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BEST PRACTICE BRIEF
Powering New Product Success with Opportunity Engineering with Real Options Converting new product uncertainty into revenue and growth.
Uncertainty, structural change and complexity are here to stay. These market realities can make the most promising opportunities of the future seem inaccessible. As product executives, practitioners and marketers know all too well, these powerful forces can lay waste to even the most promising new product development (NPD) and new product introduction (NPI) strategies. tt
tt
In this environment, applying the conventional, linear, Stage-Gate approach to NPD and NPI can force product executives, practitioners and marketers into inflexible "bet the farm" (or bet your career!) decisions. Making these high-stakes go/no-go calls can severely limit customer-product fit and how products can be adjusted to accomodate changing customer behavior or other real-world circumstances. In this best practice brief, we present how product executives, practitioners and marketers can address these critical issues by incorporating opportunity engineering and real options practices into their NPD and NPI decision-making. These upstream practices are specifically designed to provide the agility and optionality needed to reduce downstram product failures, increase customer-product fit and improve overall product performance.
Opportunities with Options. In the face of uncertainty, structural change and complexity, what product executives, practitioners and marketers need are opportunities and options. To that end, opportunity engineering and real options are well-known strategic business disciplines in capital intensive industries such as oil & gas, industrial manufacturing, transportation and pharmaceuticals. The dynamic nature of the new business environment make these disciplines appropriate in any industry where investments decisions face-off against uncertainty and increased risks. tt
tt
The objective of opportunity engineering is three-fold: 1) minimize downside exposure to risks; 2) converting those risks into positive outcomes; and 3) maximizing the opportunity upside. As the name implies, opportunity engineering is a more active, preemptive approach to shape outcomes in these three dimensions. Using opportunity engineering to take deliberate action to improve customer-product alignment and product-market fit becomes the day-to-day focus for product executives and engineers and a key to improving downstream product success and revenue performance.
1
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS tt
tt
The complement to opportunity engineering is real options theory. Predicated on BlackScholes financial options theory and the idea of making small initial investments in multiple options, a real options approach allows product executives, practitioners and marketers to purchase (e.g. invest in) the "right", but not the "obligation", to excercise those options by making subsequent investments based on experimentation, learning and changing realworld circumstances. In practice, a real options approach means 1) reframing product strategies as portfolios of product concepts; 2) creating multiple options by making small initial investments in multiple product concepts; and 3) excercising options to invest in the most promising options and adjusting course (e.g. stop investing, invest more, speed up, slow down, etc.) as warranted by experimentation, learning and real world circumstances.
The idea of opportunity engineering and real options within NPD and NPI processes gives companies the opportunity to create durable strategic advantages and real differentiation. The logic behind opportunity engineering and real options is the opposite of making "bet the farm" decisions. Specifically, these two disciplines equip product executives, practitioners and marketers to improve product success and product performance in 4 key ways: 1. Take more shots. As uncertainty, strucutral change and complexity force an expanded range of possible outcomes for a singular "make-or-brake" product strategy, the liklihood of that strategy yielding positive outcomes diminishes. In contrast, with opportunity engineering and real options, product executives, practitioners and marketers can increase the odds of product success by making more attempts. In essence "taking more shots increases the chances of hitting the bullseye."
2
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
2. View the "whole customer". Product success and performance can be increased through iterative learning. Winning products are not buit in a vacuum. Products can often be conceived, designed and built based on false or outmoded assumptions that surround customers and prospective customers. A “whole customer” view of interrelatd factors, including the competitive state of play, trends and market dynamics, form a "ecosystem" around customers and prospective customers and is essential to ensure customer-product fit. 3. Act on insights. Conducting early and continuous multi-dimensional scanning of customer ecosystems can also provide early insights into emerging opportunities and serve as an early warning system for hidden risks. When product executives, practitioners and marketers become opportunity engineers, they continuously scan for these types of political, economic, social, technical, legal and environmental issues. These new insights can then be quantified and iteratively incorporated into product strategies to refine forecasts and tighten product-market fit. 4. Adapt and adjust. Incorporating oportunity engineering and real options into NPD and NPI provides the agility needed for companies to quickly exploit emerging opportunities and mitigate unforeseen risks. Equipped with optionality, product executives, practitioners and marketers can adjust course on product strategies, prototypes and tests based on emerging dislocations, early customer insights and market reaction. The ability to act on this feedback can increase confidence in product performance, unlock hidden opportunities, inspire more aligned products and promote signficantly better customer-product fit. Bringing customer insights, market context and optionality into NPD and NPI decisions provides the agility needed for companies to exploit emerging opportunities and reduce risks - even in the face of real world uncertainty, structural change and complexity. These new approaches have implications to the day-to-day focus of product executives, practitioners and marketers.
