What is the best way to target product management to provide solutions for customers’ problems? Our guide outlines the strategies for better product targeting.
The main challenge of product management is currently the increasing digitization of products and services in many areas. Or, better said, to deal with what this digitization actually means and how future requirements in this regard can be incorporated into the product or service portfolio. The requirements for “smart” products and services are often not so clearly described or apparent that product management can convert these requirements into marketable solutions as usual.
In addition, it is not just new technologies that product management has to deal with, but often new business models for companies as well. The product management moves partly on previously unknown territory and has to develop corresponding competencies in order to fulfill its role as an entrepreneur in the company and partner of all areas of the company (its stakeholders). In many cases this means leaving the comfort zone.
Why target product management to customer solutions?
Product management must face these changes and new demands, and further develop its knowledge, communication and organization. For product management, this means positioning products and services even more clearly and highlighting the service profile and customer benefits. In short: to target product management to solve customers’ problems.
Immediately as a result of the aspects described at the outset, there is another challenge for product management. Portfolio management, the core task of every product manager, is becoming more complex. Previously known and largely homogeneous target groups may diversify more and more. New customer groups and market segments are emerging. For product management, this means positioning products and services even more clearly and highlighting the service profile and customer benefits.
It should be noted that the conventional addressees for the portfolio are not immediately lost. These are often what are known today as cash cows, which product management must also pay close attention to. In this time of change, to preserve and innovate equally with regard to a portfolio. An increase in complexity that first has to be managed. And that requires the permanent further development of knowledge, communication and organization.
How product management is changing
A third challenge that product management currently has to face is changing working models and methods in research and development. Often driven by the (product) management’s demand to provide new products and services faster and faster and in shorter and shorter cycles, new models and methods are becoming more and more popular or are being adapted. An example of this is the method of agile development according to Kanban or Atlassian’s Agile Scrum.
The latter is used particularly in software development, but more and more also in other areas. The aim of this method is the fast and inexpensive development of high-quality products according to a formulated core requirement (vision). The implementation of the core requirement and the resulting properties of a marketable product is not done by formulating the most detailed specifications and functional specifications, but in the form of descriptions of the properties from the user’s perspective, to target product management towards customers’ needs.
The respective development teams are responsible for implementing these requirements bit by bit in so-called sprints. At the end of a sprint, Scrum delivers a finished product that should be in a condition that it can be delivered to a customer.
For product management as a client for development projects, this means getting to know new roles, such as that of the so-called product owner, and integrating them into a product management structure. This results in new tasks and challenges for the product management teams in terms of knowledge, communication and organization.
How does a company target product management to the customer’s needs?
The key to the change target product management to providing solutions for customers is first of all in the strategic framework that a company imposes on itself. The change from a (often very successful) product to a solution provider can only succeed if it is strategically legitimate. Because a company has to be aware that such a change is always associated with resistance and possibly a temporary loss of efficiency.
In this context, the strategy is the anchor point that gives the company focus, security and patience. If the strategy is not only formulated by the company’s management and managers,In order to be perceived as a solution provider on the market, there must always be a need for a market or a market segment for solutions, and this need must be reflected in differentiation potential.
The path to become a successful ‘solution provider‘
What needs to be considered when developing strategies
In order to define the strategic goal of developing into a solution provider, the management initially uses a number of indicators. First of all, there are social and social trends that need to be considered, as well as technology trends.
Taking the intralogistics market as an example, these are, for example, an aging society and stricter health and safety regulations that result in an increase in the need for ergonomic and automated solutions. Or the higher focus on the environment and sustainability. The need for energy-efficient and recyclable technologies will grow.
In the area of technology, the previously mentioned digitization can be found again: Industry 4. 0 (“Internet of Things”) creates a need for networked systems and brings about a fundamental change in the requirements for intralogistic core technologies and products.
The nature of the target markets is also important. In order to be perceived as a solution provider on the market, there must always be a need for a market or a market segment for solutions, and this need must be reflected in differentiation potential.
Future requirements of the intralogistics market, for example, are the increasing demands of customers, fluctuating order quantities, the increasing variance of the product range or growth in online mail order (e-commerce), which lead to a higher demand for decentralized, smaller warehouses with shorter handling cycles.
