In today’s dynamic market, new products are the lifeblood of business growth. Yet, surprisingly, many organizations struggle to consistently and efficiently develop and launch successful innovations. This deficiency in new product development capability ultimately falls under the purview of executive leadership. It’s the leaders who must cultivate a culture of creativity while implementing the necessary frameworks for disciplined execution. Strategic decisions regarding investment, timing, and knowing when to pivot or abandon a project are crucial leadership responsibilities. A significant underlying issue in hampered business innovation is often the fragmentation of crucial activities involved in bringing a product to life. Without cohesive integration across what we can term the “innovation portfolios” – encompassing current offerings, advanced technological capabilities, and ongoing development projects – companies risk wasted resources and lost market opportunities due to ineffective product launches.
Integrating these diverse portfolios presents a considerable challenge. Each operates on distinct rhythms and responds to different drivers:
- The product portfolio is in constant dialogue with customer feedback and the ever-shifting competitive landscape. While this market-responsive approach is vital, it can sometimes lead to an overemphasis on incremental improvements and copycat products, hindering truly disruptive innovation.
- The advanced technology capabilities portfolio is geared towards pioneering new capabilities, breakthrough innovations, and repurposing existing technologies in novel ways. This technology-driven approach, by its very nature, operates on a less predictable timeline, often diverging from immediate market demands.
- The product creation projects portfolio functions within the structured framework of stage-gate processes, demanding adherence to relatively tight schedules to ensure timely market entry. This emphasis on speed and efficiency can sometimes clash with the more exploratory nature of technology development.
Experience across a wide spectrum of industries, reinforced by field research, indicates that bridging these temporal and priority gaps is achievable. High-performing companies leverage three key enablers to strengthen the connections between these critical portfolios. Firstly, they strategically separate advanced technology exploration from immediate product development, yet establish robust links through technology roadmaps and advanced technology demonstrators (ATDs). Secondly, they adopt a product architecture that balances customer variety with cost-effectiveness for the organization. Finally, they conduct annual product reviews, engaging executive leadership in a thorough analysis of all three portfolios to solidify integration and drive crucial prioritization and resource allocation decisions. This rigorous process ensures that product launches are not only timely but also strategically aligned with both market needs and technological possibilities, embodying the principles of “Launch And Learn”.
Advanced Technology Demonstrators: Launching to Learn in the Lab
Research endeavors, without focused direction, can become protracted and lose real-world relevance. Advanced Technology Demonstrators (ATDs) serve as a vital forcing function, compelling research teams to validate nascent technologies in simulated real-world scenarios. Unlike prototypes, which are typically iterations of a product within the R&D pipeline, ATDs are designed to rigorously test and authenticate new technological capabilities independently of specific product development projects. For instance, voice-activated remote control technology represents a significant leap in remote control functionality and would be ideally suited for validation as an ATD before being integrated into a consumer product.
ATDs effectively “launch” an idea onto a product “host” within an environment that mimics the intended real-world application. In the voice-activated control example, a home electronics manufacturer might initially develop an ATD to assess the technology’s feasibility in a simple bedside clock-radio, a controlled environment with limited functionalities. Subsequent, more advanced ATDs could then address the complexities of noisier living room environments and incorporate the broader feature sets of devices like DVD players. While logically linked to future product creation projects, ATD development must remain a distinct and separate process.
Companies often experience costly delays and outright product failures when attempting to simultaneously invent and develop a product for market launch. ATDs provide a flexible mechanism to mitigate this risk. They forge a link between research and product creation, allowing for a “launch and learn” approach to technology validation without the constraints of rigid product launch timelines. Breakthrough innovations are, by their nature, unpredictable. Basing a product development project on an unproven breakthrough often leads to setbacks. ATDs help discern genuine breakthroughs from mere hopeful expectations. Consequently, product creation projects should only incorporate technologies that have been rigorously validated through ATDs, and ATD development should always precede any public announcement of a product launch incorporating that technology.
