New Product Business Operation: Seize Opportunities In Uncertainty

Many of the brightest new products are withered inside the enterprise because they are unwilling to venture to do business with new products, so how can they be found?

People are prejudiced against uncertainty, and there is a gap between traditional financial evaluation method and managerial intuition.

However, uncertain environment is bound to contain positive factors, otherwise it is not an uncertain environment, but a purely bad environment, is it not?

Unlike the idea of "full implementation or non execution", a project can be divided into several stages.

If the initial performance of the project is not satisfactory, it can be decisively chosen to give up; the project being executed can be changed to another product or the development of a new market. Venture capital or its intellectual property rights can be changed to sell. The project can be accelerated or slowed down, and the development may be delayed. The project may also bring joint ventures or acquisitions with another company.

It is too simplistic and limited to take the policy of "full implementation or non execution" as a decision-making mode.

But at the same time, it is not difficult to understand why enterprises insist on following this way of thinking.

First of all, finance and accounting courses teach us this. Secondly, this theory is relatively easy to control.

But driving uncertainty is quite another matter.

However, the difficulty lies in how to set up initial indicators for the project, so as to quickly and accurately pform uncertainty into definite information, so that you can reposition the project or give up the project when the loss is minimal.

In other words, defeat should be defeated simply and badly, so as to preserve the strength and seize the real potential.

Control uncertainty

Most successful companies will set up investment portfolios that are capable of developing growth, some for basic investment and core investment, others for new growth opportunities and others for high-risk long-term investments.

In the process of innovation, enterprises need to solve two types of uncertainty.

One is the internal challenges faced by enterprises in developing new products that are not closely related to core businesses, which may involve technology, logistics, procurement, IT systems, production and other aspects, as well as corporate culture and organizational structure.

The organizational structure of enterprises is usually overlooked, but if the deep and strong interest relationship tends to allocate resources to core products and services, and thus snubbing new products, it will constitute an obstacle.

Many of the brightest new products are withered inside the enterprise, because the relevant departments are unwilling to venture to operate new products, and their attention is focused on earnings per share.

Another type of uncertainty comes from external challenges, whether it is to penetrate existing products or new products into the neighboring market, or to enter new markets.

There are also challenges in neighboring markets, because new channels, new contacts and even new customers and suppliers may be needed.

Sometimes, former allies will become competitors.

For example, Apple's iPod and Motorola's RAZR have jointly developed a music cell phone named Rocker. At that time, public opinion was generally regarded as a recipe for success: two very successful consumer products should be combined into one! Who wouldn't want to own it?

The original plan was to download the music cell phone to the charger base while downloading songs from personal computers.

This is a good idea, but the problem is that telecom operators want to get a slice of it, that is, they want consumers to download songs from their networks.

The result of the stalemate is that operators refused to sponsor Rocker, so the selling price of 500 US dollars exceeded that of young consumers.

This has become a failed business case, because Motorola RAZR's new mobile phone service plan can not be realized, and consumers can only buy a iPod for 200 US dollars.

People do want to have two things, rather than one machine at hand.

They saved 300 dollars from it.

From this we can see that even if we are faced with a relatively familiar new market, it is far from equal to winning the winning of profits.

If it is a new market area, the external challenges may be even more arduous.

The uncertainties include finding the right time, building product awareness, determining the right price, finding the demand, developing a good distribution channel and sales relationship, and setting up a new sales team if necessary.

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Opportunities for new products

High level of internal challenge and low degree of external challenge belong to projects containing new product opportunities.

This is a relatively full market condition. The existing consumption is expecting the emergence of a new type of product.

Of course, product pricing and product attributes must be right.

For example, GM has just unveiled the Volt, a fully electric concept car, which has a beautiful streamlined body and can run 40 miles on batteries alone.

But the problem is that in 2007, the cost of battery technology is not yet affordable.

Obviously, a stylish and energy efficient high-performance vehicle hardly needs to face any market uncertainty, but the premise is that its price is not daunting.

Unfortunately, GM Volt lacks the corresponding technical support, and can not be divided into investment projects in the growth trajectory area. It should be regarded as a bullish opportunity for new products.

Our judgement is based on the technical challenges of new batteries.

The existence of high uncertainty makes it impossible for anyone to make a meaningful cash flow prediction analysis for this vehicle.

Therefore, the only way to assess the value of general Volt at present is to determine its opportunity value and liquidation value.

