Which risks to the global economy are the biggest risks to your business?
We have organized the World Economic Forum’s 2019 Global Risks Landscape using Market Edge’s Opportunities & Threats tool.
Click below for a copy of the output.
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Product portfolio management is fundamental to business success. In any economic environment, companies are challenged with optimizing their portfolio to ensure that their product development pipeline reflects business objectives and growth targets. Senior managers observe business case presentations by enthusiastic product and market managers that forecast optimistic market share gains and growth projections. Unfortunately, nearly 50% of these new products never achieve market success, as measured by sales and profits.1 Managers need to address the following questions
Without quantifiable alternatives, most companies continue to depend on sales estimates, market share projections and net present value calculations. While these measures are important components of a business case, these figures typically comprise an uncomfortable amount of speculation and guesswork.
Market Edge believes there is a better and more reliable way to select the right products to include in a business, division and company portfolio. Business leaders who want to improve chances of developing sustainable sales growth and profitability must include customer value based measures into portfolio development and management. Furthermore, companies should approach portfolio management holistically, considering how resource allocations and priorities align to create products that create value for the target customers.
With a Value Based Portfolio Management (VBPM) approach, portfolio management never stands alone. Strategic planning, capability assessment and gathering actionable customer insights are ‘hard-wired’ to the development and management of a value-based portfolio. Market Edge utilizes this ‘VBPM’ approach to help clients build and sustain a leading position in the marketplace.
Value Based: The fundamental driver for pursuing an opportunity (new products and/or services) should be based on the value created for the customer. This is the foundation that will enable the creation of new product and service offers that have a competition advantage – because they start with the identification of problems and underserved needs rather than product features and attributes.
Portfolio: The entire collection of products, services and support that is required to create the value realized by the target customer(s).
Management: It is essential that senior management is active in the process of creating and supporting the organizational framework and process that enables the creation of a value-based portfolio.
Far more encompassing than the traditional portfolio management, VBPM leads to a product portfolio that:
The key building block to portfolio management is a deep understanding of your target customers and deep understanding of their requirements. Furthermore, you must have insight that enables you to uncover customer needs, their future direction and future requirements so you can provide significant customer value and not just peer-competitive offers or simply fill a gap in a product line. Perhaps an equally significant problem is that portfolio management often is treated only as a tactical activity related to allocating engineering resources and accelerating individual development projects.
Portfolio management is not a new discipline. There are many books and papers that suggest methods for determining which projects and products will be the most successful. Unfortunately, many of these accepted tools (e.g. GE/McKinsey Matrix and BCG Matrix) are useful for classifying existing products and business opportunities but not as useful for determining the future composition of a product portfolio. Even tools that appear to take an external (i.e. customer / market) view by including customer meetings or expert focus groups often fail to capture the customer’s true, unspoken and latent needs beyond simple feedback regarding product features or attributes.
Many companies have become very comfortable with a phased review process or stage-gate model and the milestone meetings that address project plans and execution. These models are effective at managing individual projects but may not effectively address or challenge broader strategic decisions about the portfolio and the value generated for the target customers.
Value Based Portfolio Management provides your business with the actionable insights to evaluate a product or service solution – not just whether it meets a set of internal specifications, but whether it provides enough customer value such that it influences their behavior (i.e. start, stop or continue to use a specific product or service). Furthermore, it can lead to the discovery of customers’ latent requirements or delighters that can enable companies to introduce truly innovative products and services. Offers are not innovative because they include a technology or capability that is unique to your company; an offer is innovative when it addresses an underserved need or problem that is significant to your customers.
When times get tough, customer focus typically becomes a casualty of financial constraints. There is no longer money spent on customer visits dedicated solely to gathering customer insights. As a result, the next new products may not generate significant value and will likely be an upgrade of existing features or a reaction to a competitor’s product launch. When financial constraints increase, companies need to sharpen their focus and align resources to the opportunities that will enable a competitive advantage.
The only way to ensure you have the best portfolio is to ensure that you continue gathering world-class insight through continuous engagement with your target customers. While slashing expenses across the board may result in short term savings, the long term consequence may be a significant devaluing of the business as your business loses ‘touch’ with customers and misses the mark with the next generation of products and services.
