As in Alice in wonderland, if a company does not have any vision of where it want to go, then any product strategy is likely to take it somewhere it want to go, then any product strategy is likely to take it somewhere. The problem is, the company, like Alice, may not be happy with "some-where" once it gets there. Product strategy is like a roadmap, and like a roadmap it's use-ful only when you know where you are and where you want to go. What we call a core strategic vision (csv) provides the destination and the general direction from where you currently stand. It supplies the context for product strategy and guides those developing the product strategy by telling them where the company want to go, how it expects to get there, and why it believes it can be successful.
While knowing where you want to go appears obvious, too many companies operate as though they are blind or as though they are blind or as thought their strategic vision has deteriorated. In fact, most business failures can be traced to such deficiencies.
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Some of the biggest successes in industrial history were created by people with exceptional vision. Joseph Wilson saw copying machines in Chester Carlson's xerography. Tom Watson saw the future in computing. Bob Noyce saw the potential of microprocessors. Henry ford envisioned a process that would put a car in every garage. And Bill Gates saw better than anyone else that the explosion in microprocessors would open vast opportunities for computer software.
Even these visionaries, however, could not always see clearly into the Future. Tom Watson turned down Carlson's xerography because he did not see future opportunity for it. Henry ford did not see the need for more than one color or model of automobile. Bill Gates's early vision for the future of computing underestimated the Internet revolution.
A good core strategic vision must be complete with three questions:
Where do we want to go?
How will we get there?
Why will we be successful?
The key to answering the question "where do we want to go?" is in finding the right balance between short-term objectives and longer-term opportunities. Compaq achieved that balance in 1993:"we want to be the leading provider of PCs and PC servers in all customer segments worldwide". Another very successful company, Intel also Knew where it was going in the mid-1990s. It wanted to dominate the ever-increasing market for microprocessors and related devices. Wal mark is an example outside the high-technology industry. It wanted to be the largest, most successful discount store chain in the world.
The following Compaq's core strategic vision in 1993 is a good example of a vision that clearly states where a company want to go.
The second question that a core strategic vision to answer is how the company expects to get where it wants to go. The Compaq vision statement did a very good job of describing how it would get there: by having a better product development process than its competitors, by competing strongly with a price-based strategy, by managing costs effectively, and by having good customer support. Here again, there's value in being specific without being too restrictive. 'By taking advantage of the new 386 microprocessor" for example, would be a limited vision. It describes how to get there for now, but it does not provide any guidance on what to do next. Intel also clearly knew how it would get to where it wanted to go. It would take advantage of Moore's Law. In addition, Intel would create new user and uses for microprocessors. Wal-Mark would get to where it wanted by establishing discount stores with a wide array of merchandise at a low price with friendly service. The "how" ingredient needs to be robust enough to last beyond the next product, "These tools will take advantage of increasing computer power." This vision provides the direction to develop these productivity tools. Computer power is increasing rapidly, and the company intends to take advantage of this trend in its products. When combined with the initial ingredient of the vision, this defines the opportunity: increasing computer power will provide new user, perhaps new market, for software productivity tools.
Always on Time
Marked to Standard
The third question why will we be successful? Usually is based on a unique value provided to the customer. This ingredient of the vision is the basis of a competitive strategy. For a company competing on price, the core strategic vision would include something like "by being the price leader and low-cost producer" For a company using a strategy of differentiation, the vision would provide direction for that differentiation.
Compaq's vision provides direction for its future success: because it will understand the dynamics of the industry. While this is not very specific, it's probably appropriate for an industry with a rapidly changing technology. The vision also indicates that Compaq expects to manage these changes in technology better than Compaq expects to manage these changes in technology better than its competitors. This provides direction for expected performance.
Apple computer: strategy with vision
Apple pursued a rather narrow vision: make some money by selling computer components assembled into an Apple I motherboard. After the success of the Apple II and failures of the Apple III and the Lisa, Apple settled into a successful strategic vision that took shape around the Macintosh computer. Its vision was to create a business with the theme of a computer "for the rest of us" with ease of use as a clear basis for differentiation.
This was a very successful vision. Apple knew where it was going. It was building a large, successful company by making personal computers really usable to the masses, not just sophisticated users. And Apple knew clearly how it would get there. It would focus on ease of use. At that time, it was difficult to install personal computers, it was frustrating to get application to work properly, and the user interface was intimidating. Apple knew why it would succeed. It would focus its development strategy on solving all these problems, and it could charge a premium for it.
