Product Tree is a tool for understanding your product strategy. It’s the most effective way to visualize your offering, its competitive positioning, and how it will evolve over time. The Product Tree is not new. It has been used by great marketing minds, including Alexander Osterwalder and Yves Pigneur in their best-selling book Business Model Generation to explain the different business models. If you are interested, this free pdf version of the book is available here.
Even though a Product Tree might seem simple to create once you understand how it works, taking into account all the positioning details of your current products and how they will evolve over time is challenging.
It’s especially difficult for product managers who don’t have any marketing background or training. According to Johanna Wright, VP of Product Management at Google: “If I had to pick one thing that PMs need more help with…it would be building a compelling vision for their product/feature.”
I found Product Tree an amazing discovery early in my career. Having gone through several exercises of building a Product Tree helped me understand my company better, especially its focus on customers and market segments. Plus it is an excellent tool for aligning stakeholders around a shared vision for the product.
Over the years I have seen teams do some brilliant work with this technique, but unfortunately, that has been rare because most people often just use it as a simple list of all their products. That is too bad because there are many creative ways to use this technique that can lead to breakthrough results! So let us look at what you can do to get the most out of the Product Tree.
The Product Tree is an excellent tool for understanding the focus of your company. Experience has shown that if you present this diagram to investors, customers or even staff – it can lead to breakthrough results! It helps build consensus around the market segments your company will target and what type of products/services you should offer (and which ones not). Not only does it help guide where you should be investing in research & development, but also how much investment capital is available to support these efforts. If presented within a larger strategic framework like Porter’s Value Chain, it provides great insights into other areas such as suppliers and distribution channels. The list goes on…
10 Most Effective Ways To Prune The Product Tree are:
- Identify And Develop Surplus Product Lines
- Increase Your Brand Prominence
- Cast A Wider Net For New Customers
- Focus On Price Integrity Only
- Only Sell The Products That Make Money
- Create Products That Can Be Combined Easily With Other Products You Sell Or Make Yourself
- Emphasize Customer Service…And Product Warranties, Too
- Offer More Product Information–And Use It To Win Sales Over The Internet
- Expand Into Home And Garden Applications For Existing Commercial Brands
- Use Technology To Enhance Customization Of Existing Routinely-Produced Goods Rather Than Manufacturing Totally New Ones.
Thus To Prune The Product Tree you need to follow the above directions. This will not be easy because some of the principles are in conflict. For instance, enhancing customization may require manufacturing totally new ones while reducing production may require more manufacturing. I believe you should try to implement each principle but give priority to the first five before proceeding with the Principle.
By Pruning The Product Tree you will make the manufacturing of goods more efficient while manufacturing fewer items, thus lowering environmental impact. You can take any product out at any time to prune but if it is necessary to maintain the quality or utility of the good, don’t remove it until later in this process when resources are available for its removal.
The Rollercoaster Principle illustrates that you should try to go from customization (high manufacturing) to low manufacturing and then back to high manufacturing in a smooth, continuous curve. It is necessary for several reasons: it will maintain the ability of your customer to order your product; when they want it; it enables you to make more money per unit which improves profits and it reduces waste because when you go from making fewer items to making many items they would otherwise be wasted without anyone buying them. The example used by Prahalad above is having your custom car made without painting it so that there are no chips. You take the car home with its raw metal exterior, paint it yourself later on which will have no damage due to shipping or other processes involved such as dirt.
What does this all mean for you and your business? Because we had no formal business training, we ended up wasting time and money on items that had little to no value whereas we could’ve spent the same amount of time and still made a decent profit keeping our prices lower. We didn’t do market research and what we thought needed to be done was not necessarily what customers wanted; it’s like those people who think their handmade shoes will sell well even though there is less demand than they think. All I can say is that I definitely paid my dues for this error, however, if you take care of these three areas then you’ll enjoy greater success with your company or new product line if appropriate).