While the implementation of ATDs might initially seem to lengthen the innovation cycle, experience demonstrates the opposite effect. The research team gains the space to refine less mature concepts within the supportive laboratory setting, free from the immediate time pressures of a specific product development project. The ATD process necessitates making the concept tangible and serves as a powerful tool to showcase the potential of the innovation across the organization. Demonstrating a working concept is far more impactful than simply describing it. This “launch and learn” within the organization builds internal buy-in and facilitates smoother technology transfer.
However, technology demonstrators are not a panacea. New technological capabilities only generate value when they reach the market as products or features. Senior management plays a critical role in ensuring that ATDs are explicitly linked to research, product creation teams, and market-facing products via well-defined technology roadmaps. Just as a roadmap connects technology projects to the product portfolio through product creation initiatives, it also proactively establishes contingency plans to address situations where invention timelines exceed initial projections.
Although research initiatives typically have longer horizons and greater uncertainty compared to product creation projects, ATDs should still adhere to a degree of schedule discipline. Establishing fixed schedules for ATD development necessitates a pragmatic approach. The scope of a specific ATD might need to be adjusted if certain advanced technologies are not ready within the timeframe. These technologies can then be incorporated into subsequent ATDs, also developed on a disciplined schedule. This structured yet adaptable approach to technology development, coupled with regular ATD validation, injects a realistic level of discipline into the inherently unpredictable realm of invention, fostering a culture of “launch and learn” at every stage.
Modular Innovation: Architecting for Agile Launches
A company’s product or service architecture forms the foundational building blocks for effective product portfolio management. By strategically utilizing common building blocks and systematically combining, adapting, and upgrading others, businesses can offer a diverse range of competitive products and services without the prohibitive cost of designing each one from scratch. The primary architectural elements are platforms, modules, and differentiators.
Platforms. Platforms serve as the bedrock for multiple product models targeting different market segments, sharing core underlying features. Modules streamline complexity and reduce part counts by providing standardized functional units. Differentiators stem from a deep understanding of customer priorities, distinguishing between features that are highly valued and those that are less critical. Thoughtful management of product architecture through platforms, modules, and differentiators drives efficiencies across product creation, procurement, manufacturing, and service, while simultaneously delivering enhanced customer value. This strategic approach allows for quicker and more cost-effective product “launches” and variations.
Alfred P. Sloan, the visionary leader of General Motors from 1923 to 1946, pioneered the modern platform-based product management strategy. In GM’s 1924 annual report, Sloan articulated his vision of providing “a car for every purse and purpose.” At the time, GM offered a confusing array of 10 car models under seven distinct brands, leading to internal competition and financial losses for most brands except Cadillac and Buick. Sloan’s strategic vision enabled each division to establish clear market positions, fostering both entrepreneurial spirit and overall strategic alignment.
Today, GM manages an even more complex product line using approximately a dozen platform variants. For instance, the Chevrolet Malibu, Pontiac G6, Saab 9-3, and Opel Vectra all share a common mid-sized, front-wheel-drive platform. Similarly, a single rear-wheel-drive platform underpins the Buick Rainier, Chevrolet Trailblazer, GMC Envoy, and Saab 9-7X. While sharing chassis and suspension designs, each model offers a unique feature set and price point aligned with its brand identity. This strategic combination of platforms across brands creates distinct brand lineups despite significant component commonality, demonstrating the power of platform-based “launch and learn”.
While platform strategies are prevalent in industries like automotive and aerospace, they are less common in sectors such as food, software, and financial services. However, the benefits of defining platforms and platform-based strategies in these “softer” product industries can be equally impactful, driving product extensions and operational efficiencies.
For example, Masterfoods, a global confectionery and food company, applies platform logic to its products, linking it to their core manufacturing technologies. They have leveraged their proprietary hard-shell coating technology, initially developed for M&Ms, to create diverse product extensions like crisped rice candies, peanut butter candies, and Skittles with their chewy centers. Product managers at Masterfoods find the platform concept to be a powerful organizational tool for streamlining product lines and enhancing efficiency. All companies should creatively explore platform definitions, considering both physical and virtual platform models for their product architectures to enable agile product “launches” and iterations.