This core strategic vision was not only clear; it was also strongly aligned with all of apple's strategies. The macintosh operating system was revolutionary in ease of use. Apple also introduced the mouse to make it easier to navigate the computer screen. Apple developed printer and custm softwareso that user could simply plug in the printer and run it. (The printer interface was a major stumbling block with most PCs at that time.) The Macintosh came with application software for word-processing and a drawing program that were unique at that time. Apple also developed software that made it easy to hook up Macintoshes in a network. Everything that Apple did supported the ease of use.
At one time Apple tried to establish a shared vision of the future with a series of internal meetings and conferences called new enterprise. But even after a lot of time and money were invested in this effort, nothing materialized. If anything, awareness was heightened of a strategic disconnect between sculley and his management team owing to a lack of vision. Instead of a core strategic vision, in 1992 Apple set the following Strategies:
Market share strategies
Reduce the time it takes to bring products to market.
Lower prices on Macintosh products to attract more customers.
Broaden the Macintosh Family.
Enterprise Computing Strategy
Establish Apple as a key player in client-server computing.
Work with partners to provide better ways to integrate Macintosh into large enterprise networks.
Emerging Technologies Strategy
Move Macintosh to RISC (reduced instruction set computing) technology.
Take a leadership role in emerging technologies.
Although on the surface these objectives may look like the details of a core strategic vision, it's now clear that there wasn't any vision behind them. These were simply reasonable objectives, more tactical than strategic, unrelated to any vision.
Sculley made a major mistake in 1990 when he declared himself to be Apple's chief technology officer, despite a lack of technical experience. He took away any strong technical voice in a period of technology transition, during which he fell in love with the Newton product platform (which later failed).
Under john sculley, Apple's share of the personal computer market declined from 20 percent to approximately 8 percent. In june 1993, he was replaced as CEO by Michael Spindler, then president and COO. Spindler, in turn was replaced in February 1996 by Gil Amelio, who lasted 500 days. Apple's revenue peaked in 1995 and then began to decline precipitously as sale of the Macintosh declined. As a result, Apple suffered $2 billion in losses in 1996 and 1997.
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Steve Jobs returned to Apple, first as interim CEO, then at the beginning of 2000 as permanent CEO. He appears to be re-establishing a strategic vision for the company. The problem with Apple wasn't that its core strategic vision was no longer applicable. The company slipped because it gave up on its vision. Granted, other PC manufacturers and Microsoft Windows caught up on ease of use , and application software support of windows made the Macintosh less competitive. But essentially the same core strategic vision could have been robust enough to lead Apple into the future. Here is a possible scenario, one that again with hindsight could have been written in 1992:
Apple continues to be committed to making computing more available to the masses through ease of use, but will deliver this in several ways. We will redesign the Macintosh operating system to run on Intel-based computers, compatible with a large range of applications software. At the same time, we will continue to exploit ease of use with the Macintosh integrated hardware/software system in emerging areas such as the Internet.
If this had been the case, Apple might have gone on to develop a viable operating system competitive with Windows on Intel based PCs and exploit the Internet browser before Netscape got a foothold. While this scenario didn't happen, it was possible. Apple had the market position, inclination to ease of use, and technology to do it. It just didn't think to do it. This is what a core strategic vision is all about marking sure you think about where you want to go.
Microsoft's growth strategy in action
Microsoft Corporation is an exciting example of applying expansion strategy for growth into new markets. Expansion strategy has been the driving force behind Microsoft's rapid growth. Strategy has been the driving force behind Microsoft's rapid growth. Starting from its early skills, Microsoft expanded from $2.5 million in 1979 to $2.7 billion in 1992. Its expansion path went in fore direction languages, applications software, operating system, and consumer products. Each expansion path established a new position for future expansion.
In 1992, Microsoft launched windows 3.1, which was the version that launched the success of the windows platform. It also released other derivative windows platforms. Windows for Workgroups integrated networking directly into the operating system and Windows NT aimed at the server market. Microsoft also continued expanding into new applications markets with the release of Access database.
Microsoft entered the multimedia market in 1993 with the release of Encarta, the first Multimedia Encyclopaedia designed for a computer, in March. It quickly added to this product line with five other multimedia titles. In addition, it released improved versions of many of its products. In 1994, Microsoft continued to add more products, albeit mostly smaller ones. In 1995, Microsoft introduced a new operating system, called Bob,that was targeted for the home computing market. Unfortunately it was not successful. Windows 95, a next-generation version of the Windows operating system, was released in august and sold more than million copies in the first four days. Microsoft expanded into a new Internet market with MSN, The Microsoft network, and Internet Explorer. Of much less importance, it released sidewinder, a digital optical joystick.
