- 18th July 2013
Note: We are currently conducting a short, 4-question survey to learn how b-to-b organizations fund different types of innovation. All participants who provide their business email address will receive a summary of the research findings.
One question we’re frequently asked by marketing, product and business leaders: “How much should we invest in new products vs. existing products?” My answer: “With all due respect, that’s the wrong question to ask.”
Looking at product investment as new vs. existing is problematic for a number of reasons:
- It’s a very internally focused view of product investment vs. a market-focused view. The question should shift from “How do we invest in our products?” to “How do we invest in addressing market opportunities and customer needs?”
- A number of internal and external factors influence this ratio. If your products are ahead of the competition, meeting customer needs and those needs aren’t changing, a different investment profile is needed vs. if your products are behind the competition, not meeting customer needs and those needs are changing rapidly.
- It doesn’t account for market opportunities, corporate goals and core competencies. Two organizations with different strategies can look at the exact same product portfolio and make completely different assessments about where to invest and focus.
So, if new vs. existing product investment is the wrong question to ask, what’s the right one? Based on our research, we recommend reframing the question to ask: Is the balance of investments optimal to support ROI and growth?
Investing in new or existing products is a means to an end, the end goal being to take advantage of market opportunities and, for most companies, achieve growth objectives. Growth comes from looking at market opportunities, analyzing how your current product portfolio compares to these opportunities, then analyzing whether you can take advantage of them with your current product portfolio, marketing and sales budgets and resources.
Our SiriusDecisions Innovation Strategy Framework is designed to help product management groups and business leadership think through these questions to ensure that investment in product, marketing and sales is appropriately structured to achieve growth objectives while managing risk. During our August 14 webcast, we explained the framework in detail, including some of the research that went into its development. We also described how to implement the framework to guide investment decisionmaking.
Meanwhile, you can start to look at investment allocation in a different way. The next time there’s a debate about whether you’re investing too much in current products or not enough, stop the discussion and ask these questions:
- What are the most appealing market opportunities?
- How do those opportunities align with our strategic objectives?
- Are we positioned today to take advantage of those opportunities? If not, what is needed?
- Are the investments we’re making aligned with those opportunities?
The answers to these questions may surprise you. You may find that most of your money isn’t spent on the most lucrative opportunities or the biggest strategic objectives.
Create an Innovation Investment Strategy
Organizations are struggling to identify the criteria needed to validate product investments, and when (and how much) to re-invest in offerings. Get an overview of the SiriusDecisions Innovation Strategy Framework and view our OnDemand webcast, Innovation Strategy: Choosing the Right Products and Opportunities to Drive Company Growth.
About the Author
Jeff Lash is Research Director, Product Management, at SiriusDecisions. A recognized thought leader in product management, he has over 10 years of experience in product management, portfolio management, product development, and user/customer experience design. Follow Jeff on Twitter at @jefflash.