As a starting point in leading my former company’s strategic plan exercise, I laid out a series of guiding principles, along with a process which we would follow almost to the letter. Included in the set of principles were 10 for product development and portfolio management. I offer these for your edification.

1. Good marketing works best in the service of good products, like Acquisio’s ppc management software (sorry for the plug – I’m a fan!).

2. Good products beat new products. Sustainable market leadership requires equal or better products than the competition.

3. Safety lies not in products but in portfolios of products.

4. Product lines must continually evolve as the market evolves.

5. The advantage goes to first movers.

6. Innovate rather than extend. In this way, you cannibalize someone else’s product instead of your own.

7. Seek technological leadership, but never be led by technology.

8. Competition always overtakes an innovation.

9. New products should not be developed, and current products should not be maintained, unless they are financially viable.

10. Product integrity and financial viability are the direct result of good execution.

At first glance, these principles appear straightforward, almost obvious, and your company may have applied many of them intuitively. My bet, though, is that there are products or groups of products in your company’s line-up that run counter to one or more of the guidelines and that their performance has been deleteriously affected as a result.

You may know of exceptions – successful products that break the rules – but invariably these exceptions will define and ultimately corroborate the rules.

Every company is different – to a point – and every market is different, again to a point. That said, I have found, over the years, that similarities outweigh differences and that one never goes too far wrong applying basic truths and process fundamentals. I would suggest, at the very least, you think about these guidelines not just abstractly but in reference to your own company’s product offering and those of your competitors. Better still, use them as a filter to see if your company is on the right track or if you are throwing fixed and working capital at losers.

A former boss of mine once opined that a point of view is worth 50 points of IQ. If you have a vision, stick to it. Build your enterprise around it. History shows that consistency and good execution of an imperfect strategy will usually win out over an excellent strategy badly executed. Of course, this was the same boss who, in referring to one of his less favorite colleagues famously said, “He has one opinion, and it is wrong”.

Saturn, a different kind of car company that never quite figured out how to make a go of being different and, as a result, made little difference to the fortunes of its parent GM, is now on the verge of extinction. It is ironic that the more Saturn made cars people actually wanted, i.e., the more mainstream it became, the less relevant and more redundant it became. In other words, it is good to have a point of view, but make sure the view has a point in the first place.

Starbucks had a strongly-held point of view about coffee and people and how the two could come together. And that was enough – along, of course, with impeccable execution – to make the company an institution and an icon. Over-expansion which led to under-execution, along with competition from the lower brow and lesser brews of McDonald’s brought Starbucks profits to a coffee grinding halt. Vivanno smoothies, breakfast foods and other unimaginative fixes proved to be little more than froth. So now, two years later, Starbucks comes out with its newest game changer: VIA Ready Brew instant coffee.

According to the company’s spinners and weavers, Ready Brew is a breakthrough in “soluble” coffee:

“Ready Brew is different – it’s full-bodied and flavorful, just like the Starbucks coffee you know and love…The magic is in a proprietary, all-natural process that we spent years perfecting. We microgrind the coffee in a way that preserves all of their essential oils and flavor. No other coffee company takes this step, and it makes all the difference.”

The wording is reminiscent of an old ad for Tab, a vile diet drink introduced in 1963. “How could just one calorie taste so good?” the jingle asked teasingly. “Because the Coca Cola Company kept the flavor in Tab.”

Ready Brew takes direct aim at the $17 billion instant coffee market. Starbucks hopes to satisfy analysts without resorting to franchising and other brand-sensitive restructuring initiatives. But you’ve got to wonder: will the Nescafe crowd spend more for a Starbucks brew and could a frapuccino freak fall for an instant coffee? Will the brand be damaged by its implausible dip in the soluble pond? My guesses are no, no and yes. Time will tell.

So what about those 50 points of IQ? Starbucks shows what happens when your view gets fuzzy and Saturn when there is no substantive and sustainable view in the first place.

Okay, so the principle of investing during a recession having been established (see: PIMS Points the Way Past the Recession), what did my former company do as it came face-to-face with an imploding economy. In fact, the company was heading straight into a perfect storm: it serves the construction industry which was already well into the downturn (in some regions, the downturn looked awfully like a drain and the sucking sound we heard was usually caused by falling prices); the exchange rate was working against exports but opening the market to cheaper imports; the company is a heavy purchaser of oil-based raw materials which until recently were at historic highs; meanwhile, other commodities it purchases heavily were being gobbled up by the Chinese; new technologies were being introduced by well-heeled competitors…the list of threats was long and forbidding.

Time to yank out the PIMS database. The marketing budget was not going down without a fight. In fact, I had little trouble convincing my colleagues of the need to keep investing in marketing and product development. To my surprise, we had even less trouble convincing the Board. The issue arose with our attempt to determine the extent of this investment.

I came up with a plan to focus expenditures on winning technologies, products, markets and even specific customers. My Power of One presentation explained why we should put all our money on leadership products, first movers, consolidators and core markets. I was successful on the principles of the thing, but not the details. My colleagues were all for focusing, but to most that meant keeping the pressure up on those areas and pulling back elsewhere. Which translated not into the reallocation of funds and resources but into cutting what had now become ‘non-strategic’ investments. Hmph…here I was, hoisted on my own petard!

Seeing the Big Picture

It was useful, however, to take a broader view of things. Pulling back on the marketing spend (as I would normally define it) was offset by pushing ahead in R&D and operating efficiencies. What is Marketing in fact? Arguably, the additional investment in R&D and operations covered two of the four Ps…maybe even three. In fact, the company was about to embark on the biggest capital program in its history.

So now the marketing exercise was to get the biggest bang for the buck being spent on the ‘focus’ items and find a way to keep the rest sailing along in their slipstreams.

Remember the last post? “In down times, consumers and businesses alike look to safe havens, familiar brands and dependable suppliers that focus on delivering consistent value.” While we kept plugging away at our key focus items, all items were ceremoniously dumped in the safe haven / familiar brand / dependable supplier basket. Public relations, customer service, complaint handling, loyalty programs…all those things that make customers comfortable with a brand were tightly managed with the safe/familiar/dependable relationship in mind.

The jury is still out on how, ultimately, this strategy will work. But the company is sticking to the plan and, in fact, has returned to the black well ahead of schedule. The future looks bright…even if, right now, that future feels very far away.

Note: Our best wishes for a speedy recovery to David St Lawrence over at Making Ripples. The long-time blogger, author, artisan, community activist, gentleman and friend recently suffered a heart attack. This obviously strikes close to home, given my history. Take care of yourself, dear reader, and pay heed when your body sends you signals that something is wrong.