5 ways to purge “me-too” products from your portfolio
Original Publish Date: Sep 30, 2020. Pic Source: Wikimedia Commons.
“We’re gambling on our vision, and we would rather do that than make me-too products. Let some other companies do that. For us, it’s always the next dream.” – Steve Jobs on the release of the first Macintosh (1984)
The only way to follow-up that quote from Steve Jobs would be to highlight the failure of a me-too product from a famous nemesis. Enter Microsoft’s Zune.
Microsoft was already late to the party to take advantage of iPod’s massive success by the time of Zune’s launch in 2006. Zune hardly made any dent in iPod’s market share.
In retrospect, you can see that Zune was always a limited-term opportunity given the eventual launch of iPhone in 2007. Still, missing out on different insights from iPod’s success further made any chance of Zune’s success very minimal. Zune could’ve dominated a small market outside of iPod’s purview. Even then, it didn’t convince consumers by differentiating itself very well from the field of portable media players.
Former Microsoft entertainment executive Robbie Bach explained the Zune debacle eloquently in hindsight.
“We just weren’t brave enough, honestly, and we ended up chasing Apple with a product that actually wasn’t a bad product, but it was still a chasing product, and there wasn’t a reason for somebody to say, oh, I have to go out and get that thing.”
We all know that Microsoft is doing just fine right now. Zune’s me-too product failure didn’t sink the company, but it left a tangible (unwelcome) mark on Microsoft. Other companies hoping to ride the wave of me-too products may not be so lucky.
We sometimes ignore an entire set of downsides while launching me-too products. The following are a few easily verifiable, immediate downsides from any me-too product endeavor to give you a flavor.
Launch Costs – Any launch is a cross-functional effort involving multiple teams including sales, marketing, engineering, customer service, etc. This is true as well for a me-too product. We can label all these costs as unwanted costs if you offer a me-too product that erodes value instead of a differentiated, value capturing product.
Loss of Pricing Power – A lack of differentiation for your product in the marketplace places the focus strictly on price. You may have limited options on price and dropping it might be the only way to get the customer’s attention. This can start a price war where the company with the cash reserves wins out gradually with narrow margins!
Customer Acquisition Costs – You need to spend a lot of money on advertising and marketing to gain any market share in a crowded marketplace with a me-too product. This drives up the cost of customer acquisition for all the companies in a market segment (for example) that has a limited set of customers.
Opportunity Costs – Placing your focus on a me-too product launch takes attention away from broader, innovation-friendly shifts in the marketplace. The example of Microsoft losing sight of iPhone for a focus on Zune fits perfectly here.
There needs to be a culture and philosophy shift to avoid launching me-too products. This may pose a challenge for mature companies that might be used to doing things a certain way. Culture shifts take some time to occur and require support from champions across the organization. While it’s good to get that shift underway; I’d like to propose 5 different ways to purge me-too products from your portfolio no matter the size, type, stage of your company.
#1 – The “Inefficiency” Test
The best way to purge me-too products from your portfolio is to avoid launching them for starters. The “inefficiency” test should be something you conduct prior to launching any product. And it’s very simple.
We launch products into an ecosystem of players in any market. There’s a demand for a product which (typically) creates an ecosystem to produce and deliver the product to serve the demand.
The “inefficiency” test forces you to ask – what market or business or ecosystem inefficiency am I solving by entering the market? This question is at the heart of why a company participates in a market to offer a product/solution. For example – are you solving an unmet customer preference, cost imbalance, risk issue, etc.?
Answering this key question also solves the conundrum of whether someone’s going to pay for whatever product you might offer.
#2 – The Value Proposition Exercise
This option should be the ultimate kryptonite for me-too products if done right. Me-too products can’t withstand the glare of the value proposition exercise.
An effective value proposition should speak to a customer’s situation while also describing why it’s better than every other available alternative. It needs to be specific and clear while also linking itself to the customer’s desired outcomes. Any me-too product can’t meet these requirements.
#3 – Active Product Portfolio Management
Every company should review its product portfolio periodically – at least once every 6 months. This offers a chance to (1) review every product’s performance in the marketplace, (2) evaluate its future based on its stage in the product lifecycle.
Any me-too product from the past can hide underneath the success of popular products. Being active in your product portfolio management process can eliminate that altogether.
Evaluate each product like an “investment”. Look at each product’s revenue, profitability, and additional metrics as need be like CAGR, strategic fit. Decide if you plan to (1) invest in growing its sales, (2) limit investment, (3) retire the product, (4) merge with another product, (5) remove the product from your portfolio.
#4 – The “Hidden Incentives” Test
Sometimes a company offers incentives for certain behaviors that it didn’t really plan for. For example, if a company is pushing for a certain number of new products every year; every product team might overlook certain validation steps to meet the goal.
Look through your own product development process – be it with innovation programs you have in place or product management practices or even the product funding process. You might be offering an incentive that takes the form of a me-too product further downstream.
#5 – MVP & Decide
This is the last option to deal with a me-too product pushing full steam ahead to launch. Instead of going big, it might be worthwhile to launch a minimum viable product (MVP) to gauge the feedback from customers and analyze traction in the marketplace.
It’s a perfect last option that embraces the lean startup fundamentals while limiting damage from excessive spend or erosion of brand value.
Me-too products have hidden costs. They can easily erode value in the markets you play. Any immediate benefit from launching me-too products doesn’t last long. Try using the different options in this write-up to ensure your company doesn’t get swept away by the craze for me-too products.
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