Accordingly, we believe that universal Volt, a high-performance all electric vehicle, can get bullish opportunities, whether it can really turn into large-scale commercial applications.

We look forward to the commercialization of general Volt, but if we can not, we have to face the reality calmly.

An insight is worth mentioning, and new product opportunities (such as general Volt) can often be used to enhance value in many ways.

Acquiring intellectual property from the outside world, whether by buying permission or buying property rights, can speed up project progress and add weight to success.

Assuming that GM is relying on its internal R & D power to acquire the required battery technology, GM can plan to cooperate with a company with battery technology intellectual property rights, with a view to getting help in making the battery needed.

Acquiring intellectual property from a highly skilled external company can greatly increase the possibility of successfully developing batteries, so that the probability that GM will enter the market before the loss of competitiveness is greatly improved.

If general application is applied to the opportunity development law, its value is clearly visible.

Let's continue to expand this example, assuming that GM is cooperating with a company that owns the intellectual property rights of battery technology, which can sign an exclusive agreement or sign a non exclusive agreement.

For general purposes, the choice of different costs is different, and the opportunities contained by them are of different strategic significance.

If the general agreement decides to sign an exclusive agreement, the important value contained in it is obvious, because it can be used to isolate the competition for a period of time.

Can the value of the general Volt project be improved? This requires the two companies to make progress in the battery technology cooperation, and the cost that GM can pay to acquire the intellectual property rights can not be higher than a value difference: the difference between the value gained by the internal R & D road and the higher potential value captured by the first step in capturing the market.

Whether it is an exclusive agreement or a non exclusive agreement, it will help to seize the market in advance.

Planning under uncertainty

Strategic planning is based on such anticipation: anticipation of market reaction and competition response that can be initiated by actions taken initially.

However, it is often difficult to know whether the reaction of the market and competitors is consistent with expectations, because in terms of strategy, it itself contains a lot of uncertainty.

These uncertainties can be pformed into option value captured by opportunity development, and then polished and polished by traditional management mode and assessment tool.

Such options are directly derived from the competitors' response to the strategy, some of which are beneficial to us and others are the opposite.

Managers need to make value estimates for each strategic choice and expected competitive response based on decision making and probability distribution, so as to design the best strategy.

Now let's take a look at a strategic case in the 1990s cigarette war, which has attracted wide media attention.

In April 2, 1993 (the "Marlboro Friday" in marketing history), Philip Morris Companies, the tobacco giant, announced that it would reduce its star brand Marlboro's selling price in the United States by 20%, while substantially increasing advertising expenses.

Renault tobacco companies tit for tat, but also in the U.S. market significantly reduced product prices, while increasing the amount of advertising.

In less than 3 months, the market share of the two companies returned to their original positions. The difference is that the prices of the products have dropped a lot.

The result of Philip Morris's big price cuts is that he owns the original market share in a lower profit margin. Why does he want to do so? In fact, Philip Morris's goal lies not in the US market but in the Eastern European market.

Eastern Europe was just out of control in the former Soviet Union, and the US cigarette was taking the opportunity. The problem is that Philip Morris is the late arrival of the party and has to catch up with the leading Renault tobacco.

Philip Morris's strategic choice can be a confrontation with Reynolds tobacco in the Eastern European market, or an indirect approach. If it works, the effect will be more obvious than the confrontation.

Philip Morris chopped off 20% of the Marlboro's price, because it believes Renault tobacco will respond to a competitive response to the market share of its high-end brand, wynth.

And Renault tobacco had a tight cash flow at that time. It had to choose between defending the US market and expanding the Eastern European market.

Philip Morris concluded that Renault would choose to protect its Winston cigarettes in the US, so that Philip Morris could gain time to revitalize his plan to lead the Eastern European market.

In this example, we can clearly see the mutual influence of strategic choices.

The first choice is how Renault tobacco will react to its market offensive.

Renault tobacco can ignore it. In this way, Philip Morris will lose a lot of money, because it increases the advertising investment while cutting the price of Marlboro, and the other option is to fight back immediately, which is the choice made by Renault tobacco in practice.

In this business case, Philip Morris's uncertainties include Renault's competitive response, the duration of the US market offensive, the cost of entering the Eastern European market, and the possibility of gaining market share in Eastern Europe.

If we do not regard this strategy as a series of choices, how else can we view it?