Your products are the basis for your business. How attractive is your product offering to your target customers? How attractive will it be in three years? Which product features particularly distinguish your products from the customer’s point of view? How do you keep your product offering attractive? These are questions concerning product management. Product management is an important function, but it does not necessarily have to be created as a “job” in the organization chart. The product management function may well be performed by different existing positions. Some companies have “category managers” who can perform the role of product managers in “their” product segments. However, make sure that overall a coherent product portfolio is created that is in line with the market. Product management must ensure that products that meet demand can be offered at any time. Product specialists would therefore not be enough; you need a product strategist who has a combination of product and market expertise. Is this requirement fulfilled in your company? It is also crucial that product management is actively pursued. Is this a given in your company?
Let’s take a look at what the function of product management actually is:
Your products must be strategically managed throughout their entire product lifecycle, from product development to market readiness to removal from the product portfolio. Are you regularly adding enough and the right new products to your portfolio? Are you also continuously ridding your portfolio of older products?
How well is your product range structured? Does it contain all the variants that are important to your target customers? How modular is your product range? Can you create a sufficiently broad product range from a few standardized basic components? Think about service-friendliness, think also about parts logistics, including stocking.
Involve your product management starting from the first phase in the development of new products. Product management should already play a significant role in the creation of specifications.
During the active phase in the market, product managers should ensure that identified product weaknesses are eliminated; they should also keep their products marketable by initiating and coordinating meaningful adaptations. The challenge lies in managing different versions (facelifts) and differentiated variants, right through to aftersales service.
Finally, the decision to remove items from the range, portfolio streamlining, is an important function of product management.
Example 1: The British car manufacturer Riley Engine Corporation, which built the “little man’s Jaguar,” produced entirely according to customer wishes in the 1930s. As a result, the available resources were spread over too many models. Production became too costly and service was unmanageable. Percy Riley, the founder of the Riley Engine Corporation, continuously improved his models, but without a clear production plan. No two Rileys were alike. Percy’s successor Victor Riley could no longer finance the company in the 1930s and had to sell his company in 1938 for little money to Lord Nuffield, who ran Morris Motors.
Example 2: At a design-oriented German tile manufacturer, the number of articles continued to grow because new, attractive articles were added to the product range for each new season, but the sales department could not decide to courageously remove existing articles from the range. In order to remain able to deliver with all articles, the complexity and costs of manufacturing and warehousing increased dramatically and led to a cost level that was no longer manageable.
Product management has an essential and far-reaching function in the company. It plays a decisive role in determining the success of the company. Therefore, make sure that product management can shape important decisions. If you only allow your product management to play an advisory role, this is clearly not enough.
Network your product management well within the company: Network it with your marketing, your sales, your product development, your “operations”, especially purchasing, manufacturing and quality assurance, and with your controlling and financial management. This will enable product management to respond quickly to changes in demand and competitive initiatives and keep your company dynamically adaptable.
Encourage your product management to bring the spirit of the times into your company and make the entire company receptive to entirely new products.
Example: Sometimes it is worth taking a look at industrial history: Georg Egestorf founded his iron and machine factory in Hanover-Linden in 1835. At first, he produced steam engines, but soon expanded his range to include entire locomotives. After Egestorf’s death, ownership changed and Hannoversche Maschinenbau AG (Hanomag) started to build small cars, the “Kommissbrot.” Locomotive builders built the first German cars off the assembly line in the 1920s. In the 1930s, Hanomag even built a racing car with a diesel engine in 1939. During World War II, Hanomag had to manufacture armaments, especially anti-aircraft guns, tracked vehicles and grenades. In the 1950s, Hanomag also built construction machinery, agricultural machinery, tractors and trucks. Almost all parts were manufactured at Hanomag with more than 13,000 employees and high vertical integration. Hanomag’s success was attributed to the myth of technology and the loyalty of the workforce over several generations. The factory was always able to successfully enter completely new products and markets.
Now, however, let?s look at the rest of the Hanomag story, which is less positive: Since 1952, Hanomag has been held by Rhein-Stahl, which invested in its core business, steel production, but not in steel processing, as Hanomag did. Overproduction of agricultural products led to a drop in prices for farmers, who invested less. As a result, Hanomag’s truck division was merged with Henschel in 1969 and sold to Mercedes, and tractor production ceased in 1970. This upset the workforce, who had not been involved in these decisions. Industrial disputes increased. The company found itself in a difficult economic situation.
In 1980, Horst Dieter Esch took over the traditional Hanomag company without any significant equity capital with his construction machinery holding company IBH in order to turn Hanomag into the world’s largest construction machinery group. But Esch struggled with sales problems. He procured bank loans totaling DM 12 billion in exchange for bogus orders and falsified invoices. In November 1983, Esch and his IBH had to file for insolvency; Hanomag’s insolvency followed. After Esch’s arrest in March 1984, Günter Papenburg ran the plant on an interim basis in 1984 and brought in Japanese construction machinery manufacturer Komatsu, which took over Hanomag in 1989. Thus, construction machinery and wheel loaders are still built in Hannover-Linden today, but under the “Komatsu” label.
A holistic controlling is very helpful in supporting the product management.