3
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Conclusion In the future, companies are more likely to find their most promising revenue and growth opportunities in unfamiliar markets, serving unfamiliar customers and requiring new product offerings. To improve the capture rates of these opportunities, new product development (NPD), new product introduction (NPI) and product innovation alignment must be more aligned to customers and market realities. tt
tt
These new approaches have implications to the day-to-day focus of product executives, practitioners and marketers. For those who are seeking out the most promising and most risky opportunities, an important part of the job becomes taking action to systematically maximize the upside of opportunities while minimizing the downside exposure to risks. To meet this challenge, we strongly advocate incorporating opportunity engineering and real options into product lifecycles. These proven practices provide the optionality, agility and rigor needed to improve customer-product fit and product-marketing fit. These are critical variables to improving product success and product performance in times of uncertainty, structural change and complexity.
tt
The driver for product executives and practitioners to adopt opportunity engineering and real options is clear: the most promising opportunities of the future may be hidden behind uncertainty, strucutural change and complexity. With this reality, these two time-tested disciplines offer a systematic way for companies to move beyond risk-averse paralysis to a place where they can capture these high-payoff opportunities more consistently and confidently.
4
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Want to learn more? Find out how you can transform the way you do business, Connect with your future customers and markets, and Unlock next generation revenue and growth opportunities without the guesswork.
www.opptiv.com
5
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Disclaimers, Warranties, and Permissions Copyright © 2015 Opptiv LLC
All Rights Reserved. All text, images, graphics and other materials in this printed material are subject to the copy-right and other intellectual property rights of Opptiv. These materials may not be reproduced, distributed or modified without the express written permission of Opptiv LLC. The marks appearing in this material including, but not limited to logos, emblems, slogans and names are trademarks of Opptiv LLC, its subsidiaries, affiliates and licensors. The information contained in this publication has been obtained from sources believed to be reliable. Opptiv LLC disclaims all warranties as to the accuracy, completeness or adequacy of such in-formation and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the research and experiential opinions of Opptiv LLC and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice.
6
Powering New Product Success with Opportunity Engineering with Real Options Converting new product uncertainty into revenue and growth.
Uncertainty, structural change and complexity are here to stay. These market realities can make the most promising opportunities of the future seem inaccessible. As product executives, practitioners and marketers know all too well, these powerful forces can lay waste to even the most promising new product development (NPD) and new product introduction (NPI) strategies. tt
tt
In this environment, applying the conventional, linear, Stage-Gate approach to NPD and NPI can force product executives, practitioners and marketers into inflexible "bet the farm" (or bet your career!) decisions. Making these high-stakes go/no-go calls can severely limit customer-product fit and how products can be adjusted to accomodate changing customer behavior or other real-world circumstances. In this best practice brief, we present how product executives, practitioners and marketers can address these critical issues by incorporating opportunity engineering and real options practices into their NPD and NPI decision-making. These upstream practices are specifically designed to provide the agility and optionality needed to reduce downstram product failures, increase customer-product fit and improve overall product performance.
Opportunities with Options. In the face of uncertainty, structural change and complexity, what product executives, practitioners and marketers need are opportunities and options. To that end, opportunity engineering and real options are well-known strategic business disciplines in capital intensive industries such as oil & gas, industrial manufacturing, transportation and pharmaceuticals. The dynamic nature of the new business environment make these disciplines appropriate in any industry where investments decisions face-off against uncertainty and increased risks. tt
tt
The objective of opportunity engineering is three-fold: 1) minimize downside exposure to risks; 2) converting those risks into positive outcomes; and 3) maximizing the opportunity upside. As the name implies, opportunity engineering is a more active, preemptive approach to shape outcomes in these three dimensions. Using opportunity engineering to take deliberate action to improve customer-product alignment and product-market fit becomes the day-to-day focus for product executives and engineers and a key to improving downstream product success and revenue performance.
1
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS tt
tt
The complement to opportunity engineering is real options theory. Predicated on BlackScholes financial options theory and the idea of making small initial investments in multiple options, a real options approach allows product executives, practitioners and marketers to purchase (e.g. invest in) the "right", but not the "obligation", to excercise those options by making subsequent investments based on experimentation, learning and changing realworld circumstances. In practice, a real options approach means 1) reframing product strategies as portfolios of product concepts; 2) creating multiple options by making small initial investments in multiple product concepts; and 3) excercising options to invest in the most promising options and adjusting course (e.g. stop investing, invest more, speed up, slow down, etc.) as warranted by experimentation, learning and real world circumstances.
