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Ulcer-free Product Development

Managing Risk Throughout the Product Development Lifecycle Using Competitive Intelligence

As anyone involved in product strategy or product marketing knows, the Product Development Lifecycle is wrought with risks and unforeseen surprises all aimed at derailing a product's success. Whether it is the advent of a new disruptive technology, changing customer demands or a competitor intent on making one's life miserable, product development sometimes feels like it has more working against it than for it. It is these unexpected incidents that cause products to be late, run over budget or miss their target market altogether.

However, it is not necessary to tolerate these problems as acceptable risks. A systematized Competitive Intelligence (CI) program can gain a future-looking perspective on events yet to come. Having an understanding of what is 'likely' to happen, one can employ a risk management strategy that helps avoid common product development pitfalls and ultimately ensures the creation of highly successful products.

It was during my earlier career involvement in product management that I became interested in CI. I was always troubled by the complacency of management regarding the obvious product risks we were undertaking that I thought avoidable. I was also bothered by the uninformed decisions, routinely made without a valid attempt to understand the full scope of the issues at hand. At every stage in the Product Development Lifecycle, critical decisions are made that have a lasting effect on the remainder of the project. Like a lioness guarding her cubs, a project manager is constantly trying to protect their products from internal and external threats.

The ultimate goal is a completed and successful project within the allocated budget (time and money). The best way to avoid threats and obstacles are to see them coming. This is the reason why only the truly insane drive with their eyes closed. However, when it comes to product development, some people do just that.

Managing Risks During the Cycle
In order to successfully manage the risks of a product development cycle through CI, a deeper understanding of a comprehensive, systemized Competitive Intelligence program is needed. CI in this context is not the departmentalized secondary research passed off by many marketing departments as competitive intelligence. True Competitive Intelligence extends beyond determining pricing lists and matching up features from a competitor's brochure to try to tell your sales team why your product is better.

Internet research alone is not competitive intelligence. The majority of competitor information on the Internet was created by PR agencies and through carefully crafted statements of market participants. Company websites are carefully crafted worked of how a company wants to be perceived, much like a person's online dating profile. In addition, this generally available and distributed information provides no competitive advantage.

This is also true of industry reports created by the large research agencies. If everybody has access to the same report, how can it provide a competitive advantage? Downloading SEC filings and obtaining a competitor's pricing lists may be a good start, but to anticipate future events, a targeted and organized intelligence effort utilizing carefully planned primary research is required. CI is not just about the what (e.g. a competitor's lower prices), but also the why (e.g. a more efficient manufacturing process).

Actionable foreknowledge
Competitive Intelligence is an executive Decision Support System (DSS) for planning, collecting, analyzing and disseminating both business and competitor information with the dedicated intent of taking action. As noted the book by Liam Fahey (1999), it produces actionable foreknowledge that equips the firm to more reliably outwit, outmaneuver and outperform competitors. Good CI projects always follow the proven Intelligence Cycle (Figure 1).

Competitive Intelligence comes into play when a company needs to start answering specific questions. CI differs from market research in that there is no "nice-to-know" information in a CI report. Unlike market research, extra close attention is also paid to who is asked what questions and when. Because of the sensitive nature of CI projects, special care is taken so that competitors are not 'tipped off'. Management's key concerns are the drivers of each project and used for planning. The gathering stage relies heavily on primary research and human source intelligence gathering (HUMINT).

Analysis is not solely constrained to a company brain trust, but instead utilizes internal and external experts across the organization. Dissemination is carefully controlled with extra attention paid to the consumers of intelligence so that the intelligence is easily digestible and actionable.

In order to address the product development lifecycles of products in multiple industries, the product development process will be simplified into three major areas; Study Period, Implementation Period and Operations/Deployment Period (Figure 2). In each of these stages there are CI techniques and frameworks that can be applied to reduce risks and evade the potholes while navigating the product development course.

Financial services case study
To illustrate this, a financial services company looking to create a new software application that would facilitate the processing of an insurance-based transaction will be examined. The company was founded in 1997 with limited funds and in a market full of a closed group industry powerhouses. However, a thorough market research study had already identified a sizable market with no direct or obvious competitive solution. It also showed a direct and immediate benefit from the proposed solution. But the product's success was also contingent on its ability to create a better solution than one the potential customers could create themselves and whether they would accept it.

During the Study Period, companies are trying to determine what they need to build and how they are going to build it. It is at this time that companies are going through their concept stage and performing traditional market research. It is also the point in time where product strategists can carve their product's epitaph by failing to be aware of all of the forces acting against them.

CI supplements market research by targeting potential competitors and customers by eliciting key go or no-go decision criteria. In the case example above, this was a critical factor. A careful campaign of human source primary intelligence collection was needed to uncover hidden landmines. It needed to be understood whether these prospects, conditioned to developing comparable services in-house, would be open to external solutions.

Although market research showed that there was a need for this product offering, recognizing whether the target customers would readily accept it was an unknown. In addition, the nature of the product prevented the company from exposing its hand too early. As with many products, the time-to-market factor was crucial along with being able to carefully control and orchestrate its market entrance. These primary intelligence operations were continued throughout the concept stage by learning in-depth what the prospects' needs were and where they were falling short. Since the prospects had the ability to develop an in-house solution, the product needed to be built in a way that would be cost effective and have an obvious advantage over anything they could do themselves. The CI project focused on items such as their timelines, bureaucratic obstacles, costs and technical capabilities. Knowing this ahead of time, more accurate time and cost requirements could be developed for the project instead of waiting until the product was half completed and then finding out later that the product line was not feasible or economically viable.