When customer value considerations are integrated into every stage of your business planning process, your company or business can begin to create an optimal portfolio that delivers value to the customer while also supporting the business strategy. Properly aligning the portfolio with the vision and strategy is not easy or simple. However, Value Based Portfolio Management will enable your company to stay ahead of peers and develop a sustainable competitive advantage that results in above-average industry sales growth and profits.
Market Edge collaborates with client teams to lead the application of the VBPM process that will lead to the following:
Market Edge has worked with category leading B2B companies to develop effective product launches and campaigns for the past 25 years. To learn more about our programs related to Campaign Planning and Execution or to attend a Market Edge Academy program on this subject or other related Marketing and Sales topics, go to https://mkt-edge.com/market-edge-academy/.
Market Edge’s proprietary Marketing Benchmarks and Capability databases are based on >20 years’ experience with category-leading clients in a range of B2B and B2C industries.
Strategic, tactical and product management marketing roles are analyzed as a function of operating profit, R&D investment and anticipated growth. Extracts from the database compare similar business units (industries, size, profitability, and growth).
Benchmarks provide guidance to determine if the quantity of marketing investment is appropriate.
In modern healthcare, commercial success depends on designing offerings that provide value to multiple stakeholders simultaneously. Although clinical benefit is always a key factor when a patient, physician, payor, or provider evaluates a new product, it is insufficient to prompt adoption by many healthcare institutions. New medical devices and treatment options must provide significant clinical and economic value relative to the current standard of care (or next best alternative/competitor).
What is the current standard of care for your product? What demographic, regulatory, and technological trends are shaping the standard? What value can you offer to various stakeholders relative to the current standard? How will the processes and resources developed around the current standard affect the clinical and economic performance of your product? Will existing processes create barriers or incentives for adoption? How can your product streamline these processes to create more value? The complexity of the modern healthcare system provides numerous opportunities to create value; a business that is willing to invest the resources to understand it thoroughly will have a significant competitive advantage in the marketplace.
Determining the true clinical and economic value of a new product requires a comprehensive, data-driven understanding of when, where, why, and how similar products are currently used within the healthcare system. To succeed, businesses must develop this understanding early in the product development process, iteratively refine it during commercialization, and stay up-to-date on evolving standards throughout the product’s lifecycle. Research, whether primary or secondary, is necessary but insufficient to inform strategic decision-making. It is essential to articulate the treatment process through a framework like the Market Edge’s “Treatment Activity Cycle.”
The Treatment Activity Cycle is a process mapping tool used to understand how patients move through a healthcare system and interact with healthcare professionals. A Treatment Activity Cycle focuses on patients with a particular disease or set of symptoms, tracing their path from initial interaction with a healthcare professional, through diagnosis and referral pathway, various stages or iterations of treatment, and post-treatment follow-up. A treatment activity cycle captures where, when, and how decision-making incorporates economic, organizational, and regulatory considerations.
Other related business and regulatory processes can be mapped using similar frameworks, such as the Customer Activity Cycle. By utilizing consistent frameworks for different but related processes, one can clearly represent the interactions between these diverse processes and the divergent priorities of various individuals involved.
For example, consider a company with an innovative offering that could revolutionize the treatment of cholecystitis. Cholecystectomy, the surgical removal of a diseased gallbladder, is the most common form of treatment for cholecystitis, and is the commonly performed abdominal procedure in the US. In order to develop value propositions and a strategy for market entrance, it is key to understand the existing clinical pathways, including patient segmentation, referral patterns, treatment options, and reimbursement. Customer R&DSM market research techniques, such as interviews with stakeholders and direct observation of healthcare professionals, provide the data needed to understand and map this process.
Within this framework we can highlight specific strategically-relevant insights, such as the most important pain points for healthcare professionals, variations in behavior that may drive segmentation and offer positioning, and opportunities for value creation. Treatment Activity Cycles also provide a qualitative framework for contextualizing and interpreting quantitative data such as market volume, competitive share, and revenue potential.
