Product Manager, do you have a CLU?
Surprisingly, too many product managers just don't understand their competition. Without a CLU they only have a superficial perception of it.
What is CLU? Competitive Line Up is a basic tool to define, develop and position your product in competitive markets. The CLU is a data set that shows clearly how your product offering stands relative to your competition in terms of performance, features, cost and pricing.
Back to the future
On the tactical level, CLU helps you to position and differentiate better your current products relative to the competition. But on the strategic level, the purpose of CLU is to predict your competition and make sure that your next-gen product is highly competitive.
The soul (see my article about product soul here) of competitive analysis is to answer two ‘what & when’ key questions:
- What will be your competitor next product (specifications, performance, cost)?
- When will they put it on the market?
Making an intelligent prediction for ‘what’ requires a deep technical understanding of current products as a starting point. Then you need to understand fundamental technologies roadmap that enables the future generations of the products in your category. Every product is built on top of enabling technologies. Few examples of those fundamental technologies: silicon process (TSMC roadmap dictate power end cost envelopes), processing power(ARM / Intel roadmaps), batteries improvements (volumetric efficiencies), WIFI technology roadmaps, camera sensors roadmap, DDR interface roadmap, NAND die roadmap, servers roadmaps, cloud services roadmaps.... Good PM needs to understand the technologies that enable its product and know deeply the roadmaps of those technologies. With the knowledge of the market trends, the customer requirements, and the enabling technologies evolution you should be able to predict your competitor's product.
Speed of light and rules of physics
Staying on the cutting edge is hard and companies fall into the trap of underestimate competitors technology evolution. This is happening even in high quality highly motivated engineering organizations. It's natural. Therefore in the competitive analysis world be skeptical and be paranoid. Being skeptical means that you should validate and cross-check assumptions on technical limitations stated by your own team. Paranoid means that if the technology has a certain speed of evolution, assume that your competition will take every advantage of it.
Few examples statements that should be warning signs to PMs:
- There is no way to have this performance at that cost structure (i.e, you must have at least X CPUs and Y amount of memory to that…).
- The relationship between parameter A to parameter B is pure physics, there is nothing we can do about it ( i.e, the relationship between leakage current and temperature).
I have seen in my eyes the rules of physics bending by smart competitors. Either it is pure superior technology, or, making a smart trade-off that enabled them to ‘bend’ the rules of physics and break what you believed is the speed of light.
As for the ‘when’, look at historical behavior patterns. Companies operate in markets that have a specific cadence and big events (very distinctive in consumers markets) and have engineering capacities that set their ability to put products on the market. In a way, a corporation is like a human with a unique brain and mussels that makes same tricks over and over. Examine your competition and ask these questions:
- How often do they typically launched a product? i.e Apple iPhone.
- What is the timing of products launch? i.e Samsung Galaxy and Samsung Note consistent launch times.
- How do they leverage platforms? i.e start at high-end high performance, then comes with cost reduction mainstream product six months after?
- Platform leverage between adjacent markets? i.e in the SSD market, some companies share platform between enterprise and consumers(client) while others have complete separation between them( whether this separation is driven by technology or simply by organizational structure).
So with the right thinking and research, you can get fairly good predictions of what are you going to compete with and when.
Take a self-test
What is the difference between superficial understanding and deep understanding of your competition? I will list few statements that show the difference between competitive analysis amateurs and professionals:
Amatures:
- The data you have is mostly from your competitor's website.
- You don't have hands-on experience with the product (you didn't install and benchmark it yourself)
- You don't have competitors products teardowns (hardware & consumer goods).
- You have no idea of your competitor's cost structure.
Professionals:
- You have hands-on out of the box experience of your competitor's products.
- You have the infrastructure and knowledge to benchmark the product yourself, and you measured the data in-house.
- You have fairly good cost model of your competition.
- You have a predictive model showing what you believe is your competitors two years roadmap.
If you are not in the professional league yet, its time to roll up the sleeves and start working on it.
This is an example (template) for a snapshot of CLU for a product planned to be launch in Q1 2018. The pros can fill in the fine details of such a table.
Show me the money!
This is the reason why I focus on cost and not pricing - cost structures are solid and don't change easily. The cost structure of a product is rooted in its architecture. The cost structure is coupled with the silicon process of a product, square millimeters of silicon, size of PCB, number of components on PCB, mechanical design, plastic casing, optics, hosting environment, CPU utilization, storage utilization.... Whatever your product is, the cost structure is fairly stable (at a given scale and volumes).
Pricing is dynamics and can be changed in a heartbeat. But one cannot price below cost for a long time as they go out of business. So if you think that you see that by a competitor it is either a short-time market share move or, you have completely wrong cost models and soon you are going out business (or you are looking at unicorn with endless VC money to burn).
