When second means best
BY SANDRA SWANSON
Picture this: Your team has persevered through a complex, big-budget project for a year, and you're only weeks from a new product launch. Then one morning, you hear startling news: A competitor has just introduced a similar product in the marketplace. What now?
It's a scenario that can rattle even the most experienced project teams. Conventional wisdom favors first-mover advantage, reasoning that if a competitor's project leaves the gate first, yours will always be working to catch up. Although a competitor's first-to-market head start can be unnerving, it doesn't necessarily doom your project to failure. When Apple introduced the iPod in 2001, it wasn't the first digital music player available. But the iPod quickly dominated that product category, and it still does, gobbling up an impressive 70 percent of U.S. market share for MP3 players. And the search-engine field was already crowded when Google launched its minimalist site 15 years ago. Today, Google is the world's top search engine and claims 65 percent of market share—more than six times that of its closest competitor.
It doesn't always hurt to be late to the party. In some cases, project teams can even parlay that presumed disadvantage into a competitive edge.
KNOW THY ENEMY
To differentiate your project's deliverables, start by analyzing what the competition's product or service can actually do, says Patrick Sullivan Jr., chief product officer at Contatta, a business-collaboration software company in Scottsdale, Arizona, USA. The most effective method is to observe how others use the product—meaning people outside of your project team. “In a crowded marketplace, there are many overlapping functions from product to product,” he says. “So the final arbiter is actually using the product.”
During the development phase of Contatta's product, a competitor launched a product that seemed, at first blush, similar. “Reading the bullet points on their website made me a bit nervous,” he admits. “I signed up for a free trial and was moderately impressed.” Then he asked his wife to try it. “She's very smart but less techie than I am,” says Mr. Sullivan. “It was difficult for my wife to use the product.”
That's when Mr. Sullivan realized getting to market second doesn't necessarily mean the race is lost. “Many of the competitor's features were rough around the edges. So I knew they had a problem they still had to solve.” He cautions against chasing competitors—instead, he advises staying focused on what's most useful to customers. “The biggest mistake is rushing to add features that a competitor has added just for ‘me too’ reasons,” he says.
Some competitors may release a product or service before the project is completed to gain a clear understanding of consumers' preferences, says Syed Zaidi, PMP, project manager at automotive manufacturer Scania, Södertälje, Sweden. In that case, it's best not to be first. “Then the project team can find the correct time to launch an even better product, using lessons learned from the market,” he says.
The biggest mistake is rushing to add features that a competitor has added just for ‘me too’ reasons.”
—Patrick Sullivan Jr., Contatta, Scottsdale, Arizona, USA
Mr. Zaidi's current project, which started about two years ago, focuses on optimizing heavy-vehicle maintenance for Scania's customers. One year into the project, a competitor entered the market with a similar service. Mr. Zaidi and his team responded with an analysis of the competitor's product, comparing it to the one Scania expected to complete in a year.
The steering group revisited the project plan, and 14 months were added to the schedule, a bold move that increased the budget by nearly 30 percent. The group estimated that the move would also drastically increase the chance of success, says Mr. Zaidi, because the added time and money gave the project team the flexibility it needed to modify the project's scope.
“We got a chance to study customer reactions and expectations,” he says, which provided a better understanding of what Scania's product should include. Scania continued to support its existing maintenance products while extending the launch date for the advanced maintenance product.
Ultimately, the Scania project will benefit from studying the market's response and finding ways to improve on the competitor's product. “To understand the risks from the market, business analysis should be clearly highlighted by the project team before a project begins,” says Mr. Zaidi. “Keep the risk register intact and alive, and be prepared to be flexible and accept the challenges as soon as they are visible.”
To allow for product modifications, Mr. Zaidi's project team responded with a more generous schedule. But sometimes, a competitor's product introduction can lead to schedule compression. Just ask Renato Lourenço, PMP, operations director at Rencorp Consulting in São Paulo, Brazil. In March 2013, his company began a US$250,000 project for a large fish producer. The producer's objective was to have a new set of frozen fish products available at São Paulo's two main supermarket chains and one premium food shop chain by 30 December 2013.
The project was split into four phases: statistics and local market research, product line selection, product line and process improvements, and product line launching. In the midst of the product line and process improvements phase, in early August 2013, the project team received bad news: A competitor had just introduced a similar set of frozen fish products. At that point, the schedule was 65 percent complete.
