Situation: A company has experienced limited growth and profitability for the past five years. It is also short of resources. They have invested a lot of time and effort in a new technology which has yet to bear fruit. The CEO seeks advice on the company’s future direction. Where should you focus the business?
Advice from the CEOs:
- Continue to support BOTH business – the core product line and the new technology – but rearrange priorities to boost revenue and profitability growth. Simultaneously, focus new R&D investment in the company’s core product. This has three principal benefits:
- The company’s primary expertise is in its core product line. This product is its principal source of revenue and has the greatest potential for profitability and growth.
- R&D and start-up production of new iterations of the principal product is less resource intensive than the new technology.
- Further, sales of the core product are far less cyclical than the market for the new technology, and therefore more promising to a small, niche company.
- Looking at this recommendation sequentially, the group recommends that the company:
- Continue to sell the current product line a well as existing complimentary products to maintain revenue and profits.
- If additional work or resources are needed to mature the new technology, have someone else take the lead role in R&D and private label the technology for the company.
- Focus all new R&D investment on improvements to the core product.
- Refocus market research on current and potential customers for the principal product line to determine their greatest needs to guide product line innovation.
- The company needs access to advanced equipment to support development of the core product line. Consider creative ways to gain access to this equipment at little expense.
- Look for advanced equipment that is available at distress or liquidation-sale prices by companies who made poor investment decisions.
- Find a partner that wants to focus on the new technology, but who also wants and needs the company’s expertise in its core product line.
- The company focuses on the core line; let the partner develop the technology.
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