some thoughts on strategic solution marketing

8/14/2019 Some Thoughts on Strategic Solution Marketing

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Tony Hontzeas Page 1 7/26/2009

SOME THOUGHTS ON STRATEGIC PRODUCT MARKETING

By : Antonis Hontzeas,

Director, Product/Solutions Management,Ericsson Hellas Telecommunications

Introduction

Strategic product marketing refers to the set of processes required to place products, services and overall

solutions to ensure long term profitability and growth. Typically, a companys product management

department performs strategic product marketing with the assistance of the marketing and sales

organizations. Strategic product marketing is not selling, or marketing research or product marketing per se.It is the strategic placement of products, solutions and services to lock in the market and thus keep

competition in check while ensuring that the target market evolves in such a way guaranteeing long term

demand for the supplying corporations solutions and services.

This article explains the organizational and procedural requirements required for any market driven

company to achieve a balanced portfolio. The article uses the telecommunication/information industry as a

target example, but the articles concepts and thoughts apply to most growth industries.

Organizational requirements for a market driven company

There are many ways to organize a company so that it can be considered market rather than product driven

and any good text on organizational structure and organizational behavior can be used as a reference for

this. What concern us here are the required strategic marketing functions that will facilitate any market

driven organization to achieve long term profitability. We therefore define the three necessary functions of

marketing, strategic product management and sales that must function and interact properly in order to

allow the successful marketing of solutions. This article refers to functions rather than departments or unitsbecause we are not per se concerned with organizational structure or efficiencies. For the purposes of this

article it is irrelevant if these functions are within the same unit, or within separate units. What is important

is that these functions exist and interact properly. Where they are placed is a question of organization

efficiency that has to do with the corporate culture of the particular company.

2001, Antonis Hontzeasall rights reserved


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Now that we have established the necessary functions we can focus on the product/solutions management

function and the process of strategic product/solution marketing.

The strategic product marketing process

Upon reception of the marketing requirements, the product/solution management function will conceive theoverall solution and prepare the necessary technical requirements to allow the relevant design

departments, manufacturing and deliver channels to design and deliver the said solution at an acceptable

cost. Proper cost control is essential for any future competitive pricing effort.

One important issue that will be tackled during the initial solution conception phase, and this is one of the

primary roles of solution management, is to design a solution that first of all includes an evolution roadmap

in order to secure future income from this solution, and in addition monitor/influence the customersnetwork evolution in such a way that will first of all benefit the said customer, but in addition will not

misalign the target customers installed base vis--vis the suppliers products. Of course this means that

first of all the suppliers technology must be state of the art, secondly that the supplier influences industry

standards so that future technologies are compatible with the suppliers produce, but in addition that the

network evolution of the customer is monitored to ensure that placed items do not produce a discontinuity

with regards to products that are imperative to first of all lock out competitors, and more importantly ensure

a smooth evolution to future revisions of the suppliers products.

A common approach to securing the above is to have a thorough model of the target environment that thesolution is to be implemented in, before development of the solution begins. In the case of a

telecommunications operator, the supplier will have a detailed model of the customer telecom operatorstarget network where the solution will be implemented. Such variables as network node load as well as

signaling load, billing mediation systems as well as customer care should be well defined and understood

since those areas are considered of strategic importance to any operator and thus need to be addressed by

the relevant supplier.

A strong understanding of the target environment implies that areas can be identified that are crucial to be

addressed by the supplier in order to ensure future revenue. If we return to our telecom operator above, if

the particular supplier is in the core business of selling billing systems, then it is perhaps in the interest of

this supplier to have good information on what kind of billing equipment the operator has, what sort ofbilling mediation equipment is included in the network, and how all this is connected to the customer care

units of the operator.

Another requirement for a supplier and its strategic product management function is to include roadmapsfor core products that address the issue of product evolution towards a target technology while at the same

time protecting present and past investments. Thus, a particular customer that invests in a particular

installed base will be assured that their investment is protected as long as their network evolves in the right

way.



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With the above in mind we can define the following procedure:

1. The solution management function receives from the marketing function the needs of acustomer. It is assumed that these needs can be satisfied by a solution that relates to the core

business that the supplier is in.2. A detailed copy of the customer network exists, and an analysis is performed to identify the

area of the network that the solution is expected to play, as well as an anticipation of the

evolution of the part of the network (as well as related parts) that relates to the present and

future supplier core business.