Modules. A modular design philosophy, where different products share standardized parts and specifications, complements platform architecture by simplifying the creation of product variations on a common platform. Designers can group product functions and features into modules with standardized interfaces, allowing for plug-and-play substitution. Modules are often used across multiple product platforms, facilitating “block upgrades” – adding new features to refresh products and maintain market interest without costly major redesigns. Planned block upgrades prevent development teams from delaying product launches in an attempt to incorporate every possible feature in the initial version. Ideas emerging late in the development cycle can be slated for inclusion in the first block upgrade post-launch, embodying a “launch and learn” iterative approach. Modular designs make the ongoing process of block upgrades seamless and efficient, allowing for continuous product evolution based on market feedback.
While modular designs offer compelling advantages, they also have potential downsides. They can necessitate design compromises and potentially lead to suboptimal designs due to the need to maintain clear interfaces with existing modules. For example, modern office copiers commonly employ modular designs with various sorter and paper tray options to meet diverse customer needs. A more integrated design, where components are optimized to work together but are not interchangeable, might reduce the cost of a single unit but increase the overall cost across the entire product line.
Despite the benefits of reduced complexity, overly modular product architectures can eventually commoditize the end product. When modules become fully interchangeable across an industry, the end-product assembler loses market power, and component suppliers with competitive advantages capture the majority of industry profits. The personal computer industry exemplifies this phenomenon, where major manufacturers, except for Dell, struggle with profitability while component suppliers like Microsoft and Intel enjoy substantial returns. Charles Fine of MIT argues that industries with excessively modular designs may eventually revert to integral designs to regain competitive differentiation. This highlights the importance of strategically managing modularity within a “launch and learn” framework.
Differentiators. The most successful adopters of modular design strategically identify and continuously innovate a set of differentiators, even as they standardize modules and leverage platform architecture to reduce costs in areas of lesser customer importance. Whirlpool uses the concept of “the green line” to distinguish between differentiators and less-critical product attributes. Features that are perceived and valued by consumers reside “in front” of the green line, while less noticeable or valued features lie “behind” it. In a refrigerator, for instance, the cooling system, insulation, and control system are behind the green line, while aesthetic design, interior shelving, drawers, and user interface controls are in front. Whirlpool encourages product teams to focus on cost optimization behind the green line and to concentrate creative efforts on innovating features in front of the line to create competitive differentiation and drive successful product “launches”.
Beyond refrigerators, differentiators need not be physically visible or even consistent across competitors and market segments. Suspension and powertrain performance are key differentiators in high-end sports cars like BMWs or Porsches, but are less critical (“behind the green line”) in family sedans. Family car buyers prioritize practical features like interior space, fuel efficiency, and safety systems. A sports car enthusiast might prioritize performance and handling over a luxurious interior.
The green line concept is equally applicable in service industries. Airlines differentiate services for frequent flyers by offering dedicated reservation lines with agents who greet them by name and prioritize their calls. Unseen by most customers (“behind the green line”), a single call center efficiently serves all callers, optimizing staffing while providing a superior service experience for high-value customers. This strategic differentiation allows for targeted “launches” of service enhancements to specific customer segments.
Annual Product Reviews: Integrating Portfolios for Strategic Launches
Senior management plays a crucial oversight role in integrating advanced technology projects, product creation projects, and product portfolios through annual product strategy reviews. Despite their critical importance, these reviews are surprisingly rare, even among leading companies. They are as vital as strategic planning and annual budgeting processes. Many companies conduct multi-year strategic reviews early in the fiscal year and finalize operating budgets towards the end. An annual product review, strategically positioned between these events, focuses attention on the core of business growth: the continuous development and evolution of the product or service portfolio.