When the model gets complex
Initially, your competitive DB can be an excel file. But cost models get complex in these areas:
In many industries costs are changing quarterly. This is true for semiconductors and flat screen displays as an example. So the model has a cost reduction assumption that reduces the cost quarterly. In those industries, your product and your competitor's product have a launch cost and then rolling cost that is changing quarterly. In the semiconductors business, every silicon process has its own cost reduction curve so things get tricky. Then there are yields assumptions that have a dramatic impact on cost, and they change over time as well.
Tunable cost parameters - in some models there is a need for a range flexibility. Example are cost models that have significant subsystems that are bought externally. You need to assume the price for those as part of the cost model. So there is a need for margins assumptions ranges or price range for components that are bought from 3rd parties (by yourself and competition).
When you get to the level of rolling cost model over time, and high-low boundaries the model gets heavier.
Organizational aspects
“There are no resources” - this is the typical answer you get from the amateurs. There are no resources identified in the organization to do the competitive analysis or not the right talent to get the data.
It is not uncommon to see companies that will assign 50 engineers to build a product, and not even single one to make competitive analysis so they know the other 49 is building a competitive product!.
But this is just a symptom of the real issue - culture. A culture of internal focus. Technology companies simply tend to focus internally on their own technology. There are very few people that have the time or R&R to look outside and understand deeply what is going on.
Another organizational aspect is Intellectual honesty - dealing with competitive analysis requires intellectual honesty. It is hard to be the competitive analysis guy in some companies..the bad news guy. Management team without intellectual honesty will disregard and dismiss the findings. But leaders with highest intellectual honesty will seek and demand the most objective view on the market.
IT & infrastructure
One critical aspect of competitive analysis and CLU is the supporting IT system. The data must be easily captured (input interface), maintained and usable to a presentation level (dashboards).
Creating the database from scratch takes quite a bit of work but the maintenance and updates are not as frequent. I had a very good experience in starting it with students. One bright industrial engineering student compiled all the data into a system ( we used ClickView at that time), and make all the competitive data in the company easily accessible for all product managers.
Treasure island's - hidden data in your company
There are hidden islands of competitive data in every company. Two teams that usually have tons of data are the WW sales and technical sales.
Sales team - throughout many customers interactions, sales reps around the world are getting lots of data (I would call them tidbits). The data would be around high-level product specs, supply chain, availability, quality issues and yes...pricing.
Application engineering (FAEs, technical sales, professional services) - the team that interacts with the customers engineering teams is typically exposed to valuable product data like competitors performance, bugs, failures in qualifications, manufacturing quality issues.
In many companies, valuable data never gets to decision makers. Sometimes the feet on the ground just don't understand how valuable pieces of data they have. They don't realize that the puzzle is composed of many small pieces, and sometimes one bit of info suddenly make the whole picture clear.
I was always overwhelmed by the amount of new data I got when I visited Korea, Taiwan, and China as Product Management Director. Product managers are responsible to see the whole picture and report the competitive position of a product line to the top management. So go outside, meet customers, meet your field teams and get to those tidbits by direct interactions with them.
Competitive intelligence
Competitive intelligence and reverse engineering are a legal landmine. This is true for the technology side of things and even more so in the domain of competition and pricing. There are legal guidelines to follow, I would not go into those here for obvious reasons but would urge anyone that is dealing with this sensitive info to get advice from the corporate legal department. Not on the legal front, remember this: there are countries and geographies that do not have strong confidentiality ethics. Customers and distributors tend to leak sensitive info between vendors. So be mindful - in the theoretical event that you got your biggest competitor confidential roadmap, just assume that he got yours. From the same source probably…
CLU goes beyond product management
While CLU is mainly a product management tool, when done properly its usage goes far beyond that.
Value-based pricing
Value-based pricing is a leading methodology for pricing (quite a few consulting firms make good money from projects around that). One of the very basic data set for value-based pricing is CLU. The pricing team must have a clear data set showing how your product is stacked up relative to your competition. When my previous company started value-based pricing project, I was surprised how fast the guys in the fancy suits got to the product manager's offices to get an up to date competitive view of the market.
Marcom
Well trained companies have a competitive Quick Response Team. They won't leave their sales folks out to dry with customers questions they don't know how to answer. Competitive QRT usually has reps from R&D, Marcom, product marketing, technical marketing, and PM. As a product manager, when your competition is launching or announcing a new product it is good practice to do:
- Learn all the data that was released.
- Try to get hands-on as fast as you can.
- Make a one-pager Q&A for sales, addressing the following: what was announced, key specifications if available, your positioning of why your product is much better choice, and the parameters that your product is better.
Summary
The Competetive Line Up is a major element in the product management discipline. It should be used starting the early product definition phase up to the product launch. Whenever product managers make a significant product decision, they should remember this key takeaway:"without a CLU, you don't have clue!. You just have an opinion".
About the author
Everything brought here is based on my own experience at different levels of product management positions. For what it’s worth, my 17 years tech journey goes through networking infrastructure products, semiconductors, Mobile, and IoT. It also includes technology startups, Fortune 500 corporations, and two acquisitions that turned my company's culture and processes upside down.