Although it is essential to understand the treatment activity cycle as a whole, some portions may be of more interest based on a company’s offerings and expertise. The Treatment Activity Cycle framework can be applied to any component processes, at the level of detail required to answer relevant strategic questions. For instance, if the new product would be used within a cholecystectomy procedure, it would be important to understand the procedure flow, healthcare professionals involved, and surgical setting in more detail. Mapping this process would help identify opportunities for improving efficiency or providing value-added services, define key user needs, and anticipate barriers to adoption.
Regardless of the particular medical process, detailed mapping of the Treatment Activity Cycle highlights important information gaps, suggests new strategic questions to pursue, and reveals the actionable insights necessary for commercial success. It acts as your business’s working hypothesis regarding the clinical pathways and institutional mechanisms that you seek to improve, influence, or disrupt.
Every year, Market Edge teaches hundreds of business professionals how to employ the Treatment Activity Cycle framework to achieve their goals. Market Edge utilizes the framework in combination with its proprietary Customer R&DSM market research approach to provide healthcare businesses with their intelligence they need to succeed.
Market Landscape Maps clarify the market landscape and help businesses make critical strategy and marketing decisions. They are especially helpful to explore new markets or to compare multiple geographies.
A traditional market map shows the relative size of various sectors or market segments, applications, technologies or customers in two dimensions.
A range of criteria (dimensions) can be used to develop market maps. Creating multiple maps with different combinations of criteria generates new perspectives of the market leading to targeting and growth opportunity insights. Additional layers of information (growth rates, profitability, current areas of focus) can be added to the map to generate further insights.
Following is an example of a Market Landscape Map we developed for a client looking for opportunities to increase their sales in the Latin American fertilizer market.
First, consider the dimensions that could be used for each axis on the map.
For an initial high-level map, the X-axis should be defined by the dimension that is driving overall market growth. Usually, this will be the applications or geographic segments that comprise the market. For the Y-axis, select the technologies or product categories that are competing to serve the market.
In our example, we developed the following map combining countries and nutrient as the initial dimensions.
Then, focusing on each nutrient, we developed multiple maps for the two largest countries that incorporated the product dimension.
Developing the Market Landscape Maps above enabled our client to identify existing gaps, improve their segmentation, develop more accurate targeting and – eventually – serve sub-segments they had not previously considered, leading to double digit top line and bottom line growth.
Market Landscape Maps are extremely useful for analyzing and communicating an overview of the target market. They help explore market adjacencies and challenge the organization to think with a market focused orientation.
Independent research on the NPS scores by industry sectors and major brands is most available for B2C companies, where word of mouth (or social media) can quickly lead to increases and decreases in sales. However, there seems to be less available independent study on B2B businesses, but that does not mean that NPS is not important to those companies as well.
In B2C environments, personal interactions more readily lend themselves to favorable/unfavorable references to other contacts (“That restaurant was wonderful – here’s a picture of my meal!”). However, in B2B environments other factors beyond just the personal interactions may come into play such as corporate procurement policies, requirements for multiple suppliers and technical performance standards that weigh equally in the buying decision process. NPS alone may not be enough to gauge potential for growth in B2B environments, so you should look deeper at other Critical Purchasing Criteria.
Utilize your knowledge of customer’s purchasing process to supplement your assessment of NPS in B2B environments. In addition to the relationships with promoters within the customer company, what are the key value drivers that will differentiate your offer from other suppliers? The combination of NPS knowledge and Critical Purchasing Criteria will help drive greater success with targeted customer accounts in the B2B environment.
Market Edge has developed simplified, online NPS assessment and Critical Purchasing Criteria (CPC) tools which can be quickly deployed to solicit customer feedback on how well you are performing and likely to be recommended to others as well as their key buying criteria. Contact us at info@mkt-edge.com (mailto:info@mkt-edge.com) to learn more about these tools and their application in your business.
As businesses grow it critical maintain alignment between the sales and marketing functions. Without this alignment, impacts can be seen in:
The combination of business processes and marketing skills help organizations address the issues above and target, price and position appropriately.
Our experience with a range of global, category leading B2B companies has shown the following specific capabilities are critical to effective sales/marketing effectiveness.
