Are companies delaying strategic product investments (i.e., where product returns are realized in future years) for investments that provide returns in 2009?
Tom Nicholas from the Harvard Business School published in The McKinsey Quarterly an article which says that executives who take a “wait and see” approach to innovation investment during downturns may be putting their firms at a competitive disadvantage. “Companies that delay these investments may forego significant growth opportunities when uncertainty subsides and the economy recovers.”
In the 1930’s, DuPont R&D produced synthetic rubber and nylon. Radio Corporation of America (RCA) focused on a new technology called Television… And Hewlett Packard and Polaroid were start-ups back then.
The lessons on innovation investment in downturns is very pertinent today. The market will improve and those firms that continue to invest strategically in the down economic cycle will likely see a product advantage over competitors once the cycle improves.
So, are strategic investments taking a back seat during this downturn?
Strategy should drive tactics. Companies that forego alignment to strategic alignment and simply execute tactically will become entangled in a frenzied, generally unproductive flurry of activities.
Yes. This does not mean that setting a sound, defensible strategy that leads to profitable growth is not important. It does imply that today’s economy is driving all companies to be more ROI/metrics focused than ever. Strategy can be a bit nebulous and hard to measure until it leads to crisp, productive tactics. I encourage all of the product managers I meet and train to be very focused on hardcore, measureable milestones and metrics, even when they’re dealing with strategy issues. Tactical product management is what most executives link directly to revenue and success. In terms of the timeframe for ROI, it depends on the company, industry,etc. Best-in-class companies are still investing for the future, it’s just that the future, in most cases, is more like 1-3 years vs. 5-8.
This shift is on, budgets are tightening and the focus is changing. Many of us are faced with fewer resources going into this year than we had in more recent years. And this includes money and people. Our organization and many others in our industry are trimming the funds that product managers normally draw from for those typical strategic activities. Trade shows, research efforts, analyst events, are just some of those items that will not make the cut. I will be forced to be more creative, more entrepreneurial in my approaches. I will return back to some of the basic tactical activities while we await for the economic waters to calm. The trick is to avoid getting so deep into the trenches that when the time comes to reverse the course I can’t break free.
The fact is that most product managers have so much tactical work to do that they are lucky if they can find time to do the strategic thinking. When people and budgets get cut the average product manager ends up managing more products and this makes the situation worse.
The key to breaking free from this is to get incredibly good at prioritizing and increasing your productivity so that you have a few hours per week to spend on strategy. Check out my webinar on PM Productivity – it talks a lot about this. http://www.280group.com/productmanagementwebinars.htm.