“The product development pipeline should be a funnel, not a tunnel!” This commonly heard mantra is based on the idea of killing bad projects in the development process. However, this lesson is often forgotten when companies review their products already in-market, leading to an overall portfolio of products that looks like a sideways hourglass.
This is especially problematic for B2B manufacturing companies that try to cater to very large customers. By failing to keep their in-market offerings trim, these companies can end up with product catalogs that are thousands of items deep, and many of them are only slight variations of each other. In some cases, these unique variations are even simultaneously in production.
Why does this happen? Many times there are one or two customers that still use an older model component, which drives the need for replacement parts. Compounding the problem, a manufacturing company’s sales force is usually compensated based on sales commission, and the highly commoditized nature of many manufacturing sectors means buyers have significant power. These two factors create salespeople who, fearing a loss in sales, are often reluctant to move their customers to new product versions.
Manufacturers with a sideways hourglass pipeline are probably serving their customers well in the short term, but there are significant disadvantages to maintaining bloated product catalogs. Inventory must be kept to support the in-market portfolio and it extends beyond finished goods. Unnecessary inventory comes in the form of product data (CAD drawings, BOMs, etc.), stored raw material, machinery, and institutional knowledge. When this is considered in terms of wasted time, space, and maintenance, it can quickly become real dollars.
Additionally, a bloated catalog can stifle innovation for a manufacturing company. A highly innovative product may make it through a company’s development pipeline only to get lost in the shuffle of a crowded product set without any champions to introduce it to customers.
Manufacturing companies should advance themselves and their customers by taking the necessary steps to keep their product pipeline funnel in shape and by developing the ability to show some in-market products the exit door. We’ll cover the commercial value of solving the problem in a future blog.