Through its acquisition of Vermeer Technologies in 1996, Microsoft expanded into the market for software to create Web pages. In March, it introduced ActiveX, a set of development tool for the creation of active content on Internet and PCs. It continued expansion into new markets with a joint venture with NBC called MSNBC, as well as the introduction of slate, an online magazine.
In 1997, Microsoft continued its expansion by acquiring WebTV to expand Into the Market for Internet Access via television. It also created a new Product line of online city guides, called sidewalk.
By 1999, Microsoft had created a $21.9 billion business by leveraging its capabilities to expand into many new markets. Operating systems platform were a $9.0 billion business, up from $1 billion business, up from $150 million in 1992. Business applications were $7.8billion, up from $1.3 billion in 1992. Consumer products were $2.5 billion, up from less than $300 million in 1992.
Growth through innovation
All high technology companies would like to be innovative. The issue is how. The goal of innovation strategy is to increase the likelihood of innovation by defining how companies should look for innovation opportunities. Classify innovation strategy into three groups opportunity drive, prediction driven, and technology drive.
In context of product strategy innovation means the act of creating something really new-developing a new type of product that creates an entirely new market. An improved or more competitive product may be new for a company, but it's not new in the sense that there was nothing like it before.
Innovation is not to be confused with invention, the discovery of a new device, method, or process through study and experimentation. Invention can lead to innovations, but all innovations are not based on inventions. Nor are all innovations successful in the marketplace. History is full of innovations that, while seemingly clever and novel, never gained a foothold in the marketplace, or did so only after a long and tortuous journey.
What makes some innovations commercial successes and others only interesting novelties? Successful commercialization of an innovation requires a change in one of three components; the technology, the market context in which goods and services are delivered, or the business model. Nevertheless, changes in these three components do not necessarily result in an innovation. By and large, the changes are incremental and continuous. They are often predictable, and, in some cases can be planned for.
For some innovations to take root, it's necessary for a discontinuous or disruptive change in one of these three components to occur, usually as rapidly emerging customer segments, technical capabilities, or organization structures. Novel technologies that lack the proper business model to commercialize them, or that do not serve the demands of emerging customer needs, will not be successful innovations.
Government, universities, and businesses have invested a lot to develop new technology that does not meet the emerging need of customer and has no practical application. In this sense, the best technology doesn't always win, especially if it's not well suited to the new market. The Apple Newton personal assistance device is an example. It implemented novel handwriting recognition software with the goal of meeting a need for portable electronic data storage and retrieval. Previously a key limitation to the portability of such devices had been the data entry system, workable keyboards made the devices too large, while smaller keyboards were too difficult to operate. The idea behind Newton was to enter date using a stylus and pad, enabled by a technology that could translate handwriting into computer text. The handwriting technology was not perfected, requiring a significant investment to "teach" the device to recognize a personal handwriting style, often with much proofreading and correction. More important, it did not really address the key needs of this emerging market, which were portability, connectivity, and ease of use. If the need to translate handwriting into electronic text and the ensuing freedom of data entry were the key drivers, the marketplace probably would have been more willing to invest in this technology and embrace future enhancements.
The palmpilot, on the other hand, succeeded in meeting a similar market need by employing a different technology in a different market context. One key to its success was the decision to use a technology that did not recognize handwriting but, rather, required the user to employ simple graffiti or a digital keyboard to enter data. The user gave up the freedom of using standard handwriting to enter text for the speed, simplicity, and accuracy of the palmpilot approach. Even though the PalmPilot technology was inferior to that of the Newton in handwriting recognition, it won out because it was able to meet the needs of this new market.
Ingredients of innovation
Illustrates the interplay of the tree components needed to commercialize innovation: market context, the enterprise, and technology. Innovation using technologies that offer minor improvements does not require as much change in the market context or enterprise structure to be successfully commercialized. Truly discontinuous technologies require more dramatic changes. When polypropylene was introduced, for example, companies instantly found numerous applications for it, because it was
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Three components are needed to commercialize innovation: market context, the enterprise, and technology.
More flexible and easier to use than preceding form of plastic Manufactures incorporated these improvements into a wide variety of existing applications, such as roofing materials, pipes, and upholstery; components for dishwashers, clothes washers, and refrigerators; automotive parts; clothing; and consumer products, such as videocassettes.
Technology that emerges rapidly or offers a discontinuous advantage requires a larger response in the market context or enterprise structure of an organization. By the time a technology matures, most of its more obvious applications have been introduced. The burden of innovation using mature technology shifts to creative inspiration on new ways to solve customer problems or generalize from a solution to specific applications.