3. Taking as input the customers requirements (including budget and competitive information

such as pricing, or related aspects of pricing such as network dimensioning) and the networkanalysis plus the anticipated network evolution to future technologies (for example evolution

of a 2G wireless network to 2.5G and then 3G) a solution is drawn . It is imperative that this

solution first of all satisfies the customers full needs (ex: features, financial, etc...), but also

contains a roadmap that coincides with the anticipated technological evolution of the

customer network.

4. When the solution is considered adequate, a financial analysis is made to see if this solution is

worth pursuing. This financial analysis will of course include the cash outlays that are

required to produce this solution and in addition the incomes that will be received byachieving and installed base, but more importantly the future cash revenues resulting from the

evolution of this solution towards future technologies as anticipated by the solution and theproduct roadmaps.

5. If the result of point 4 is a decision to pursue the business, then requirements can be drawn

and sent to the appropriate departments in order to design, deliver and put a final price tag on

the solution, or the solution can be abandoned and other more favorable business

opportunities can be pursued.

6. Any decision (step 5) should be monitored on a quarterly basis and any changes to crucial

success parameters (ex: future cash flows, npv etc) should prompt executive management

to take the necessary corrective measures.

The go decision is made in step 5. The only costs that have been incurred so far are the necessary pre-sales

costs that come with marketing efforts. The said solution is only on paper and has not been communicatedto parts of the company (example: R+D and design) that will develop the solution (and thus incur the

costs). Rather, steps 1 through 5 propose that a solution should first of all be developed if there is a need

(and not vice versa ie. develop a product/solution and then try to find a customer), secondly that any

solution should be viewed in terms of initial cash outlays in order to develop and achieve an installed base,

and then projections should be made with respect to the revenue income initially from the installed baseand then from any future upgrades of this base. The solution should be assessed by the initial cash outlay,

the income received from the installed base, and the future income that will be received from upgrades that

will evolve the solution towards a target technology. This evolution is ensured by adherence of the

roadmaps of the products that make up the solution to industry standards as well as overall technological

evolution. By using the right financial assessment model (example: Net Present Value) a decision can be

made whether to pursue the business or not. Also note that taking future income in account will deter an

erroneous decision from being made with regards to restrictive initial outlays. For example, it may be that

the costs and received income from producing and delivering a solution result in a negative profit.However, if future income is also taken into account that the right rate of return, then the accumulated

present value of the profit may turn positive thus reflecting the solutions strategic value to the corporation.If of course the solution has a future cash discontinuity which result in a negative present value then either

this solution has an inadequate roadmap that guarantees future cash flows, or the break in cost is simply too

high and can never be recovered. Step 6 merely indicates that we live in a dynamic business environment.

The important thing to notice in these steps is that an opportunity is assessed in terms of breaking into a

business and ensuring future business and growth, rather than pirating in just to make a quick buck. An



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enterprise is assessed (in the same way that stocks are assessed ie. future dividends) not by its ability to

make a quick buck, but to convert this buck into future business and of course employment.

.

Conclusion

Although this article is primarily written with the telecommunication/infocom industry in mind, its

concepts can be expanded to other types of businesses. It is imperative to understand that in todays worldwhere standards dominate industrial models, in order for a corporation to ensure its future viability,

strategic product marketing must be considered as a necessary process that insured, and is measured by

long term investment as defined by net present value analysis. The thoughtful reader or financial officer

may object citing that net present value is a tool that is used to assess the viability or rationality of project

undertaking ie. the assurance that a project is financially viable. The aggressive marketing of solutions and

services should be assessed in the same way since long term growth is not assured by placing a box here

and there, but by entering a market in such a way that the initial cash outlays due to different pre-salesactivities should be measured vis--vis long term cash inflows which can be achieved only by strategic

product marketing whose roadmaps guarantee evolution in favor of the corporations future products /

solutions and services thus effectively locking out competition in the long term.

Finally, emphasis is given to the fact that strategic product marketing will never work if the

products/solutions and services of a particular organization lack quality, cost effectiveness, time to market,

and simply do not satisfy the customers need. As the market rewards thoughtful strategies as mentioned

above, it thus punishes players with questionable tactics whose results are poor products and policies that

endanger the credibility of the overall business environment.



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some thoughts on strategic solution marketing

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