If you want to create a great new product, do less

Counter-intuitive, right? Sure was to me. We marketers are brainwashed to believe that "better" means more features. But creating value by doing less is the new horizon in product innovation. Just ask Clayton Christensen of Harvard Business School, or Mark Hart, who wrote about the phenomenon in the latest PDMA Visions magazine.

Christensen (the most quoted man in innovation today?) discusses the concept in the December Harvard Business Review, focusing on social services (link - $$). One example cited is MinuteClinic, which started in Minneapolis providing walk-in health services at CVS drugstores (CVS subsequently acquired MinuteClinic).

MinuteClinic treats a finite set of common maladies with nurse practitioners, not doctors, with reasonable cost and a high-level of convenience. Is MinuteClinic service "better" than treatment from the Mayo Clinic? No, but it's good enough, much cheaper and more convenient. That's the "underdo" strategy in a nutshell.

Mark Hart's example is 37signals, a company that evolved an internal need for simple, Internet-based collaborative project management into Basecamp, a product now used by more than 500,000 users and awarded "Best of the Web" by Business Week--even though it does much less than Microsoft Project. Which of course is the point.

(Picture: a Rube Goldberg device from Wilf Ratzburg via stock.xchng)

innovation, product development, marketing, Harvard Business Review, PDMA, business

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Startups, ditch your business plan!

The business plan is an entrepreneur's lifeline. It has near-mythic qualities--the ability to distill an entire business into one short (or long) document, the ability to attract investors, the ability, even, to predict the future. (Want to know what a startup's EBITDA will be in 2010? Check Exhibit K.)

In addition to all these things, according to today's Wall Street Journal, it may also be a waste of time. Referring to several studies of startup performance, reporter Kelly Spors cites a study from Inc. magazine showing that nearly two-thirds of fastest-growing startups had rudimentary business plans or no plan at all.

Why is that? One explanation cited is that startups have to be nimble, and if you are too wedded to a business plan, you may stick with a failing concept too long. Or that spending lots of time writing the perfect business plan can cause you to miss the business opportunity.

You must understand the financial model for your business--how will you charge customers? What are your expenses, fixed and variable, and how will your prices cover your costs? What working capital will you need? But, as stated in the Journal article, "it's not always crucial to have the 60-page plan."

If you're considering ditching the business plan, remember one thing. If you're going to ask any institutions for money (VCs, banks, etc.), you're gonna have to have one. But keep it small and simple--and be prepared to change it.

(Picture from broker via stock.xchng)

entrepreneurship, business plan, startups, business, Wall Street Journal

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Software distribution partnerships--got to know what you want

When you set out to form software distribution partnerships, you know one thing at least: you are looking for someone to sell your stuff. Beyond that, though, many companies wade into this phase of partnering with few other things decided.

And that's a problem.

Are you looking for the partner to fulfill any other roles besides sales? Like, say:

• Installation
• Systems integration & project management
• Ongoing account management
• Providing complementary software
• First-level maintenance
• Second-level maintenance

It's important to have a point of view on this, because it will help you narrow down the types of companies who will be good partners (and perhaps more importantly, the types who won't).

Let me describe two partnerships at the extremes of the distributor spectrum:

Partnership 1: the software provider wants the distributor to sell the product, but the software provider will do all the installation work, any integration/customization required, ongoing maintenance.

Partnership 2: the software provider wants to sell a standard platform, and wants the distributor to install, customize, integrate and provide most maintenance (the software provider only provides core product customization and level 3 support for bug fixes to its platform).

These two partnerships will have very different commercial models, legal agreements, training, exclusivity provisions, etc. The type of partners you look for will be very different as well. Partner 1 can sell and doesn't need any other capabilities (e.g., manufacturer's rep). Partner 2 better also have lots of professional services, strong processes, industry domain expertise, a reliable brand name, etc. Partner 1 will need a share of the license revenue, but most of the overall revenue will be yours. Partner 2 will command a much larger share of each customer's spend, but will let you distribute much more widely.

So think about what you want before you start signing up partners. It'll save lots of money and headaches. And you'll sell more stuff, too.

B2B, software, alliances, sales, business, marketing

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Friday comix - McDonald's thrives despite controversy

marketing, management, McDonald's, Wall Street Journal, cartoons, business, Friday Comix

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The Seven-Man Clock

My wife got me one of these for my 40th birthday, a few years back. It is without doubt the best conversation piece I've ever had in my office. It's a small replica of a large kinetic sculpture which is in Seattle's Pacific Science Center. There are seven small brass people working at various places on the clock--turning cranks, riding escalators then falling down, etc. It makes a fairly loud whirring noise that thankfully fades into the background as you get used to it.

It seems at first that the workers are moving the machine. But, as you stare at the clock, it becomes increasingly clear that, in fact, the machine is moving the workers.

Which reminds me a lot of when I worked for very large companies.

(photo: the seven-man clock from Kinetico Studios and Gordon Bradt)

design, psychology, organizational behavior, management, business

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Examples of different partnerships

Continuing from the last post, here is an example of each type of partnership:


Technology partnership:
Pfizer licenses the right to market Scripps Research Institute's drug discoveries.


Joint venture:
Sony and Ericsson combine their mobile phone operations into a jointly-owned company.


Joint marketing agreement:
Sun Microsystems and Quark collaborate to promote and sell Quark's publishing software running on Sun platforms. (Here's an example contract from Sun.)


Referral relationship:
IDT, and Net2Phone, two telephone providers selling different services (long distance and voice-over-IP), refer leads to each other. (Note: partnerships often grow into deeper relationships--the companies subsequently merged.)

(Photo: the Walkman 810 phone from Sony Ericsson)

innovation, alliances, sales, business, marketing

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What's a "strategic alliance" or a "partnership" anyway?

When people in business say they want to be your partner, they usually mean this:

I want you to sell my stuff.

In fact, one of the most dispiriting situations in a product manager's career is getting your first great "partner" lead and discovering the inevitable: while you thought they wanted to sell your stuff, in fact they want you to sell their stuff.

There are other partnerships--technology partnerships, where one company uses another's technology as part of its product (in open innovation vernacular, this is often called in-licensing or out-licensing, depending on whether you're using or supplying the technology); joint ventures, where two or more companies share ownership of a third company which develops, manufacturers and/or markets a product; joint marketing relationships, where companies co-invest in marketing but sell side-by-side to customers; and referral relationships, where companies whose products don't overlap refer prospects to each other, sometimes for a fee or other consideration.

But most of the time, we're talking about somebody selling somebody else's stuff. In the next several posts, I'll talk about how to develop and structure that kind of partnership.

(Picture from stock.xchng)

innovation, alliances, sales, business, marketing

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