“Our project team responded with maturity, checking how the competitor's set of products could affect the expected impact of our customer's set of products,” says Mr. Lourenço. Although the competitor's product used the same type of fish, the package quality, appearance and sizes differed from the customer's product plan. That encouraged the team to forge ahead with the project. “After evaluating all of the information available, we realized that the impact would not be considerable.”
Our project team responded with maturity, checking how the competitor's set of products could affect the expected impact of our customer's set of products.”
—Renato Lourenço, PMP, Rencorp Consulting, São Paulo, Brazil
The competitor's product introduction did significantly alter the project's schedule, however. The deadline was bumped up by two months, to 30 October, which allowed the competitor less time to build product momentum. “In Brazil, supermarket chains usually select two or three suppliers for similar products, and if the competitor is well accepted by consumers, it is more difficult to introduce ours,” says Mr. Lourenço.
The team worked extra hours, including weekends, to achieve that compressed schedule, and it applied crashing and fast-tracking techniques. “We had new team members doing activities in parallel, sometimes in the same type of task,” he says. A separate team started immediately on all tasks planned for the final product line's launching phase. The two teams held daily meetings to track the progress and synchronization of dependent tasks, says Mr. Lourenço. To help keep team members motivated, the firm organized an awards event to recognize workers who contributed most to the project's success. Thanks to contingency and managerial reserves (at 10 percent each), the changes had minimal impact on the consultancy's project profitability, he says.
For Mr. Lourenço, that project experience reinforced the need to expect the unexpected. The takeaway, he said, is to always have a contingency and managerial reserve in terms of budget and time—and don't hesitate to use it when needed. “You can have the project profitability reduced a little bit to guarantee a successful project and a satisfied customer.”
SIZING UP THE COMPETITION
Yaravi Cardoze, PMP, knows the frustration of seeing a competitor get to market first. But she's also witnessed the benefits of arriving there second.
A couple of years ago, she worked for a systems integration company that used small interfaces developed in-house that allowed different software products to work together. “As services delivery director, my responsibilities included making sure our solution was unique and still attractive from a price perspective—as labor cost was a big part of the equation and also the most difficult part to estimate early in the planning phase,” says Ms. Cardoze, now a program management consultant in Panama City, Panama for Dell Latin America, a PMI Global Executive Council member.
One project focused on integrating an industry-specific customer service operation. The project was originally planned to take 12 months. With three approved schedule changes, that plan became 19 months. One month shy of the launch, Ms. Cardoze and her team made an unpleasant discovery. “Our competition had developed a very similar solution, and it was already working,” she says.
The competitor's product had less functionality, but that didn't matter. For complex solutions with many features and functions, customers don't immediately recognize the difference between a less complete product and a more complete one, says Ms. Cardoze. “Customers have to go deep to understand the differences. So, at least from high in the sky, both products looked alike,” she says.
Never underestimate a competitor's capacity to rapidly evolve, capture talent and improve your ideas faster than you.”
—Yaravi Cardoze, PMP, Dell Latin America, Panama City, Panama
The project team was disappointed but not defeated. “We regrouped, researched the competitor's product limitations and made sure we had them covered in our product,” Ms. Cardoze says. The schedule didn't change, but it was closely watched over by all high-level executives and stakeholders. (That “silent” pressure wasn't there before.) The company adjusted the business plan to consider what impact not being pioneers would have on revenue. The breakeven point for return on investment was pushed back eight months, and the marketing budget increased by about 20 percent. The team also reviewed which main features should be promoted as key differentiators of the product.
That experience yielded valuable lessons. “At the early stages of the project, during the initiation and planning phases, executive stakeholders were very confident about the unique condition of the final product, and they were very certain that the time to market was fine,” she says. That was a huge mistake. “Never underestimate a competitor's capacity to rapidly evolve, capture talent and improve your ideas faster than you.” When that competitor beat her team to market by only four weeks, it taught Ms. Cardoze a lesson about simplicity. “For some projects and ideas, simplifying the specs and finishing it earlier is smarter than spending a lot of time and effort working on tons of features and finishing it later than your competition,” she says.
Although the competitor benefited from first-to-market buzz, that momentum didn't last. “Initially, demand for our product wasn't great,” says Ms. Cardoze. After a while, though, the product gained market share as customers became more aware of features that the pioneering competitor's product lacked.
While first-to-market may bestow some bragging rights, these project teams prove that with smart recalibration, it's possible to be second and best. PM
PM NETWORK FEBRUARY 2014 WWW.PMI.ORG
FEBRUARY 2014 PM NETWORK