Part 2 – Uncovering the Value of New Products and Services

Continuing the first post on assessing the value of new products

Question no 3: What are the current usage rules, patterns and behaviors that bypass the limitation?

The third question adds a new angle by looking hard at the current usage and behavior. There are three reasons to clearly outline the current behaviors.

1. It is a reference for determining the value. For instance, if reducing the limitations saves time, it is important to roughly know how much.
2. Understand the power of inertia when a change is taking place.
3. Drawing a good description of the target market segment.

Take the wine box that preserves the taste of the wine while pouring just one glass at a time. The regular way for drinking wine is opening a bottle, typically 750cc, and finishing it.  There are now ways to put a rubber cork and suck out the air by a pump, which allows reasonable preservation of taste for 2-3 days.

So, who would be interested in a wine-box?

Drinking a whole bottle is relevant for social and family events when there are several people. For an individual, or even a couple, who like wine this is a problematic limitation.

The email-service by a pharmacy saves time, relative to the current norm of waiting in a queue. When the pharmacy has enough agents to serve the public the new offer does not add value, unless the prescription requires lengthy preparation by the pharmacist.  So, we can see that the service is directed at relatively busy clients, especially those with prescriptions that need preparations.  The time saved is much more valuable in neighbourhoods with few pharmacies and thus are frequently crowded.

Question no. 4: What rules, patterns and behaviors need to be changed to get the benefits of the new technology?

This question applies to ALL new products and services. Everything required by the user to draw the best value should be acknowledged, because it is our key interest to ensure the client exploits the value.

The connection between the third question and the fourth outlines the difference in the usage and reveals the full value. More, the fourth question hints that it is not obvious that the client will be aware how to draw the value.  I think Microsoft should consider the possibility that common users, like me, might not be aware how to use Windows 10 to its best advantage.

Inertia is the enemy of everything that is new. We all are impacted by inertia, but when it comes to organizations the inertia goes up dramatically.  Many organizations have not, yet, fully digested the new possibilities opened by the Internet, for instance, how to work effectively without having the vast majority of the employees coming every day to work in the office.

The two examples are focused on individual users. The third and fourth questions when applied to the wine-box contrast the different use between opening a bottle with the intent to finish it and having just what the person likes to drink at that time.  The wine-box also allows drinking several different wines with the meal, without the feeling of wasting half empty bottles of good wine.

The email service requires Internet activity, including scanning the prescriptions and adding all other needs before going to the pharmacy itself for just picking up.

Question no. 5: What is the application of the new technology (product) that will enable the above change without causing resistance?

This is the latest verbalization of the question by Goldratt. The point is how to make the necessary changes in the product and the marketing based on the answers to the previous questions.  It emphasizes the common effect of resistance to the new.  Many times the resistance is because of some real negative effects due to the new product or service.  A wine-box made of carton might radiate inferior quality, and thus cannot fit real connoisseurs of excellent wine and those who like to gain status value.  The conclusion might be to position the wines in the boxes as “good, but not extraordinary”.  It still needs to be good, because why should someone use a 3 liter of not-too-good wine?  Wine is not usually consumed by those who like to get drunk.

Considering what is required to strengthen the value of the new product, and to shorten the time for the user to fully appreciate the value should be the main focus of the development process. Analysis of the email service for a pharmacy might reveal that it is worthwhile to provide home deliveries of pharmaceutical items in order to truly add value to a specific market segment.

Question no. 6: How to build, capitalize and sustain the business?

The sixth question reminds everyone to look for the holistic picture and inquire the dependencies between the new product and the overall Strategy of the organization, including the impact on the other products and services.

Highlighting the meaning behind the three critical elements of a Strategy:

1. Build the full capabilities that are required to develop, produce and deliver the value to the clients.
2. Capitalize on the capabilities to achieve the full impact on the market, recognizing the value and being able to purchase the products. This entry is focused on marketing and sales.
3. Sustain the growth! Goldratt always emphasized the need to be properly prepared for success. The ramifications are on both the capabilities, especially the managerial capabilities to manage a much larger system, and on capacity – the limitations on the extent of usage of the capabilities.

The six questions call for more in-depth analysis and possible expansion. For instance, we certainly need guidance how to check the effectiveness of the portfolio of products and services.  The sixth question certainly reminds us to do that.  I’ll be glad to collaborate on further thinking on these issues.