Microsoft CEO bill Gates is the precocious mastermind of the stunningly brilliant and equally successful business strategy that has propelled the firm to the top tier of global corporations. The popular image is that Gates almost singlehandedly formulates the firm's strategy from his Redmond enclave and then signals it to an eagerly waiting, well-disciplined organization. Apparently combining insightful industry analyse with a cogent grasp of Microsoft competences and a Machiavellian understanding of competitive moves, Gates seems to be the quintessential corporate strategist. But is this image of a controlled, cerebral, and well-planned strategy accurate? One observer has called recent Microsoft strategy "decisive, quick, breathtaking,' consistent with the popular image of planning, command, and control. In contrast, other sees the real story of Microsoft strategy as one of coping with fast-paced and unrelenting change. Others have noted that "the firm covers its bets and reconfigures strategy as it goes along.' Gates himself claims, "Microsoft is a company that will never make any forecasts." from this perspective, strategy at Microsoft look surprisingly like a semi coherent strategic direction.
Microsoft Internet strategy, for example is unpredictable. The initial strategy included an elaborate assault on America Online through the development of a proprietary alternative. In part, this strategy reflected a belief among senior Microsoft executives that it was not possible to make money on the Internet because access was free. Microsoft executive ended up discarding this formal strategy and joining the non-proprietary world. They embraced Sun's java, brought up Internet companies, and, ironically became a close strategic partner of its one time target, AOL. No one predicted this strategy.
Microsoft's strategy is uncontrolled. Indeed, much of the strategic thinking for the company's Internet products came from well below the senior echelon of the corporation. One manager visited Cornell University, observed students "hacking" on the Internet, and pressed for change within the corporation. A Microsoft renegade initially, developed the first Internet server in an unsanctioned project. Only later did Microsoft's senior leadership announce the strategy that had emerged from below.
Microsoft's strategy is inefficient. The firm wasted resources on developing a proprietary version of the Microsoft network, a misstep that ultimately cosy millions. Money was spending on technologies that were later brought from other companies and on promoting products that were eventually dropped. The firm passed up acquisition that later cost them much more, such as their licensing arrangement with spyglass Inc a Netscape rival.
Microsoft's strategy is proactive. Firm managers aggressively moved into a cable news channel and wed sit produced with NBC; started slate, a wed magazine; moved into information content with the film production company DreamWorks, and on and on. Of course, sometime Microsoft is reactive, but more often the firm is aggressively proactive.
Microsoft strategy is continuous. There was no one big move no single acquisition, no major corporate restructuring, no single brilliant play. There were many moves, over several years that coalesced into a strategy. For example, in 1993, work began on Marvel, an online service that became Microsoft Network. In 1994, Tiger, a video server for Internet, was announced while Web page capability was added to Word; Microsoft's word processing package and web browser was included in Windows 95. In 1995, plants were made to coordinate with sun's Java language. In 1996, Vermeer technologies make of the FrontPage, a software tool for creating and managing Web document was acquired. And in 1997, WebTV was acquired.
Microsoft's strategy is diverse. It involves strategic partnerships, acquisitions, and in house development of different scale and timeframes. It includes programs for video servers on interactive television, an online magazine, satellite communication, acquisition of information content, and an Internet gaming zone Featuring multiplayer game, such as chess and bridge.
Ultimately, strategy at Microsoft does not look muck like "do an industry analysis, pick a strategic position, and execute." It does a lot more like a "creation of a relentless flow of competitive advantages" that are crafted together to from a semicoherent strategic direction. Indeed, gates and his colleagues apparently cobbled together Microsoft's Internet approach through a competing on the edge strategy.
Where do you want to go?
Semicoherent strategic direction
What is the result?
Continuous flow of competitive advantages
How do you get there?
Edge of chaos
Edge of time
( Shona L. Brown, Kathleen M. Eisenhardt, 1998)
THE PRODUCT LIFE CYCLE
The life cycle phases of products require marketing, manufacturing, distribution and financial strategies. Unfortunately the model is not entirely reliable and while empirical finding do point out the robustness of some of the main traits of the life cycle model, under other aspects conclusion are still sometimes fuzzy. Indeed the wide adoption of life cycle model in business and economic contexts stems from a product analysis, where newer products replace older ones. Tracing a graph with product sales on the y-axis will yield, in many cases the well-know s-shaped curve of figure
Obviously this is not true for all products: small kitchen appliances products usually follow a growth/slump/maturity patter and pharmaceutical products face a cycle and recycle pattern. Some products have a very short life (fads and Fashion products) and others have a much longer life due also to cyclical marketing efforts to revive the market (automobile).
The four stages of this model are :