product management people

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Innovation is
just good product
management.

brainmates white paper 3 August 2010

Innovation is just good
product management
By Nick Coster and Adrienne Tan

Innovation has become a buzzword in countless organisations. CEOs want

it, strategists write about it, marketers talk about it and product managers
strive to deliver it.
Despite all this attention it is still uncommon to see organisations building innovation into their
mode of operation. Instead we are surrounded by products that are increasingly commoditised
with price being the only differentiator. Organisations that do consider innovations tend to focus
on new technological gambles that are dubbed to be “innovative” but fail to deliver a commercial
return.

This paper contends that effective product management should be the heart of the company’s
innovation program. We examine the fundamental role of product management and show that
the purpose of product management is essentially to execute on the principles of innovation.

We further argue that there are no silver bullets to innovation.

Innovation is just good product management.

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Innovation is just good
product management

What is innovation?

Innovation is not new

Humans have been innovating for thousands of years. Humans are creative and therefore natural
innovators1.

When faced with challenges, we conceive innovative solutions to try to solve problems. We develop
solutions that can change the way we live our lives.

For example, to meet our need for mass communication, humans have innovated from painted
pictures on cave walls to written languages, to hand written books, from the printing press to
newspapers, radio and TV. Now we see further innovations in the internet age delivering information
from a search engine, and electronic books like the Amazon Kindle.

Each step has significantly improved on the previous solution.

Given that humans instinctively innovate, we have to ask the question “Why do so many companies
find it difficult to innovate?”

Innovation defined

Firstly, let’s examine the term innovation.

The word innovate is derived from the Latin “innovatus”

meaning to “renew or change”.

This definition is important because the term is often misused by organisations.

Many simply use the term to refer to doing something new or different.

What is missing from this definition is that innovation not only delivers something new or different
but the change must create value.

Daniel Scocco of the Innovation Zen blog2 writes,

The first confusion to dismiss is the difference between invention and innovation. The former
refers to new concepts or products that derive from individual’s ideas or from scientific research.
Innovation on the other hand, represents the commercialization of the invention itself.

1
This hypothesis is supported by the Kirton Adaptation-Innovation Theory. It states that all individuals are problem solvers and hence creative.
It should be noted that the theory is more concerned with the ‘how’ – how individuals solve problems.
M.J Kirton, Adaptation - Innovation in the Context of Diversity & Change, 2002
Daniel Scocco, http://innovationzen.com/blog/2006/07/26/invention-vs-innovation/
2

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From a business perspective, effective innovation leads to change in the market that delivers
increased customer value and in turn a competitive advantage for the organisation.

Jim Andrew , author of Payback, Reaping the Rewards of Innovation is a little more direct and
3

states that,

Innovation is about making money.

Innovation exists when:

• A problem is solved in a new way that is significantly better than previous solution
> Better can be defined as faster, cheaper, easier to use, more reliable and so forth
• A currently unsolved problem is solved that changes the way that things are done

Importantly, good innovation is NOT:

Incremental improvements or feature enhancements that are devised to counter a capability from
a competitor or to address a problem impacting performance.

This path does not lead to significant leaps in product value.

Jim Andrew, The Rewards of Innovation, Harvard Organisation Review, March 2007
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Product Life Cycle Curve

Introduction

Maturity
Growth

Decline
SALES

ct
du
Why bother innovating?

ro
P
nt on
rr e a ti
Cu ov
Inn

Every product has a lifecycle. TIME

Products logically step through a gestation or development period within the organisation, an
introduction period in the marketplace and consequently move from growth to maturity and
eventually decline.

Companies that innovate can essentially extend the lifecycle of a product. A better version of the
product can mean that the product’s lifecycle can return from maturity back to a growth stage or
from decline to maturity. The delivery of Internet access to the market is one example of how a
product’s lifecycle changed when Broadband access was introduced.

Companies that fail to maintain the pace of innovation may see their products and their reason
for being in business becomes irrelevant. Consider a company selling Dial Up internet access but
failed to offer Broadband to its consumers. This company simply would not be in business today.

IBM CEO Samuel J. Palmisano comments on the need for innovation,

The way you will thrive in this environment is by innovating -- innovating in technologies,
innovating in strategies, innovating in organisation model4.

Lafley and Charan authors of The Game Changer5 have a great perspective on innovation.
They argue that,

Innovation puts companies on the offensive.

This means that through innovation, companies create a step change in value for the market
thereby surpassing competitive threats.

To reap the rewards of innovation, innovation programs must NOT be a laboratory for testing
and launching new ideas with the hope that one of the new ideas generated takes flight in the
marketplace. This approach is a costly exercise and can be likened to ‘gambling’.

For innovation to succeed there must be a method for identifying lucrative opportunities and
a process for execution.
Organisation Week, The World’s Most Innovative Companies, April 24, 2006
4

A FLafley and Ram Charan, The Game Changer, How You Can Drive Revenue and Profit Growth with Innovation, April 2008
5

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The goals of innovation and product

management are aligned

The products that product managers launch and support in the market place exist in a dynamic
and competitive environment. For a product to be successful it must deliver value to its users and
it must do so in a way that is different from the competitive alternatives.

