How To: Grow a Product-Based Business

Advice on how to develop a business around a product idea.

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Jim McManus's advice is to know what you're good at

If I were a CEO with a single-product base," says Jim McManus, "I'd . . ."

Wait a minute. This fellow McManus may be chairman of a company, but what's he know about single-product bases? His business, Marketing Corporation of America (MCA), in Westport, Conn., owns companies that develop real estate, run restaurants, deal venture capital, and operate the largest commuter airline in the Northeast -- among other things. MCA's revenues in 1989? About $200 million.

A single-product base? Not MCA. But chief among MCA's businesses is helping other companies develop and introduce their own new services and products. In fact, that was MCA's original line of business when McManus started the company in 1971, after a stint as a brand manager for Procter & Gamble. Now, he has working for him some of the smartest, most experienced market-development people we've met -- people like General Foods veteran John Luther, who heads business-development consulting at MCA. Typically, MCA helps blue-chip companies -- which don't like their names used in contexts like this -- think about their new products.

So, as McManus was saying, ". . . I'd want to understand exactly what I'm good at compared with the companies I want to compete with. What assets do I have that are leveragable, that give me a considerable competitive advantage?" In other words, MCA's founder was saying, there are lots of questions CEOs need to ask themselves before they can start making lists of new-product possibilities.

The experts at MCA believe that a new product or service has to be thought of as the next step along the path leading your company toward whatever it is going to become -- your vision.

What? You don't have a vision? It's not something that the business schools typically teach.

"After the '60s," says John Luther, "lots of new-product development was done by the numbers. It became process oriented. People forgot to take into account the internal strengths of their companies and the value of their trademarks, forgot to consider where their customers' needs were and what their consumers wanted. They never stopped to say, 'Here's where I am, and here's where the competition is.' We're not talking about product strategy, but about business vision: this is what I want my company to stand for in this world."

Vision: Debbi Fields (Mrs. Fields Inc.) had one; David Liederman (David's Cookies) did not. Vision doesn't guarantee success: Don Burr (People Express Airlines) had one, but not the ability to execute it.

STRATEGY VS. VISION

Before deciding how to get there, decide where to go. Most CEOs, says Luther, have a strategic objective, but not a vision. The two aren't the same. A strategic objective could be: to increase muffin sales by 100% a year for the next three years. The vision, in contrast, would be: to be the quality baked-goods purveyor to urban commuters and take-out customers by assuring timely delivery of fresh products using only quality ingredients.

A vision, Luther adds, gets to the how to's: how are you going to link internal strengths with external opportunities? Vision says: "I'm going to get from here to there, and here's how I'll do it."

MANAGING MARKETS

Nobody Develops New Products

At MCA, they don't like to call it new-product development. That's too narrow, says McManus. They prefer instead to talk of managing markets. It's a more inclusive label. It just means understanding your own strengths and weaknesses and matching them up with market opportunities. Here are the steps that market management entails:

* Conduct an internal analysis. What skills, assets, and capabilities do you have that competitors can't easily take away from you? They might include your location, sales force, training program, trademark, or distribution technology. Let's say you're Ballard Medical Products Inc., in Midvale, Utah, and it's your sales force, which is highly skilled at selling to hospitals. Then you would . . .

* Conduct an external analysis. What do consumers need? Where are people not as satisfied as they could be? Could a product be made easier to use or work better? Could you get it to consumers faster? Ballard finds that there's a rising concern about the health risks involved in treating AIDS patients in hospitals, dental offices, and in ambulances.

* Merge and purge the internal and external analyses to cre-ate a portfolio of new-product ideas. Ballard decides that there's a need for protective masks, rubber gloves, and eye shields, all of which it can manufacture.

* Check those ideas against your business vision to see which of them logically fits and in what sequence. Ballard's vision is to create a company with a broad line of disposable products for hospital use. That's what its sales force knows how to sell. They forgo the dental and ambulance product possibilities for the time being and concentrate on the market they know best.

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