JWI 599 Capstone, week6 summary, 8/11/13
Delighted to see our firm CTC emerging as the market leader.
I. Leadership Dashboard
********************
Here is how we are doing versus metrics that matter:
Is the firm profitable ? Yes !
Is contribution margin (CM) on track to hit 70%-75% ? Yes !
Is the team delivering numbers and are the behaviors consistent with core values ? Yes !
But this is no time to be complacent. We had CTC meeting #10 today to go over the next decisions.
Pricing => hold; market is growing; demand is growing; we are investing in marketing and increasing quality spend
Marketing => CTC is the best in market; spend just a little bit more
People vs Machines => we have a nice balance of labor & automation => hold
Supplier => expect to be limited by raw materials for production capacity this quarter
Customer => continue to get market research and sell like hell; figure out the right price, quality and volume for the new products
Quality => invest some more to get to target level
II. New product introduction
************************
The marketplace is central to everything we do (Gerstner, 2002) in CTC. In the technology business that CTC is in, change in the marketplace is the only constant. Newer and better products built with state-of-art technologies are constantly replacing older offerings. Therefore, staying wedded to an old product is not an option for CTC. A better strategy is to anticipate the lifetime of the core product and readily introduce a new product to take its place when the demand begins to drop.
Some factors are key to the success of new product introductions.
Right product
Firstly, it must be the right product for the customer at the current time and economic conditions. CTC must constantly evaluate the market conditions and invest in Research & Development to be ready with new product introductions.
Right timing
Secondly, timing of new product introduction is critical. This is especially so in the technology industry where the competitive landscape changes all the time. A product that is ahead of its time may not find adequate customers and the firm can suffer by absorbing the development cost of tools by being the front runner. Close followers can benefit from this investment made ahead by the market leader. On the other hand, if a product comes in too late it can miss the window of opportunity and lose the investment made to create it.
Right price
Pricing affects perception of quality and also influences sales volume. Therefore price point for the new products must be set carefully. When a new product is introduced the customer will need to know exactly why they should buy it and not the core product the firm has been selling till now. The up side from the value proposition of the new product must be so clear to the customer that the decision to shift is relatively easy. The price to value ratio has to be compelling to get customers to shift the demand to the new product.
Short term and Long term implications
In the short term, developing new products will require commitment to research and development. Firms under pressure in the market and running short of funds may be tempted to cut R&D to survive a market down turn. However, successful firms do the exact inverse. They commit to innovation through R&D investment, recognizing that it represents a lifeline for the firm going into the future.
In the longer term, new products will be the ones that bring in profits to the customer.
CTC must commit to investing at least 5% of the revenues in R&D each year. This investment level must be benchmarked against spending by competition. By committing to be a market leader in innovation, CTC has a better chance to survive and thrive over the long term as a superior agent of the customer.
Dr DP
Delighted to see our firm CTC emerging as the market leader.
I. Leadership Dashboard
********************
Here is how we are doing versus metrics that matter:
Is the firm profitable ? Yes !
Is contribution margin (CM) on track to hit 70%-75% ? Yes !
Is the team delivering numbers and are the behaviors consistent with core values ? Yes !
But this is no time to be complacent. We had CTC meeting #10 today to go over the next decisions.
Pricing => hold; market is growing; demand is growing; we are investing in marketing and increasing quality spend
Marketing => CTC is the best in market; spend just a little bit more
People vs Machines => we have a nice balance of labor & automation => hold
Supplier => expect to be limited by raw materials for production capacity this quarter
Customer => continue to get market research and sell like hell; figure out the right price, quality and volume for the new products
Quality => invest some more to get to target level
II. New product introduction
************************
The marketplace is central to everything we do (Gerstner, 2002) in CTC. In the technology business that CTC is in, change in the marketplace is the only constant. Newer and better products built with state-of-art technologies are constantly replacing older offerings. Therefore, staying wedded to an old product is not an option for CTC. A better strategy is to anticipate the lifetime of the core product and readily introduce a new product to take its place when the demand begins to drop.
Some factors are key to the success of new product introductions.
Right product
Firstly, it must be the right product for the customer at the current time and economic conditions. CTC must constantly evaluate the market conditions and invest in Research & Development to be ready with new product introductions.
Right timing
Secondly, timing of new product introduction is critical. This is especially so in the technology industry where the competitive landscape changes all the time. A product that is ahead of its time may not find adequate customers and the firm can suffer by absorbing the development cost of tools by being the front runner. Close followers can benefit from this investment made ahead by the market leader. On the other hand, if a product comes in too late it can miss the window of opportunity and lose the investment made to create it.
Right price
Pricing affects perception of quality and also influences sales volume. Therefore price point for the new products must be set carefully. When a new product is introduced the customer will need to know exactly why they should buy it and not the core product the firm has been selling till now. The up side from the value proposition of the new product must be so clear to the customer that the decision to shift is relatively easy. The price to value ratio has to be compelling to get customers to shift the demand to the new product.
Short term and Long term implications
In the short term, developing new products will require commitment to research and development. Firms under pressure in the market and running short of funds may be tempted to cut R&D to survive a market down turn. However, successful firms do the exact inverse. They commit to innovation through R&D investment, recognizing that it represents a lifeline for the firm going into the future.
In the longer term, new products will be the ones that bring in profits to the customer.
CTC must commit to investing at least 5% of the revenues in R&D each year. This investment level must be benchmarked against spending by competition. By committing to be a market leader in innovation, CTC has a better chance to survive and thrive over the long term as a superior agent of the customer.
Dr DP
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