A product delivers value to users when it addresses a need, solves a problem or meets an end
goal. Further the product must be delivered at a price point that leaves buyers feeling that they
have received a fair exchange for their money.

For a product to remain successful over time it must continuously deliver more value than the
competition. This may be difficult to achieve as new competitors enter the market giving buyers
more choices and prices. Profits therefore tend to be driven downwards.

To combat this effect, product managers must constantly look for a competitive edge that enables
their product to continue to contribute positively to the profitability of the organisation.

brainmates defines strategic product

management as the delivery and
maintenance of products in their
target markets that :

1. Deliver more value than the

competition (user focus)
2. Create a sustainable competitive
difference (buyer focus)
3. Generate organisation benefit to
the organisation (organisation focus)

If the goal of strategic product management is to create value and generate profit for organisations
through change, it is therefore logical to argue that the goal of product management is very much
aligned with the goal of innovation.

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CASE STUDY: AUSTAR and the MyStar PVR Service

AUSTAR is a company that sees the value of product managers innovating and creating solutions for
customers. AUSTAR has a clear process to get from ideation through to design and development,
production and deployment.

At each stage of the product delivery cycle, AUSTAR’s product management team makes sure they
have involvement from key stakeholders throughout the organisation such as sales, marketing,
service and support teams. This may seem like standard practice but it is the structure and the
strong intent to collaborate that ensures innovative ideas are closely nurtured from gestation to
market launch.

During the design and development of its Personal Video Recorded product, AUSTAR realised that
they had to stand out from the competition. They focused on the needs of the buyers and identified
that buyers wanted ‘immediacy’ when purchasing the PVR service. Buyers didn’t want to wait for
a professional installer to make an appointment to visit the home to set up the service. Buyers
wanted the service immediately.

To solve this problem, AUSTAR ensured that their customer support members were given the ability
to turn on and off the PVR service remotely and instantaneously.

AUSTAR’s PVR has many features and functions that solve both the buyer’s and user’s problems.
It’s a service that provides a seamless interface across Subscription TV content and regional free
to air content.

The success of AUSTAR’s PVR is reflected in the increased Average Revenue Per User (ARPU) and
consequently the company’s overall profitability.

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Barriers to success

There are many reasons why companies fail at innovation.

In this section, we outline some general organisational reasons and more specific product
management related reasons for failure.

Scott Anthony writing for the Harvard Organisation Review recently considered “What’s Stopping
Innovation?”6 One of the key problems he described is the execution of the idea into a profitable
product or service.

The hard part is in the doing, in taking the requisite steps to translate an idea that looks great
on paper into profits.

Whilst product management is not the panacea for all problems relating to innovation, companies
that employ good product management practices have the right structure and discipline to initiate
the ‘doing’. That is, to:

• Determine the viability of the idea

• Forecast profitability
• Establish organisational capability
• Commence product development
• Launch the product or the service

Scott Berkum author of the book The Myths of

Innovation deciphers why companies are not
innovating. He writes that:

• Teams don’t trust one another and hence

collaboration is non-existent
• Managers are risk averse
• Innovation is hard work and takes time

According to Berkum,

The main barriers to innovation are simple cultural things we overlook because we like to
believe we’re so advanced. But mostly, we’re not.

Scott Anthony, What’s Stopping Innovation?, www.blogs.hbr.org 12 March, 2010

6

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Robert Tercek, an innovation consultant also notes a few obvious reasons for failure.

Tercek7 states that:

• The physical environment needs to be conducive to innovating. An office space similar

to a rabbit warren will not inspire innovation teams to think creatively.
• A second reason why innovation fails is that the innovation team lack the authority to
bring their ideas to completion.
• Thirdly, innovation fails because the individuals innovating may not have the necessary
skills to ‘sell’ new concepts.

Poor product management is a barrier to successful innovation

From a product management perspective, organisations can find it difficult to innovate because
their product management teams focus on the minutia of ‘day to day’ and fail to prioritise activities
that deliver new solutions to the market.

Product management in these organisations are not structured well to innovate.

Organisations with poor product management practices have misguided expectations. They expect
their product managers to perform strategic tasks but tend to load these product managers largely
with operational and maintenance activities. They see product management as a support function
to sales, marketing and engineering. Product management in these organisations seems to serve
the organisation rather than lead the organisation.

Product managers that are operationally focused are not given the time to rise above the detailed
everyday product issues to understand and discover customer needs and problems. They do not
have the opportunity to engage in conversations, to ask questions or to observe their customers.
In which case, they will not have the capacity to derive innovative solutions for the organisation.

This is a consistent product management problem across many industries.

In order to facilitate and deliver on innovation, organisations should look to deploy good product
management practices.

Robert Tercek, Why Do Innovation Teams Fail?, www.roberttercek.com 10 July, 2010

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Innovation is just good
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Product management leading innovation

Ideas can come emerge from anywhere within the organisation. They can transpire from customer
visits, contextual enquiry, quantitative market research, market observations or from customer
complaints.

