Marketing & Sales Roundtable Pragmatic (Start-Up) Product Planning May 2004 Agenda – Pragmatic Product Planning      Definitions Benefits and Issues Inputs Top 10 List Appendix  Sample MRD ©2004 Arrington, Burke, Remacle 2 Product Management Product Lifecycle ©2004 Arrington, Burke, Remacle 3 Product Planning Hierarchy Roadmap Product Plan NPP1 NPP2 Gate #1 MRD Gate #2 PRD NPS4 NPPE1 Engineering Spec Gate #3 Plan of Record (POR) Gate #4 Launch Plan Gatekeepers = Executive Committee ©2004 Arrington, Burke, Remacle 4 Total Product Planning Issues BOD, Executive Team Alignment Risk Analysis, Mitigation Clear Direction to Development Team Product Planning Early Customer Buy-in Lower Cost Development, Fewer Revs Faster Time to Market and Revenue ©2004 Arrington, Burke, Remacle 5 Product Planning Process Issues          How to instill structure and process in the product planning function without introducing bureaucracy? How to get sales input without handing over control? How to balance customer-specific requests with market and competitive input? How to give the detail needed for product development without developing a full functional spec? How to limit the number of releases to match development and marketing resource constraints? How to mitigate product slips? How to manage internal buy-in and approvals? How to reset expectations due to dynamic requirements/changes and slippage? How to ensure product planning is part of strategic roadmap? How to develop a product with an offshore team involved? ©2004 Arrington, Burke, Remacle 6 Research Sources and Uses Corporate Positioning Process New Product Planning Process Lifecycle Management (Financial Modeling) Product Strategy Marketing Product Management Subscription Market Research Market analysts (IDC, Gartner, etc.)  Financial analysts  International?  ©2004 Arrington, Burke, Remacle Custom Surveys Customer Sat Channel calls Shows/Events Reg base, key accounts  Lost accounts     Qualitative Feedback   Annual Summit WW Channel, Customer Advisory Boards Emerging Technologies Competitive     Trade magazines Lab analysis Web ‘Crush’   Supplier visits Technology Advisory Board 7 Product Planning: Top 10 List #10: Segmentation (market and customer) and product roadmap are the foundations of product planning  Becomes filter for all product concept and feature requests #9: Qualitative research with opinion-leading customers in target customer segment is most important research component  Once identified and tested, build relationships for alpha input, beta program and ongoing advisory #8: Market and competitive research complete the requirements, competitive and financial picture  Qualitative input from analysts, competitors, industry associations, customer councils, advisors, gurus, historical/analogue trends, etc.  Structured, time-limited process for input from sales, SEs/FAEs, executives ©2004 Arrington, Burke, Remacle 8 Product Planning: Top 10 List (cont’d) #7: Product manager, VP marketing own the product planning process  With ‘meeting of the minds’, and formal approval process with engineering and sales VPs, CEO, founders and a defined cross-functional team #6: Detailed financial model must substantiate business opportunity:BOM, development budget, sales forecasts by quarter, lifecycle pricing , discounts, marketing budget, etc. #5: Two major releases/new products annually  Develop a theme/concept/name for releases with feature groups that address/anticipate specific market needs – not ‘bug fixes’ ©2004 Arrington, Burke, Remacle 9 Product Planning: Top 10 List (cont’d) #4: Establish ‘total product’ features as market requirements for release  Support plan, partner/channel strategies must be executed in parallel with development #3: Define clear executive (board?) review and approval process  Formal presentation and sign-off, with regular reviews as dictated by risk assessment, development progress and market dynamics #2: Include launch strategy, plan outline, budget to engage development team and reinforce delivery expectations  Go/no go dates for key launch expenditures and events ©2004 Arrington, Burke, Remacle 10 #1: Product Planning is a Contact Sport! ©2004 Arrington, Burke, Remacle 11 Summary  It’s not necessary to turn product planning into a bureaucratic process, but  It does need to be built upon customer segment requirements  Higher probability that you’ll get the product right, the first time ©2004 Arrington, Burke, Remacle 12 Appendix ©2004 Arrington, Burke, Remacle 13 Sample MRD Outline Preface - The development of a Market Requirements Document (MRD) is a critical first step in any new product planning effort. The MRD provides a business view of the market requirements and environment. It also serves as the foundation for the creation of detailed product requirements/engineering specifications, and the starting point for