Regis McKenna
Noted product development expert for Management Roundtable

If you want to play with the winners, the name of the game is "fast, lean and friendly."

That's the word from Regis McKenna, the marketing genius who helped launch so many products that power us through the Information Age. Speaking to a packed house at the recent "International Conference on Best Product Development Practices for Defining Customer Needs" in New Orleans, the Silicon Valley guru issued a wake up call, and identified a number of strategic best practices that characterize today's champions.

Wake Up Call

Says McKenna, "It is getting continually harder to develop breakthrough products." Brand loyalty is waning. Customer awareness of options, diversity, mobility, and discontent are hallmarks of today's environment. Traditional design and development approaches flunk in this context. Minor correction won't get you back in the game: you need to take a real fresh look at your whole development process. While you're at it, not a bad idea to scrutinize marketing's role in product design.

Look around: the market is saturated with variety. We're in the middle of a revolution of rising expectations. And it's certain to accelerate.

Notes McKenna, "We have 500 brands of computers, 500 brands of cars, 500 brands of clothes, 100 brands of cookies, 1,000 brands of mustard, 1,000 brands of software, 250 brands of beer, 525 brands of semiconductors, 50 brands of cable TV. There are more than 600 varieties of Motorola cellular phones for the U.S. alone. More than 100 types of Intel microprocessor. More than 90 base models of Compaq desktop PCs for business."

And the wake up call is not just about volume and variety. It's also about facing up to the dizzying pace at which products cannibalize themselves and each other. McKenna illustrates the point with an all-too-real cartoon from the Financial Times of London in which one character says to a second, "This is a fast-moving business, Rigsby. A new generation of computers has been born, grown up, and died while you were at lunch."

"The world has moved to real time," says McKenna, "Everything is faster.The key process today is to think about our business becoming real-time. We want solutions very fast. People aren't willing to wait anymore. You have to deliver what you say -- today."

Think NOW

McKenna's clearly no fan of long-term strategic planning: "We make fun of Jean Dixon when she predicts what's going to happen the following year, and then we go back and do a 5-year business plan. I once refused to go to a conference that a large automobile company invited me to to look at what the consumer will want in the year 2025!"

"What you've got to do is think about how your business is designed today so that it can handle the eventuality of anything."

Think Small

The age of the mass market has gone the way of our father's Oldsmobile. In today's customizing world, with our increasingly diverse population, the consumer can get a product the way he or she wants it. Says McKenna, "What we call, in a social sense,'fragmentation' we call, in a business sense, 'segmentation.'"

Small is what works. Niche markets are in. Identify and develop a love affair with narrow market segments, advises McKenna. Go after the early adapters. They're your enthusiasts. This gives you a real chance to work directly with targeted sets of customers so you get the kind of immediate feedback that makes for winning products.

He goes to pains to be clear that he's not just talking to the professional marketing folks. In the race to get close to the customer, it's time for the engineers to start their engines. Says McKenna, "The people who are responsible for the product design and development are the core of the business. They are the marketing people."

Think RELATIONSHIP

It's no surprise that the father of relationship marketing urges us to pay close attention to relationships. Research shows it costs a lot less to hold on to an existing customer than to find new ones "The best development practices start with the customer. Interaction between you and the customer creates brand loyalty. The point is not just to have knowledge of them, but to have dialogue with them, to create a real-time feedback mechanism."

Market-driven engineering thrives on market feedback to drive continuous refinement in product direction. But McKenna pushes for a more radical position. He argues that everything -- including products -- is coming to look like service. And at the high end of the service range, you've got to have lots of interaction for much depth of satisfaction.

Think Fast

To shorten the development cycle, shorten the dialogue cycle, urges McKenna. Great product development is not static. Most successful products go through an evolutionary process. Says McKenna, "First products often fail. It takes three, four, five iterations -- often more -- to create a really successful product. You're learning from those first attempts. If the people who are developing those products do their learning from some abstract research department, and not from first-hand dialogue feedback, then you can't respond rapidly to the needs of your customers."

He cites a Stanford University study that compares software development in Japan and the U.S. "We have a contract with the market that says we're going to get you products with lots of functionality as quickly as possible and as cheaply as possible. But we're going to have a lot of bugs, so we're going to set up an 800 number you can call for help."

According to the study, Americans own 75% of the market; by the time they're ready for market, the zero-defects-oriented Japanese are two years late.

The moral? Get to market fast. And start work on the second generation the day you go to market with the first. Use the feedback from your 800 number to keep refining. You're not only fixing the bugs; you're enhancing the product.

Coaches McKenna, "You should never be satisfied with your products. Everything is evolving. It is never complete. No product is born perfect. The problems come when people have problems and they're not addressed properly. Set up a response mechanism and use that mechanism to help integrate feedback into the organization."

Think Integration

Too many organizations still operate with a what McKenna calls a "100-year-old pass-off model" Like other core business processes, with this model product development moves in a linear manner, with a series of pass-offs among engineering, manufacturing, marketing & sales, distribution, and, finally, customers.

"We've broken our organizations up so that we no longer know how to look at the holistic approach." Break down the walls.

McKenna says an Intel executive told him about a study the company did ten years ago of its development process. Nearly eighty percent of products they brought to market returned less than the investment in their development. They decided the problem was their pass-off process, so they integrated marketing and design.

Reports McKenna, "If you go into a product design meeting now, it's hard to identify who's in engineering and who's in marketing. Most of the engineering people complain about having to make so many customer calls. But eighty percent of new products now show a return on investment in two-three years."

And don't be afraid to integrate with an external partner. Remember: you're no longer selling just a product, you're selling a service -- a solution to a customer problem. You have the core product. The age of the vertically-integrated company is over. Advises McKenna, "Ask yourself what other companies are out there that you could work with to help fulfill the product solution for your customer."

George Burns

McKenna sums up his view of product development in the Age of Relationship with a story of George Burns and Gracie Allen's success in Vaudeville. It was a crowded field in which to shine. Said Burns, "Our audience made us successful.. As the audience responded, we watched their faces. And we adjusted according to what we saw."

Regis McKenna is a frequent speaker for Management Roundtable. Management Roundtable is the premier developer and marketer of product development conferences.

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