Know the competition
Equally important is to understand the progress and position of the competition. CI has the advantage of keeping a lower profile than traditional market research efforts. The product being developed in the aforementioned case unfortunately did not have a high barrier to entry. Success would be reliant on a quick time to market and accurate assessment of the customer needs the first time. With little room for error, it was imperative to find out what the potential competition had cooking. As with many new market segments the competition was scattered and unfocused. It was a typical situation where I often hear the scariest phrase in business, "we don't have any competitors" when asked that all-too-critical question, which either means there is no business, or the management is clueless.

CI elicitation tactics allowed a subtle polling of the direct and tangential industries to find out who else out there was capable of offering up a blockade to the product's success without alarming industry players. Primary intelligence was performed on potential competitors. Analysis was aimed at determining their focus, strengths and weaknesses. Porter's SWOT analyses were done to identify who the major competitor threats were. These were the players we would have to continue to monitor throughout the entire product development lifecycle. Surprises were unwelcome. With limited resources, the company didn't need to have anyone rain on their parade. CI's job is to provide an accurate weather forecast.

Implementation Period
As you are building your product, careful attention needs to be given to changing market conditions and competitor positioning. Once again, CI helps you keep your finger on the pulse of your market environment. Since most products can still benefit from stealth operations at this point, using competitive intelligence techniques allowed us to carefully question unsuspecting market players to keep the product development undercover while gathering critical elements that might derail it.

This is where you would pay close attention to the primary competitors identified in the Study Period. If you are lucky enough to have your competitor releasing beta products to select customers, you can poll them and attain a wealth of information. If they have existing clientele for other product lines, contact them to gain a sense of their business direction and focus along with their sales techniques that you will have to combat when you release your product. Getting an early discernment of your competitor's playing style will assist you in cultivating an effective sales and marketing plan.

Competitor sales intelligence will give you insight into what your competition is doing to take customers away from you. Customer sales intelligence can get you inside the buying decision process of your customers. In the running case example, changes in government regulations, industry consolidation and competitive offerings caused the greatest threat for the product line. If resources allowed, an early warning system would be put in place for each area. But unfortunately, only one could be covered with any success. In this case, we focused our resources on a sales intelligence CI effort. In one example, CI was used to debunk a competitor's claims to a key prospect. The competitor alleged to have a number of dedicated engineers at the disposal of the client for customization.

The prospect considered this a deciding factor. Interviews of the competitor's sales personnel and corporate partners gave us four reliable sources of the competitor's headcount and size of their engineering department. It indicated that they currently did not have this engineering talent in-house. Their ability to expand to accommodate the needs of the customer was then investigated.

A local government office was contacted to determine the size of the competitor's office space. Using our headcount estimates, it was easily concluded that the company was already at maximum capacity with no plans for further expansion. This could be verified by contacting the HR department for any openings in the engineering department or outsourced efforts. The competitor was bluffing. Armed with this information, the sales team could press the prospect to force the competitor to present these resources. When it became evident the competitor was deceiving the prospect, the company won the contract.

Operations Period
Now that the product is ready for rollout, it needs to be grown and protected. Again, Competitive Intelligence can give you an edge. M&A Intelligence is crucial in monitoring any key market changes. This is especially important with long development cycles where many factors can affect the product's success. Mergers, acquisitions, supplier or customer consolidations can affect how the completed product is received. Paying attention to these factors now helps keep the product on track so that it can accurately meet customer demands when it hits the streets.

Since it is usually impossible to monitor everything that can go wrong, use the prioritized risk factor list in your Product Plan to monitor the biggest risks that would cause the project to fail. In our case, consolidation of customers was the greatest risk, as it would change our prospect's capabilities to build an in-house solution. Key prospects were monitored for M&A change signals such as change in business focus, partnerships, financial health and changing key customer relationships. This involved building an "early warning" system where instruction was given to the general company staff to collect and report on any item listed in a 'CI watch list'. For CI monitoring projects, it is recommended that key identifiers are noted and distributed to the entire staff of the company. This is an effective method for increasing your company's ability to capture relevant intelligence in a timely manner.

Beyond traditional benchmarking
In this period it is vital that one refers back to their product plan and identifies the greatest risks to the product and look how they can be more efficient. Xerox excels in this area with their benchmarking program. They go beyond competitive benchmarking employed at most companies and do functional benchmarking as well. Instead of just looking at their own direct competitors, they pick best practice companies to benchmark its various processes. Often in this case you may want to focus on items that are not your core processes.

Xerox looked to DuPont for manufacturing safety, Honda for supplier development, American Express for billing and collection and LL Bean for warehousing and inventory management. Xerox broke its processes into measurable factors. Then it broke down these factors into sub processes. It then used these as points of improvement that it compared against other companies. Xerox used management consulting firms and published technical data to acquire information, but the same approach used for CI operations can be employed here with the same results.

Summary
A systematized and organized Competitive Intelligence program gives any product development effort the needed edge in creating a successful product and beating out the competition. Use the risks outlined in your product plan to target your CI effort. Ask yourself what you would need to know in order to handle the pressing concern. Use the CI lifecycle of planning, gathering, analysis and dissemination to govern your project. Realize that primary research will be necessary to acquire current intelligence. Whatever phase you are in within your product development lifecycle, CI can considerably reduce the risks associated with that stage. Limited resources are not a reason to avoid performing CI but rather a reason to make sure you do it. When you can't afford to make mistakes or bad decisions, understanding more about what can go wrong allows you to avoid it. It is less expensive to avoid a problem than to correct after it is already going wrong.

2006 Handbook of Business Strategy pp 121-124 © Emerald Publishing Limited ISSN 0894-4318, DOI 10.1108/10775730610618729