Building upon an understanding of customer trends and anticipated competitive moves, the annual product review allows management to set strategic priorities and integrate development efforts across the entire spectrum of project and product portfolios. These priorities then inform the annual operating plan, guiding the allocation of expense and capital budgets based on product creation commitments. This process ensures that resource allocation is strategically aligned with product “launch” objectives and market opportunities.
Product strategy reviews differ significantly from corporate strategy reviews. Corporate reviews typically focus on strategic direction, new business ventures, revenue and profit targets, and M&A opportunities. Product strategy reviews, in contrast, compel senior management and product teams to assess the entire product offering, both current and future.
Preparation for the product strategy review acts as a crucial forcing function for all product areas, requiring them to comprehensively communicate their plans and rationale, free from other business distractions. These reviews often reveal gaps and opportunities within the product portfolio. They also serve as a forum to ensure shared understanding of key customer trends and to address cross-functional questions. Should one product type be expanded faster than another? Are technology concepts being prioritized for optimal consumer applications? How are competitor product portfolios evolving? These crucial questions are addressed within the “launch and learn” framework of the annual review.
Senior management can leverage product strategy reviews to strengthen linkages between R&D technology groups and product management teams. The process encourages a broader perspective, moving beyond internal focus on incremental upgrades or the “next big thing.” Reviews begin with an “outside-in” market perspective, analyzing customers and competitors, and then working “market-back” to assess the portfolio. Simultaneously, the review adopts a “technology-forward” approach, systematically analyzing the portfolio from a technological innovation standpoint. This comprehensive analysis often leads to clarifications and adjustments in product portfolio objectives, ensuring that product “launches” are strategically sound and market-relevant.
Ultimately, the collective effort of senior management, product management teams, and technology managers during product strategy reviews defines the priorities to ensure that advanced technology and product creation projects generate the most competitive product or service portfolio as efficiently as possible. The level of investment dictates the pace of change, naturally transitioning into the annual budgeting process. A strategically sound portfolio emerges when market-back and technology-forward reviews converge at an affordable investment level. The product strategy review then informs the budgeting process, ensuring that new annual budgets are objective-driven, rather than simply extrapolating past performance. This integrated approach ensures that every product “launch” is a strategic step towards long-term market success.
Platforms, modules, and differentiators enable continuous innovation while leveraging economies of scale. Senior management sets the strategic context. Individual product managers, designers, engineers, and researchers typically focus on their specific areas. No company can pursue every opportunity; strategic choices are essential. The essence of strategy is deciding what not to do as much as what to do.
Does a new technology necessitate a fundamental breakthrough, warranting separation from product development and validation through an ATD? Or is the technology mature enough to be directly integrated into a new product program? When introducing night vision into automobiles, GM used the 2000 Cadillac DeVille launch as a driver for timing. Does the platform architecture provide adequate brand differentiation, or has it blurred crucial distinctions? Should an innovation effort be halted or receive further investment? These strategic decisions require executive leadership with a deep understanding of both technology and innovation processes. A former GM manager observed that before the 1980s, “General Motors had 20 cars that looked different on the outside but were the same underneath.” By the early 1990s, “GM had 20 cars that looked the same on the outside but were different underneath.” The responsibility for this shift, and the strategic direction of product “launches”, ultimately rests with executive leadership.
Reprint No. 08104
Author profiles: Tim Laseter ([email protected]) currently holds visiting faculty appointments at the Darden Graduate Business School at the University of Virginia, IESE in Barcelona, the London Business School, Emory University’s Goizueta Business School in Atlanta, and the Stern School of Business at New York University. Formerly a vice president with Booz Allen Hamilton, he has more than 20 years of experience in operations strategy.
Ron Kerber ([email protected]) has held executive positions in product development and technology management at the Whirlpool Corporation, McDonnell Douglas, and the U.S. Department of Defense. Now retired from corporate life, he remains an active entrepreneur and independent consultant who also provides pro bono service on a variety of federal government committees. This article is adapted from the book Strategic Product Creation (McGraw-Hill, 2007), by Ron Kerber and Tim Laseter.
