Your Product Manager is responsible for defining the products or services that you’ll bring to market. If you’re operating in a competitive market your competitors won’t be standing still; they’ll be continuing to innovate so they can offer their customers more for less, make more money or increase their market share.
In my industry, in mobile phones, competition is cut-throat – my competitors are constantly innovating to offer more features and to cut costs. They each want to have the most attractive products on the market so they can sell more phones. One of the tools I use to understand this is to do some benchmarking. I buy phones from each of my competitors to evaluate the features they offer and even, by completely dismantling the phones, get an idea of how much they cost to make. I get my engineers to tell me how much this chip might cost, or this display, battery, mechanical construction, accessory, even the packaging.
Let’s suppose I’ve found out that my biggest competitor’s new phone costs £50 to make. That gives me an idea that if I develop a comparable phone I must meet a certain cost goal. But I’m looking at my competitor’s phone today, and it’s going to take me 1 year to develop a phone like that. If I set my cost goal at £50 I’m going to get whipped, because in 1 year’s time that same phone might cost £40 to make – and by the way in that year he’ll have a new model with even more features.
Enter the idea of experience curves. They are literally charts that plot the estimated improvements that your competitor might make in an attribute of their product. It could be the cost, or the amount of memory, or the camera capability or any other important feature - whatever the key drivers are for your business. If your experience curve predicts your competitor will be at £40 cost in a year’s time then you know that to beat him, all other things being equal, you need a cost that is below £40.
You can apply this technique to anything that you’re selling – a product or a service. Study carefully what your competition has done and get a sense of the pace of the improvements they make between product launches. Then estimate their forward trajectory and set one for your company that is better. It won’t be easy to get there, but when you’re setting tough goals for your developers at least you can tell them why.
You’ll still need great marketing, distribution, customer service and business support but you’ll know, with as much clarity as is available, that what you’re bringing to market is better than your competitor and you have a chance to eat their lunch.
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