release and launch planning. The MRD in the Product Planning Process MRD ©2004 Arrington, Burke, Remacle PRD Engineering Spec Plan of Record (POR) Release (Launch) Plan 14 Sample MRD Outline When to Create/Refine an MRD  New product planning  Product enhancement or extension planning Objectives and Uses of an MRD  Confirm market/customer need and opportunity  Ensure product strategy development and refinement is market- and customer-driven  Evaluate potential business model options and opportunity for ROI  Identify potential partner categories and requirements in timely way  Understand barriers and risks  Product reviews (review and refine MRD assumptions on quarterly basis)  Allocate resources Risks of Not Producing an MRD  Technology risk  Technology won’t work as envisioned  Key component not available  Product risk  Wrong product  Wrong price point  Market risk  No market – ‘technology looking for problem’  Established market – ‘me too product’ facing entrenched competition  Unattractive market – not big enough to be interesting  Business risk  Too expensive to develop (time and $$)  Not profitable to manufacture and sell ©2004 Arrington, Burke, Remacle 15 Sample MRD Outline MRD Outline I. Product Overview This section of the MRD introduces the product concept and structure. Also outlined here are assumptions regarding key requirements, release schedule and potential risks and dependencies. A. Product description (high-level) 1. Market category a. What is it (Component/SW/HW/System, usage)? b. Where does it fit in the market (per industry/market analysts’ schema)? c. Product category name (e.g. PC, PDA, Infrastructure SW) 2. Architecture/Core structure a. Component – block diagram b. HW – processor, OS, storage, NW, etc. c. SW - server, client, modules d. System – HW, SW, NW, etc. 3. Key features and capabilities B. Problem addressed and benefits provided by the product (prioritized in order of importance to customers) C. Value proposition D. Other market requirements identified but not essential to this rev E. Product release schedule 1. Alpha 2. Beta 3. Release (general availability) F. Risks and dependencies 1. Technology – development feasibility, component availability 2. Product - performance 3. Market – timing, competition, etc. ©2004 Arrington, Burke, Remacle 16 Sample MRD Outline II.  Product Strategy A. Strategic goals/objectives for the product 1. Role of product in the company’s strategy 2. Financial goals B. Market vision Why is this product important to potential customers now and in the future? Why can it be the basis for a sustainable company versus just a point product? 1. Market trends/drivers 2. Technology enablers 3. Market segment problem being addressed by the product C. Targeted market(s) 1. Market segment – Who has the problem being addressed (broadly), and the most critical need to get it fixed? 2. Market segment development roadmap – potential customer segments (prioritized to the extent possible) a. Critical need drivers – ‘must-haves’ versus ‘nice to haves’ b. Sample usage scenarios i. Current solution(s) to the problem outlined in B-3 and their deficiencies ii. Priority requirements - table stakes – e.g. standards support, integrate-ability, performance, etc.) iii. Barriers to adoption – for all participants in the product category, and those specific to company 3. Market size and growth rates (3-5 year CAGRs) – See Appendix A for definitions a. Total Available Market (TAM) b. Served Available Market (SAM) D. Competitive Landscape 1. Primary competitor categories (direct/indirect, current/future) – strengths and weaknesses 2. Company/product differentiation against each competitor category ©2004 Arrington, Burke, Remacle 17 Sample MRD Outline Product Strategy - Cont’d II. E. III. Partnership strategy by category type 1. Technology 2. Product 3. Marketing 4. Sales/distribution 5. Other? Marketing Planning Assumptions 1. Communications strategy a. High-level message model - key points related to market, technology, product, company b. Market leverage model – categorization of market influencers and strategy for reaching them 2. Beta program a. Objectives b. Criteria to select beta customers c. How many and what type d. Duration and management of program 3. Launch strategy (Objectives and key milestone - detailed plan comes later) 4. Sales channel strategy (role of direct versus indirect) 5. International strategy – what, if any markets will be addressed in the first release ©2004 Arrington, Burke, Remacle 18 Sample MRD Outline IV. Product Requirements This section outlines product development priorities in more detail, and includes preliminary assumptions regarding future releases and/or product extensions. In the event that the company’s product planning process does not include the creation of a PRD, this section is used as the foundation for the development