Test new opportunities
You’re not always lucky enough to have customers hand you opportunities. Even in those cases, you have to strategically decide what to pursue.
“It’s all about pooling pieces of sometimes diverging information and seeing trends that we can capitalize on,” McCluney says. “We’ve employed some portfolio management techniques with some fairly strict financial guidelines around them. Before we get too enamored with a given technology or market, [we ask]: ‘Can we make money? Can we grow? What are the competitive dynamics? Can we capitalize on what we have today, or is it something that would require major working capital investment?’”
Of course, many opportunities may pass that test, and you won’t have resources for all of them. Set priorities against other existing investments.
“You decide what the best investment is and best return for each of the markets and segments that you’re competing in,” McCluney says. “So you balance that portfolio against your overall objectives in terms of earnings and return to shareholders.”
You can predict some of that by researching markets, technologies and financials. But sometimes you have to see an opportunity play out to know whether the market will really adopt it.
If a trend passes those initial — somewhat subjective — tests, McCluney has a system for allotting more resources to winning ideas.
“We keep a pocket of funds to one side where it’s like seed money,” he says. “So for a while we’re seeding some things and maybe not spending a lot of money on it. If it starts to look really interesting, we’ll do a much further market, technology and financial analysis.”
When you start testing a new opportunity, put as much planning and goal-setting into it as you would a new business. The more targets you set ahead of time, the better you’ll be able to track progress and determine how many resources to add or subtract.
“Before we actually get into creating the new product, we write out a business plan, a marketing plan, a development plan that says, ‘Here’s what we expect to see and here are the outcomes we expect,’ so we have a scorecard for each of our programs, whether that’s in relation to revenue and profitability expectations, the profile of the product — the features, the cost — the timing of when we’ll get things done,” McCluney says. “We lay all that out to begin with. Then we usually have a very senior program manager on top of it whose job it is to monitor progress.
“We have a very straightforward red-yellow-green marker system for each of those attributes, and we monitor it as we move through the product life cycle.”
At first, new programs are tested with key customers, industry analysts and business partners who serve as marketplace guinea pigs under confidentiality agreements. But the key is having an internal leader devoted to each new project.
“You have to watch it doesn’t get subsumed or disappear into the day-to-day,” McCluney says. “Even in the best-run organizations, it’s so easy for new ideas to just disappear because people are so busy servicing customers, getting the quarterly results done and fighting the daily fires. So it’s very important to have leadership for the new idea and people championing it. Make sure you give it enough oxygen and enough money to thrive, even if it means taking something away from your day-to-day business to make those investments.”
But at the same time, don’t become so focused on the new line that it slips into a vacuum. Always keep your eyes turned out to watch for obstacles or more lucrative opportunities.
“We also have business development people who are out looking at the market and what’s happening outside to see if anything’s changed in our assumptions for that specific market,” McCluney says. “Has the growth changed? Are there other new technologies that could be disruptive to what we’re doing?”
All of those factors play into your decision of how many resources to feed the new opportunity — and when to cut it off entirely.
“When any of those [parameters] starts to get out of bounds, that’s when you really look closely at the project,” McCluney says. “And if too many things go out of bounds or if you see a competitor come out with something sooner, then that’s when you start saying, ‘Is it time to cancel this program, or could we repurpose the technology in some way that we’re not in direct competition?’
“If things change in the market, you may want to kill the program because it’s the best thing to get scarce talent onto some new things. What you always want to do is keep the hopper full of new ideas. We always have more ideas than we have money to put on them.”
