The best product leaders not only drive the development of great products, but they also drive sound decisions around which products they will develop. These decisions aren’t based on gut feel, but rather on a rigorous approach to modeling the projected impact to be generated by each new product.

Have you ever launched a new product, and everything went according to plan…except that the revenue impact was not what you had projected?  Product features were released on time, Product Marketing produced the right content, coordination with sales was strong, and yet…the financial impact didn’t meet expectations.  If you’ve been a product leader long enough, this has almost certainly happened to you.  But why?

 

Download the Annual Planning Checklist here to prepare and guide you in preparing for 2019 and beyond.

 

It’s All About The Model

 

Often times, when we think about product launches that don’t meet expectations, we think about development lagging behind deadlines.  We think about a product that didn’t align to a market problem.  We think about Product, Sales, and Marketing not working well with one another.  We think about a go-to-market plan that wasn’t well-conceived.  But sometimes, the culprit can be tracked back to the original decision to develop the product.  Was sound logic used to validate the profitability of this new innovation?

 

The framework in the figure below describes a 6-step process to estimate the return you can expect to see from the investment in a new product.

 

 

Step 1 – Understand Your Total Market Opportunity

 

The first step in new product planning involves market segmentation.  You must get a grip on the total addressable market (TAM) for this product.  You should also estimate the Serviceable Available Market (SAM), which accounts for any limitations in your company’s ability to cover the market.  Furthermore, you should identify which markets are you specifically going to focus on and how might this change over time.  You can then begin to estimate what share of the market can you reasonably expect to capture in Year 1, Year 2, etc.

 

Step 2 – Don’t Trust Your Gut

 

The second step serves as a fact-check to your original view of the market.  Incorporate 3rd party research to rationalize the market opportunity that you’ve identified.  Whether you realize it or not, you’re probably too close to the situation to make accurate projections yourself.  Move away from rosy internal projections and find an unbiased view of the market that isn’t influenced by the same pressures you’re facing to develop a star product.

 

Step 3 – Validate Against Corporate 5-Year Plan

 

Once you’ve made your initial estimates of both the cost and revenue impact of your new product, what implications do you see to your company’s 5-year plan.  What percentage of your product development budget will be consumed by investment in this new product?  Does this allocation pass the sniff test?  Based on where your other products are within the product lifecycle, will you have enough to fund the needed investments in your new product?  Product leaders generally do a good job of projecting costs over the first 1 or 2 years of a product’s lifecycle, but fail to consider the years to follow and the implications these costs may have on the rest of the product portfolio.

 

For additional perspective on the role of the Product Leader in the annual planning process, see Dan Korten’s recent article.

 

Your product decisions should never be made in a vacuum.  As reflected in the chart below, the efforts that Product makes in launching a new product are only part of the overall picture.  If done well, every decision you make should be made in lockstep with Sales and Marketing.

 

 

So, just as you should validate the budgetary needs of your new product over the next 5 years, you should also be validating against Sales & Marketing’s plans over the next 5 years.

 

Consider the following questions:

 

  • How much of the annual sales plan over the next 5 years is estimated to come from this new product? Does this seem realistic?

     

  • Does Sales have the right talent and structure to achieve these projections for the new product? If not, is it realistic to think that they can get there?

     

  • Is Marketing projected to have the right resources allocated to generate demand for the new product?

     

  • Will Sales and Marketing be equipped to create and deliver the required enablement resources to sell the new product?

     

Download the Annual Planning Checklist here to prepare and guide you in preparing for 2019 and beyond.

 

Step 5 – Refine Product Roadmap & Budget

 

After you have tested your ROI model against both the corporate 5-year plan and the sales 5-year plan, you should then refine your product roadmap.  You should not only be revising your plans for the new product, but also for other products in your portfolio. 

 

Are there other areas in your portfolio where you should be scaling back investment to ensure that you’re providing the support that your new product requires?  Conversely, did your review indicate that your initial plans for the new product were going to starve one of your cash cows?

 

This refinement of your product roadmap and budget should force you to holistically consider where all of your products are in the product lifecycle.  And you should now be ready to make an informed decision on if and when you’re ready to invest in the launch your new product.

 

See the article I wrote earlier this year on classifying your current products and determining how you should handle each.

 

Step 6 – Finalize and Communicate

 

Now you’ve completed the steps detailed above and you’ve made your decision on the launch of a new product as well as investment planning decisions on the rest of your products.  All that’s left to do is to finalize these plans and communicate to the rest of the organization.  As always, Sales and Marketing should be aligned with Product decisions so that they can plan appropriately.  With careful product planning, sound ROI validation, and alignment to the long-term plans of the rest of the organization, you’ve set the foundation for successful revenue growth!

 

Download the Annual Planning Checklist here to prepare and guide you in preparing for 2019 and beyond.

 


Schedule a working session at SBI’s Studio.

 

Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.

 

As a guest of The Studio, you’ll get unlimited access to SBI’s CEO, Partners, and a handpicked team of experts. Together we’ll focus on developing an action plan for your needs by getting a month of work done in just eight hours. It’s an amplified experience that you can only get in one place: The Studio. I hope you join us.

 

New call-to-action

ABOUT THE AUTHOR

Chad Wittenborn

Bringing growth leaders into alignment around emerging best practices, enabling them to outpace their competitors and make their number.

Chad deploys a highly analytical approach, leveraging a background heavy on growth strategy, sales effectiveness, and operations, to drive top-line revenue growth.  Prior to joining SBI, Chad held a variety of growth leadership roles in industries ranging from Manufacturing to Healthcare.  He has worked closely with sales, marketing, and operations leaders to identify obstacles to growth and to execute initiatives to overcome those barriers. Chad has delivered results by leading projects involving structural transformations of sales organizations, new service line launches, incentive plan overhauls, performance management programs, and CRM implementation and adoption.

Read full bio >