The idea of opportunity engineering and real options within NPD and NPI processes gives companies the opportunity to create durable strategic advantages and real differentiation. The logic behind opportunity engineering and real options is the opposite of making "bet the farm" decisions. Specifically, these two disciplines equip product executives, practitioners and marketers to improve product success and product performance in 4 key ways: 1. Take more shots. As uncertainty, strucutral change and complexity force an expanded range of possible outcomes for a singular "make-or-brake" product strategy, the liklihood of that strategy yielding positive outcomes diminishes. In contrast, with opportunity engineering and real options, product executives, practitioners and marketers can increase the odds of product success by making more attempts. In essence "taking more shots increases the chances of hitting the bullseye."
2
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
2. View the "whole customer". Product success and performance can be increased through iterative learning. Winning products are not buit in a vacuum. Products can often be conceived, designed and built based on false or outmoded assumptions that surround customers and prospective customers. A “whole customer” view of interrelatd factors, including the competitive state of play, trends and market dynamics, form a "ecosystem" around customers and prospective customers and is essential to ensure customer-product fit. 3. Act on insights. Conducting early and continuous multi-dimensional scanning of customer ecosystems can also provide early insights into emerging opportunities and serve as an early warning system for hidden risks. When product executives, practitioners and marketers become opportunity engineers, they continuously scan for these types of political, economic, social, technical, legal and environmental issues. These new insights can then be quantified and iteratively incorporated into product strategies to refine forecasts and tighten product-market fit. 4. Adapt and adjust. Incorporating oportunity engineering and real options into NPD and NPI provides the agility needed for companies to quickly exploit emerging opportunities and mitigate unforeseen risks. Equipped with optionality, product executives, practitioners and marketers can adjust course on product strategies, prototypes and tests based on emerging dislocations, early customer insights and market reaction. The ability to act on this feedback can increase confidence in product performance, unlock hidden opportunities, inspire more aligned products and promote signficantly better customer-product fit. Bringing customer insights, market context and optionality into NPD and NPI decisions provides the agility needed for companies to exploit emerging opportunities and reduce risks - even in the face of real world uncertainty, structural change and complexity. These new approaches have implications to the day-to-day focus of product executives, practitioners and marketers.
3
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Conclusion In the future, companies are more likely to find their most promising revenue and growth opportunities in unfamiliar markets, serving unfamiliar customers and requiring new product offerings. To improve the capture rates of these opportunities, new product development (NPD), new product introduction (NPI) and product innovation alignment must be more aligned to customers and market realities. tt
tt
These new approaches have implications to the day-to-day focus of product executives, practitioners and marketers. For those who are seeking out the most promising and most risky opportunities, an important part of the job becomes taking action to systematically maximize the upside of opportunities while minimizing the downside exposure to risks. To meet this challenge, we strongly advocate incorporating opportunity engineering and real options into product lifecycles. These proven practices provide the optionality, agility and rigor needed to improve customer-product fit and product-marketing fit. These are critical variables to improving product success and product performance in times of uncertainty, structural change and complexity.
tt
The driver for product executives and practitioners to adopt opportunity engineering and real options is clear: the most promising opportunities of the future may be hidden behind uncertainty, strucutural change and complexity. With this reality, these two time-tested disciplines offer a systematic way for companies to move beyond risk-averse paralysis to a place where they can capture these high-payoff opportunities more consistently and confidently.
4
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Want to learn more? Find out how you can transform the way you do business, Connect with your future customers and markets, and Unlock next generation revenue and growth opportunities without the guesswork.
www.opptiv.com
5
POWERING NEW PRODUCT SUCESS WITH OPPORTUNITY ENGINEERING WITH REAL OPTIONS
Disclaimers, Warranties, and Permissions Copyright © 2015 Opptiv LLC
All Rights Reserved. All text, images, graphics and other materials in this printed material are subject to the copy-right and other intellectual property rights of Opptiv. These materials may not be reproduced, distributed or modified without the express written permission of Opptiv LLC. The marks appearing in this material including, but not limited to logos, emblems, slogans and names are trademarks of Opptiv LLC, its subsidiaries, affiliates and licensors. The information contained in this publication has been obtained from sources believed to be reliable. Opptiv LLC disclaims all warranties as to the accuracy, completeness or adequacy of such in-formation and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the research and experiential opinions of Opptiv LLC and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice.
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