project, and motivate everyone toward the same goal. As with heavyweight product managers in other industries, the FMCG brand manager must strive for and champion product integrity.

A Planning Framework

No shortage of perspectives exists on planning approaches and frameworks. That's probably good, since product managers from different companies benefit from different "realities" in how they strategize. Business-to-business product managers need a strong understanding of how to help salespeople and distributors sell to commercial customers. Consumer product managers not only require a clear "brand manager" perspective of household buyers, but also must have the ability to motivate trade partners. Global product managers have different responsibilities, depending on whether they design products for foreign purchasers or accept existing products from their headquarters in another country to "glocalize" within their domestic borders. Many planning principles are common across all these situations, although the implementation of the principles might vary.

It's also worth noting that product managers may be responsible for many types of plans. One plan is based on longer-term strategies—generating a "vision" of what the product portfolio should be in the future—to ensure future cash flows for their product area. This plan might include various innovation and rationalization strategies. Those who are involved in new product development must create project plans to guide the development effort and launch plans to guide commercialization activities. And on an annual basis, product managers will develop marketing or business plans for the top products or, possibly, their entire product line. These types of plans identify tactics to improve sales and profitability, possibly incorporating revitalization and maintenance strategies for select products.

Figure 1.1 shows the relationships among product planning forces and the primary categories of product strategies. A knowledge of market and competitive trends, along with an understanding of the sustainable product, brand, and financial performance characteristics, yields the analytical foundation for the product vision and portfolio goals. The tools to conduct these analyses are described in chapters 2 and 3. Using the information to craft brand and financial (business) plans is described in chapters 4 and 5. Chapters 6 through 10 provide more ideas to implement innovation, revitalization, maintenance, and rationalization strategies.

Determining the vision and strategy of the overall company is a basic part of this analysis (Figure 1.2). The vision is the mental picture of what the company will be in the future: the products it will offer and the markets it will serve. The corporate and divisional strategies are the general plans needed to move toward this vision. The product plans and marketing tac-tics should be consistent with the vision and strategies and move the company closer to superior customer satisfaction. The vision and corporate strategies are broad, with a focus on developing and leveraging core competencies. The product-specific strategies and tactics focus on customer-specific needs.

The vision should highlight the core capabilities that the company has or is willing to develop. For example, Komatsu, a Japanese manufacturer of earth- moving equipment, had a vision of beating Caterpillar. The company's strategies specified the skills it needed to acquire and the products it needed to develop to move toward that vision (see Business Brief 1.1, Komatsu's Long-Term Marketing Challenge).

The corporate assessment also looks at the general culture of the company, the strengths that provide the core competence, the weaknesses that must be minimized, and the role a product or product line plays in accomplishing the corporate strategy. The culture refers to how a company operates: its philosophies, management style, and structure. A product manager cannot impact the culture in the short term, but must rather understand and attempt to work within the culture. Examples of business culture include the innovative, fast-paced organization on one hand or the conservative, "blue-chip" organization on the other. The management style may be autocratic or democratic, and will have a resulting impact on a product manager's effectiveness.

Product managers often are uncertain about how their products contribute to the attainment of corporate goals (beyond revenue). To be sure, it's not an easy question to answer, but it must be considered. If the company is changing its position from economy products to more quality products, this change will impact the strategies of its product managers. Hyundai, for example, has declared that it would be the industry's top-quality producer, displacing Toyota, by 2008. Although a difficult goal, Hyundai has made progress: In 2004, it tied with Honda on J.D. Power & Associates Initial Quality Survey, jumping from 10th to second place. From a strategic perspective, product managers must consider these linkages (Worksheet 1.1).

Several questions must be asked as part of this assessment, to help identify the key strengths and weaknesses of management, core competencies, the planning process, and other functional areas.

Management

1. Who are the actual movers and shakers within the company? Which ones should be part of a newproduct venture?

2. Who is responsible for the budgeting process?

3. Does the company have any unusual business practices that are different from the competition?

Distinctive Competencies

1. What capabilities form the core of the firm's reason for being?

2. Are the various products produced by the firm leveraging these competencies effectively? How can product managers leverage the capabilities of other parts of the company?

The Planning Process

1. What is the basic approach to tactical and strategic planning?

2. Is it more likely that the company will grow by acquisition, penetration of new markets, or increased market share?

3. To what extent are documented objectives used in planning?

4. Where is the emphasis placed for the development of new products (e.g., product-line extensions, new applications, newproduct ventures, etc.)?

5. What are the plans for global or international growth?

6. What significant new products are under development?

Other Functional Areas

1. What is the background of the research and development manager?

2. What is the overall caliber of the research staff?

3. What is the company's technical position?

4. Does the company have idle plants and excess capacity?

5. What is the major research and development thrust?

6. How is research and development organized?

After thinking more carefully about these questions, test your company's strategic IQ by completing the assessment in Worksheet 1.2.
(Continues...)

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Excerpted from The Product Manager's Handbook by LINDA GORCHELS. Copyright © 2006 by The McGraw-Hill Companies, Inc.. Excerpted by permission of The McGraw-Hill Companies, Inc..
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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