Importantly, these ideas need to be collated and channelled through a review process to determine
ideas that have merit.

A point of failure in innovation is the ability to distinguish the good ideas from the large pool of
ideas.

In our opinion, ideas should be fed into a product management framework to manage, distil and
eventually execute on the right ideas, turning them into profitable products.

A recent Neilsen study (June 2010) of the FMCG industry showed that successful innovators have
precise new product development processes.

FMCG companies with rigid stage gates - - (decision points in the process where a new product
idea must pass certain criteria to proceed forward) - - average 130 percent more new product
revenue than companies with loose processes.

Neilsen, Secret to Successful New Product Innovation: Keep The Boss Out Of It, June 2010
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Idea Phase

During the ideation phase, product managers should use the market potential formula to:

• Filter ideas to find ideas worth pursuing

• Understand the financial rewards to be gained

To calculate the market potential for a product or service firstly determine the size of the market
problem, the value of the problem to consumers and the duration consumers are willing to pay
for the problem to be solved.

Sourced from Blackblot Strategic Product Management Training

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Innovation is just good
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Product Strategy Phase

Once a good idea has been identified, the next stage of the product delivery process elaborates
on the idea further, determines if the business has the capability to develop the idea as well as
refines the financial return.

During the product strategy phase, the product manager should prepare:

• A more detailed proposal of the idea

• A business case to determine its capability in obtaining some or all of the market potential,
costs of delivery and the return on investment

For innovative ideas to succeed in the market, it must deliver a return to the business. Using
a business case helps organisations to determine if the idea has any merit.

The business case at

this point in the process
is considered a ‘straw
man’ during the product
strategy phase since the
product idea is still in
its infancy.

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Innovation is just good
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Product Planning Phase

The product planning stage further defines and assesses the target market and the target market’s
need for the proposed idea. Seeing the idea through the lenses of a potential customer helps craft
the idea further.

The product planning

stage defines the user
requirements and sets the
boundaries of the new
product or service.
A market requirements
document is the resultant
activity of this phase.

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Innovation is just good
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Product Definition Phase

During the product definition phase, product managers can initiate one of the following activities:

1. Prepare a product requirements document that defines the features and functions of the
product in detail. An interactive, high fidelity prototype can be developed to test the product
idea and to help finalise the requirements before development.

2. Engage with a technical team to rapidly prototype the product idea initially and
consequently, write a product requirements document that describes the features and
functions and rules governing the product.

3. Create low fidelity, paper mock ups of the product to test idea without using technical
resources. Create a product requirements document based on the outcomes of the low,
fidelity prototype.

Activities within the

product definition stage
are NOT onerous.
It’s important to prepare
some documentation to
describe the product.

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Innovation is just good
product management

Final Words

Product management and innovation seek to deliver the same goals. Both practices look to the
market and users for problems that are worth solving, problems that when solved will deliver value
to the user and rewards for the business.

To be successful in achieving these goals both product management and innovation require hard
work, time, and a robust repeatable process. If product management is effectively resourced and
is outwardly focused on understanding users and buyers in the market place, it can be the engine
room for innovation in any company.

However, if product management is forced to manage day to day operational activities, it will not
have the opportunity to innovate.

Organisations that seek to deliver innovation to the market should resource their product
management teams to enable them to focus on new market opportunities and disruptive market
change.

About brainmates

brainmates leads companies to define, develop and deploy customer-centric products and services.
We offer professional services and training and have helped leading clients enhance their products
and services. Our clients include industry leaders in media, communications, financial services,
medical devices, software and hardware manufacturers. Contact us today to find out how we can
help you.

+61 (0)2 9232 8147

info@brainmates.com.au
www.brainmates.com.au

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Innovation is just good
product management

About the authors

Adrienne Tan, Director, brainmates
(MCom USYD, BCOM)
Nick Coster, Director, brainmates

With over fifteen years of experience in product management, Adrienne Tan is the co-founder of
brainmates, a boutique product management and marketing agency based in Sydney, Australia.

Adrienne has helped to lead and coordinate product development in a range of industries with
clients such as AUSTAR, Fairfax Digital, Veda Advantage, The Weather Channel and many more.
Adrienne’s research focuses on customer-centric decision product design and development
and she has written extensively on the topic via the brainmates blog, brainrants and lectured at
postgraduate level at the University of Technology, Australia.

actan@brainmates.com.au

Nick Coster is a co-founder of brainmates who is passionate about the benefits of putting the
customer before the technology and building products and services that delight the buyer and the
user.

Nick has been developing and managing products for over 13 years, with range of different
companies including Telstra BigPond, Excite@Home, Optus, Westpac and eBay, delivering internet
service and telecommunications, online applications and internet security products.

In the process of this journey he has developed a deep understanding of the way the different
technologies fit together and is always amazed at the new and exciting ways that people use them.

Since joining brainmates full time in 2007, he has also consulted to clients whose products
include legal accounting software, implantable medical devices, fashion, personal training, pay
TV services and financial services. Each time he brings his experience and the brainmates best
practice product management approach to deliver on client outcomes.

Email nick@brainmates.com.au

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