Sunday, June 7, 2009

Differentiate or Neutralize?: A core first product decision

An early decision of utmost importance to a product development effort is whether a new product's strategic intent is differentiation or neutralization. Some people believe that neutralization is never a strong product objective. Let's for a second put aside that argument and look at why the decision is so important.

When you are making a decision on a portfolio level, or on a feature level, to neutralize, you are essentially looking to match competition on particular feature or specification. Key in this decision is to minimize your spend and to make certain that you don't overinvest. Potential overinvestment can result from development functions wanting to add value to the feature and take it beyond its requirements. To clarify this, I believe it helps to consistently and emphatically state the neutralizing strategic purpose of the product or feature.

Differentiation, on the other hand,oftentimes can yield a more troubling failure -- that of underinvestment in time and / or resources. Interestingly, when you see underinvestment in time and / or resources on your supposedly differentiated products, I believe it can also be because of the overinvestment in neutralizing products. Making people aware of these trade-offs is essential to driving strong focus from development functions and ensuring that the portfolio mix matches your business needs.

So, is there ever a need for neutralization? I would contend that few companies do not do some amount of neutralization. The iPod was not the first MP3 player in the market. And it did not differentiate on what would have been the obvious criteria: sound quality. Rather, Apple choice music distribution, user experience and design as its differentiating features.

Based on reading about Steve Jobs, it appears that Mr. Jobs has an incredible intuitive sense of what consumers care about but think their existing products already deliver, what consumers care about but don't think their existing products already deliver and what consumers just don't care about. I would suggest that Apple focuses its efforts on the things that consumers care about and don't think existing products deliver. This is usually centered upon making technology easier to deal with and addressing the softer challenges, while being "good enough" on the basics. Apple, in other words, has a crystal clear sense of not only when to differentiate but also of when to neutralize. This seems to me to be an essential decision of any good PM.

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