Perhaps second only to setting the strategic business direction, choosing the “right” product opportunity to develop and launch is the most important strategic decision a company makes. After all – “you are what you sell.” In other words: what you choose to launch and sell defines who you are in the eyes of the customer.
There are a lot of factors that go into making a go/kill decision for funding a product development project. The core question that needs to be answered at the new product portfolio decision gate is:
Why is this opportunity better than the rest of the opportunities competing for development resources?
To answer this question the pre-development project team needs to build a business case to demonstrate the merits of their opportunity and “sell” their recommendation to the portfolio decision team. The business case needs to clearly answer:
1) Why should the company build this product? (i.e. the strategic fit)
2) Who needs it? (i.e. who’s the customer and what’s their pain)
a. Confirmation of the need/ “job-to-be done”
b. The value placed on successfully getting the job done
3) How much will they buy? (i.e. market forecast)
4) Why we can execute and how we will manage the associated risk
a. The likelihood of winning the business – (why we will win this battle)
5) What our payback and ROI will be
I put the word “sell” in quotations because in actuality it is the job of the pre-development project team leader (often a Product Manager or R&D; Manager) to put his or her opportunity in the best light against all other opportunities the portfolio decision team will evaluate. Note too – it is acceptable and preferable that in the course of creating a business case, if the project team discovers the opportunity is flawed it recommends to the portfolio board a “kill,” or a “hold” for additional R&D; (i.e. maybe the concept is good but there are technical gaps that need to be addressed).
So how does one build a case to fund a product opportunity in view of the fuzziness and uncertainty of early stage product concepts? Many companies assume that the front end of innovation (a.k.a. the fuzzy front end) is inherently messy and unmanageable and thus true innovative product selection is based on gut feel or fiat (“go” decision dictated by a charismatic leader- “it feels right – just do it”). This simple is not the case for “best-in-class” product innovation companies who consistently launch a steady stream of new products.
Best-in-class companies have learned how to manage the front end of innovation by creating an execution framework and process to transform ideas into winning product opportunities efficiently and effectively. The best-in-class companies have learned to “front-load” pre-development phase projects by doing proper marketing and feasibility due diligence. As Cooper and Edgett point out in their whitepaper “10 Ways to Make Better Portfolio and Project Management Selection Decisions.” – “The best project selection system in the world is worthless unless the data are sound.”
The business case is a core element/tool to managing the fuzzy front end successfully. It provides an execution framework and process to transform ideas into commercial successful new products. Over the next several blogs I will explore and answer these questions about making-the-case:
1) What is a business case and why it an essential activity for NPD execution
2) Why the “process” of making the case matters more than the business case that eventually emerges.
3) Explore the core elements of the business case and best practices in making the case
4) How to make the business case activity a powerful tool to increase your odds of launching commercial successful new products and services
I will also explore in other core elements of managing the fuzzy front end that will help you improve your odds of launching commercially successful new products.
Stay tuned!
Kevin
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