of engineering specifications. A. B. C. D. E. V. Priority 1 features and capabilities (identify which are mandatory for first release) *See Appendix B for sample list of key elements to be addressed in core product and in support of the product. Priority 2 features and capabilities (highly desirable but may not be committed to yet) Future requirements (may be included in future releases but not committed to at this point) Features that will not be implemented (with explanation of why) End-of-life strategy/plan Financials This section should demonstrate that the company has thought through the key financial considerations and include an Excel model demonstrating an attractive business opportunity given estimated (best guess) revenue assumptions and development, manufacturing, sales and marketing costs. A. B. C. D. E. F. Bill of materials (preliminary make or buy assumptions for key components) Development budget Customer adoption scenarios (how many, over what period of time) Business model/pricing assumptions (over time) 1. License versus subscription/hosted pricing 2. System versus component (HW/SW/Service) pricing Sales process 1. Revenue targets and discount structures by channel 2. Sales cycles Marketing budget ©2004 Arrington, Burke, Remacle 19 Sample MRD Outline VI. Cross-Functional Project Team (Roles, Responsibilities, Timeframe, Point Person) The product planning process should involve representatives of most functional areas/departments. This section should outline the roles and responsibilities of each department, identify a departmental point person and highlight the points at which his or her input/involvement are required. A. B. C. D. E. F. G. Development/Engineering Marketing Support Operations Sales Legal International Approvals and Certifications ©2004 Arrington, Burke, Remacle 20 Sample MRD Outline Appendix A - Glossary of New Product Planning Terms PLANNING TOOL ROLE New Product Planning Process Phased approach for managing the development of a new product that reflects stated corporate (and product line) strategies Market Requirements Document (MRD) Business view of market requirements and environment, summarizing segmentation strategy, competitive landscape, total product composition and business model/potential ROI. Source of initial product plan business assumptions Product Requirements Document (PRD) Definition of features, functions, technical specifications for an individual product of family of products. Basis for development of engineering specifications Engineering Spec Detailed engineering specifications based on MRD/PRD inputs. Core of development plan Plan of Record (POR) Detailed summary of product development activities, schedule and key milestones, including Beta – Engineering/Manufacturing Release (Launch) Plan Plan for product release detailing activities, schedule, roles, responsibilities and costs – Engineering/Manufacturing-oriented Launch Plan Marketing plan for product launch detailing activities, schedule, roles, responsibilities and costs Product Roadmap Outlines medium to long-term product platform strategy and response to market vision (trends/drivers/enablers). Provides explanation of rationale for product evolution relative to target market segments. Total Available Market (TAM) Total units/$ available at all potential customer companies for relevant categories of products/services and applications. Top-down approach using market forecast data Served Available Market (SAM) 100% of the units/$ available from addressable customer companies for addressable percentages of applications that company can serve. Should reflect company’s technical capability, market rate of adoption of technology, geographic reach, target market segment, etc. ©2004 Arrington, Burke, Remacle 21 Sample MRD Outline  Appendix B – Sample List of Features/Capabilities * Sample list of elements to be addressed and prioritized in development and communications plans (What are table stakes/must haves? What are differentiators?)            Core product features/functions Product performance metrics (relative improvements), dependencies Uptime and QoS Regulatory certifications and adherence to standards (e.g. platforms and protocols supported) Compatibility/interoperability (backward and forward) requirements and testing Bugs/fix requirements Internationalization (e.g. Unicode-enabled) Documentation requirements and plan (users, developers, etc.) Next generation architectural changes Environmental (e.g. ISO 1400, recycling, etc) Maintenance and technical support requirements ©2004 Arrington, Burke, Remacle 22 Presenters  Liz Arrington, Consultant Market Focus 650-329-0823 liz@mktfocus.net  Patty Burke, Consultant Market Focus patty@mktfocus.net 408-398-4921  Rosemary Remacle, Consultant Market Focus 408-244-0412 rosemary@mktfocus.net ©2004 Arrington, Burke, Remacle 23