Sunday, May 29, 2011

Competitive Advantage vs. Competing

So I'm going to borrow a page from MBA days (and of course, Mr. Porter) and discuss competitive strategy today. Everything always boils down to how do you create a long term sustainable competitive advantage and then manage to keep it. Many times, product manager just want to compete rather than build a competitive advantage.

Whenever I look at building a feature or assessing a competitor I rate/rank the feature against the following 4 criteria:
  • Valuable - Is the feature valuable for your customers/prospects?
  • Rare - Is it rare or common in the marketplace?
  • Costly to Copy - If you were to build the feature, would it be easy for competitors to mimic you?
  • Easy to Substitute - Can the feature be substituted with another feature, thus eliminating this features importance?
You should apply these 4 criteria to the target market segment for your product/company. For example, 8 cylinder engines are Rare for 4 door family sedans, but not so rare for large SUVs. If you start with your company/product and create a VRIN matrix of all of your features and then one for your competitors you may find some nuggets of information such as:

  • Your product has no long-term source of competitive advantage
  • Your product is well positioned vs. the competition, however, this is likely short term as it is easy for competitors to catch up
  • Your product has a lot of features that are not valuable to your target market, but are valuable to another market segment.
As you and your competitors add new features add them to the matrix and put a date of launch. You may find that by focusing on when a feature is launched you may be able to determine trends (e.g. your competitor has been building a lot of features lately that are focused on a particular market segment). You will be prepared next time an executive asks you for how you compare to the competition. 

Another analysis technique I have used is Kano analysis to help determine the type of feature. For more information on Kano analysis click here. The uniqueness of Kano is that it asks the negative question (i.e. How would you feel if the feature was not present?) in addition to the positive question (i.e. How would you feel if the feature was present?). The negative question allows the product manager to determine which features are "exciters" vs. "expected".

So as you think about competing in the market, don't forget to think about building up your competitive advantage!

Saturday, May 28, 2011

Why companies fail - A lack of focus on the "micro"

Much like physicists are trying to create a grand unified theory of all physics to explain all the various forces and particles, I started to think about a unifying theory about why companies fail. Now I know what you are thinking, there are many reasons and coming up with a single reason is silly. Don't worry I thought the same thing. But I didn't give up.

There are so many books out there such as "Innovators Dilemma", "Good to Great" and "Blue Ocean Strategy" that provide all sorts of reasons why companies don't achieve their potential. I think all of these books focus on the "macro" side of things. Things like corporate strategy, corporate focus, etc.

But the reality is that the "macro" result is the sum of many "micro" interactions. That is the topic of this blog post...what creates the types of negative micro-interactions that cause companies to fail. At the end of day companies are run by people and people interact with each other and it is these interactions that are of interest. This topic reminds me of Patrick Lencioni's book "5 Dysfuntions of a Team"

So I'll start with this hypothesis and then we can pick it apart.

All negative micro interactions are driven by the employee putting their needs before the companies need. So let's ask Why?

  • Why - Because I have a desire or need that supercedes the needs of the organization
  • For example - I will not share my opinion when asked because I fear for my job.
  • As a result - They attempt to rationalize this disconnect by convincing themselves that there needs are aligned and that it is ok for me to not give my true opinion when asked.
Or let's try this one:
  • Why - Because I have a desire to advance my career at the expense of the organization
  • For example - I'm going to get "buddy buddy" with key influencers in the company so that I can become their "Yes" men in order to get the next promotion. 
  • As a result - People have a tendency to hire/promote folks like themselves. Employees will see this "favoritism" and complain about politics and morale suffers.
Now multiply these interactions be every time they occur with all the employees in your company.  Healthy companies spend time focused on the "macro" and "micro" in order to improve.

What are your thoughts? I wonder if we can go look at companies that have failed and see if we can characterize their cultures and draw out key indicators of companies going in the wrong direction. It would be like "Good to Failed - Why companies fail" the exact opposite of most books that describe how to succeed. If you think about it, it actually make is easier to drive consensus on what is bad vs. what is good just like it is easier to say and agree on what "smells bad" vs. what "smells good".

Oh well...enough rambling for a Saturday morning.....