How can a solution be differentiated from a product?
Which attributes are characteristic of solutions? And how can differentiation characteristics be created? We would like to explain this using the example of a “cup”. Imagine a company producing simple porcelain cups and selling them through specialist dealers. From the customer’s point of view, such a cup is already a solution, since it solves a problem (What do I drink my coffee or tea from?).
However, since the cup (to put it simply, passionate coffee or tea drinkers forgive me) has no distinguishing feature from other cups, it is perceived as a product, can be substituted at any time and has no functional added value compared to other cups.
The “cup” product therefore serves an undifferentiated, highly heterogeneous market. Characterized probably by strong competition and low margins.
How could the ‘cup product’ become a ‘cup solution’? By designing the “cup” product for a specific customer problem within a defined customer segment. This defined customer segment could be delimited as follows: Tea drinkers who only drink Darjeeling black tea, only use brown sugar and lemon and stir their tea with a stainless steel teaspoon. For this target group, the solution would be such that they receive a set tailored to their specific needs. Based on the product “cup”, but supplemented by further components with a functionality predefined for this target group.
The added value in this case would result from the fact that the customer complied with the complexity of the procurement process (buying a cup from a specialist dealer, procuring tea in the tea shop, Purchasing sugar and lemon in the supermarket and, in turn, teaspoons in specialist shops). For this added value, the customer would also be willing to pay a higher price than for the individual components.
Specific customer problems have to be solved
For example: the refrigerator with an integrated ice compartment; the TV with integrated WiFi; the grinding machine with integrated surface roughness measurement or the package tour by train to the flight. In summary, it can be said that a solution in the context described here represents a standardizable combination of knowledge, products or services, components or additional services with a predefined functionality that solves specific customer problems within a clearly defined market or customer segment. Another characteristic of such a solution is the repeatability, which means that a solution can ideally be sold multiple times.
So what are the drivers for such solutions? Is the analysis and recording of customer requirements sufficient? Not alone. You probably know the quote from Henry Ford: “If I had asked people what they want, they would have said faster horses.” However, faster horses are a short-term differentiation that customers only perceive and only promise a limited lead time compared to the competition and are limited in functionality.
In addition, they serve less real customer needs than feature-based expectations of a product. In addition to customer expectations, which is certainly a driver for solutions, there is technology, industry knowledge and business modeling. In summary, this is known as “Market Intelligence”, Solutions bundle customer-specific requirements and simplify value-adding customer processes.
Which differentiators are necessary for success?
The main distinguishing feature of a solution compared to a product is the added value that this solution provides. As already described above using the example of the “cup”, customers benefit from solutions if these processes simplify, make them more efficient and / or safe and deliver measurable added value.
Differentiate yourself from the competition and its products and from the customer’s point of view are considered unique solutions. Solutions bundle customer-specific requirements and simplify value-adding customer processes. Each company is responsible for evaluating these added values before offering a solution. It is important that the customer sees added value, that it must be measurable and quantifiable.
In the industrial sector, added value can often be assessed in an improved price / performance ratio of a solution compared to the product. In addition to these mostly functionally shaped added values, non-functional added values such as process security, customer service, design or image are of course also added values that can differentiate a solution from a product. However, these are to be highlighted as well as the functional added values and “evaluated”.
The Product Manager becomes a generalist and team player
As indicated earlier, product management has the following requirements due to the current challenges, particularly in terms of innovation dynamics, the need for differentiation and increasing complexity in one’s own field of work:
The Product Manager must increasingly develop into a generalist and team player. In addition to the technical competence, formerly and possibly still the essential requirement criterion for product managers, there is the market-based competence.
The product manager of tomorrow works very closely with sales and business development and also with management, evaluates processes, solution ideas and business models and is constantly expanding his know-how about market intelligence. The product manager is constantly required to deepen solution and product knowledge and to expand his knowledge of new technologies.
In addition, the Product Managers will have to expand their project and methodological skills and adapt the organization and processes to the digital environment. New work models and methods are also developing in product management, the requirements for interdisciplinary collaboration and communication skills are increasing. Due to the increasingly complex environment, the product managers must also expand and maintain their internal and external networks.