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“No Guts, No Glory” Product Launches in Telecom

Originally published March 17, 2009

During tough economic times, it becomes more difficult to launch new products and services. On the consumer side, both consumer and business customers are making tough budgetary decisions. Budgets are being reduced, and “discretionary” and new investment purchases are being squeezed into a smaller section of the overall customer budget. There is also a lower sense of “brand loyalty” due to the economic conditions. Purchasing decisions are made more in terms of absolute value to the customer rather than in terms of continuation of existing product relationships.

On the product/service provider side, organizations are making decisions about product portfolios and allocation of resources. For products/services, organizations are deciding which offerings are worthy of investment and continued emphasis. In terms of allocation of resources, organizations are also making decisions about how to allocate shrinking monetary and personal resources. Since access to capital funding has become limited and vital staff members are being asked to take on increasing workloads as the market continues to be “shaky,” CFOs in particular and management in general are taking much stronger stands on how resources are allocated around the organization.

These “risk reduction” attitudes from both consumers and providers generate a vicious cycle. Consumers are awaiting new products and services that provide value for their squeezed budgets. Companies are awaiting proven markets for new product/service offerings before they make investments of capital and resources. You might call it the difference between the “build it and they will come” and “show me” rationales.

Unfortunately, a pervasive “risk reduction” attitude in a particular industry is a sure way for the organizations in that industry to become part of a commoditized marketplace. In these commoditized markets, no one has a demonstrated competitive advantage since all the organizations are driving toward those proven product offerings. Often this takes the form of “copying” successful products/services from other organizations, which only accelerates the commoditization and drives out the value-added aspects of the industry. The airline industry in the United States, and the world in general, is a perfect example. In the airline industry, the only proven model seems to be continual cutting of services and charging for extras. In this situation, larger carriers seem to be racing for a position that the low cost carriers already occupy and have significant core competencies.

It takes a truly visionary and bold organization to break from the cycle and launch imaginative products/services to get new consumers for their products/services.

Bold Offerings Avoid “Me-Too”

In tough economic times, the initial key to getting product/service launches to break free from commoditization is to offer something new and exciting. Organizations that have the vision to release imaginative products/services will be the first to pull out of tough economic situations, leading the way and putting their competitors at a disadvantage.

Jeff Lash from GoodProductManager.com recently made the following comments about imaginative product offerings:

“Truly Superior, Differentiated Products” had an average 98% success rate and 53.5% market share, while “Me-Too” Products averaged an 18.4% success rate and 11.6% market share. Though the desire for quick revenue and immediate return within organizations is often strong, though there is good cause for launching the “right” product.”

In the telecommunications industry, Lash’s logic predicts that hardware products like the iPhone and imaginative pricing schemes will have a greater chance of success despite their significant investment.

But how do you launch these imaginative products/services in these times and not put your organization at risk?

The key is for product managers to put together much more robust business plans for their offerings in order to get finance and management team buy-in. Traditionally, new product/service offering business plans were focused on quarterly or annual results in terms of revenues and/or adoption rates. In this new economic environment, product managers must communicate their business plans to the organization monthly, and not just in terms of revenue, but in terms of overall profit and gross margins.

NOTE – This monthly time frame is not meant to put added pressure on the performance of the product team, but rather to show benchmark goals for product performance that can indicate decision points about adjustments to the product marketing or pricing mix. These benchmark goals should not be considered as monthly “drop dead” points for failure to meet expectations…unless, of course, that is the expectation that a product manager has set with management.

Innovative Inertia

In prosperous times, it is relatively easy to launch new products/services since product managers have the time and resources to allow for those products to gain traction. When times are good, finance organizations and management give more latitude on the economic value of a product/service offering without product managers “proving” the organizational investment. Now that capital and internal staffing resources are becoming more difficult to allocate around the organization, finance and management are taking a much closer look at the overall product portfolio and new product/service launches in particular. It used to be fairly common that finance and management expected a 12-18 month break-even point for a product/service launch. However, these days finance and management expect a relatively quick return on investment. Ideally, CFOs and management anticipate intra-year returns before making a significant investment.

Some less than innovative or risk-averse management teams or finance organizations may use the excuse of established metrics to prevent the launch of new products/services. A recent Harvard Business Review article listed the top financial metrics that management often uses to “avoid” or stifle innovation:
  • Gross Margins

  • Opportunity Size

  • Unit Pricing

  • Unit Margin

  • Time to breakeven

  • Net present value calculations

  • Fixed cost investment

  • Credit items
While these are all perfectly valid metrics, an issue surfaces when finance and management use mature product “tolerances” (for example, 40% gross margin) for these financial metrics in regard to new product/service offerings. When product and service managers encounter these issues, they need to be prepared to combat the view that new products and services need to have 40% margins in a relatively short amount of time. Product managers must demonstrate that their offerings are headed in the direction of that 40% margin based on its monthly performance.

Again, this strategy supports the concept of having a robust business plan based on a more granular time frame that shows both projected performance and growth trends in relation to similar market forces.

Using Data to Support Both

The best defense against innovation “blockers” in finance and management is to use information and data to support the progress of products and services. Supporting business cases for innovative products/services with accurate progress reports on adoption rates, etc. will become increasingly important to show that new product/service offerings have earned/are earning the investment in resources that CFO and management expect.

A telecom service provider’s business intelligence (BI) organization comes into play in this situation. It has two very interested “customers.” The first customer is the product/service manager who wants to get his products out into the marketplace to break free from a commoditization marketplace. The second customer is the management team that wants to make sure that its investments are well-placed (or shifted, in the case of poor performance) based on operational information.

It is critical for the BI organization to help both “customers” define the proper “neutral” metrics and demonstrate the targets from the initial business case. By taking this position, the BI organization can play the role of impartial third party as a “reporter of information/facts” instead of taking a side in the situation.

Emerging from Tough Times

Using the data from across the organization to provide both accurate and near real-time information, the BI organization can help navigate today’s “interesting” economic waters and do so in a measured and methodical manner instead of taking a haphazard approach that wastes time and resources or a limited-view approach that pushes an organization toward a commoditized marketplace.

This will allow telecom service providers to overcome commoditization and look at these tough economic times as a way to position themselves as value-added providers of products and services rather than simply another commodity in the marketplace.

SOURCE: “No Guts, No Glory” Product Launches in Telecom

  • John MyersJohn Myers

    John Myers, a senior analyst in the business intelligence (BI) practice at  Enterprise Management Associates (EMA). In this role, John delivers comprehensive coverage of the business intelligence and data warehouse industry with a focus on database management, data integration, data visualization, and process management solutions. Prior to joining EMA, John spent over ten years working with business analytics implementations associated with the telecommunications industry.

    John may be contacted by email at JMyers@enterprisemanagement.com.

    Editor's note: More telecom articles, resources, news and events are available in the BeyeNETWORK's Telecom Channel. Be sure to visit today!

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