Showing posts with label Time-to-Market. Show all posts
Showing posts with label Time-to-Market. Show all posts

Thursday, 11 August 2016

RIP ROI: Time-To-Market is the New Indicator of Success

A great article by Jonathan Becher SAP makes a convincing but disturbing case for replacing Return On Investment with Time-To-Market, based on some concrete examples.

Essentially, Jonathan makes the point that traditionally we explored strategic options by changing some key variables and assumed that all other factors remained equal, or ‘as is’, for the purpose of the exercise…

Thinking about it, the only problem with the traditional approach in a digital economy is that things, especially markets, have accelerated in rate-of-change, to such an extent that little ‘remains equal’…

He quotes Ben Thompson, author of Stratechery in that P&G’s 2005 ROI analysis of the opportunity to take over Gillette probably assumed a few fundamentals of the razor industry were immutable: brands would be expensive to build; razor cartridges would command very high margins; in-store real estate was a competitive advantage; and high distribution and R&D costs would be a constant for all players in the industry.

And then Dollar Shave Club came along with a brand built cheaply by clever creative, with blades imported from lower-cost manufacturers, with no R&D costs, and no presence in stores whatsoever. Dollar Shave Club figured out how to undercut Gillette’s pricing model by 50-75%.

In a similar way, many years ago, an early client Clark's Shoes managed to dominate an unpredictable labour-intensive market carrying high raw material costs, by starting with invitations to buyers to view designs for the new season at local hotels, and taking - unchangeable - orders up front, resulting in highly accurate sales forecasts, minimal waste, and a solid basis for negotiating the purchase of the necessary hides of leather...

Meanwhile, we traditionalists were committed to holding back brand launches until 'everything was ready...'

In a digital economy, speed to market is really the only way to stay ahead in terms of optimising a market opportunity...

Even more is it important that traditional thinking and assumptions be re-assessed, ideally before a new entrant does it on your behalf.

If the prospect of such a radical re-think of the basis of your business model represents a step too far, why not try a realistic ‘what-if’ on the possibility of a Dollar-Shave-Club subscription model entering your category, fast?