Proactive and Reactive Strategies in New Product Development
Which one are you? The Prospector, the Analyser, the Defender or the Reactor?
While new product development approach changes with the type of organization or industry you are dealing with, there are however common patterns that reflect corporate strategy or even organizational culture of the firm.
First a bit of history. Going back in time, 1978 to be precise, Raymond Miles defined four strategic typologies: prospectors, analysers, defenders and reactors which are similar in nature to those defined by innovation management guru Robert Cooper in 1984.
Cooper defined five firm strategy types: Technologically driven; Balanced; Defensive and focused; Conservative; Diverse. These various strategic typologies can be further characterized as being either Reactive or Proactive. While long dated, Miles and Cooper concepts will still resonate true today.
Their objective is to be ahead of competition in terms of new product initiatives. Their capabilities lie in finding and exploiting new products and markets.
Prospectors is the closest topology to Technology Driven Firms. There is significant economic risk for such strategies as a large portion of the sales growth come from new product success. They can be characterized by little market orientation which may jeopardize the success of the new product development. Rapid sales growth is therefore required, together with high volumes or margins. They carry significant risk, linked to their ability to protect the "innovativeness" of their product, in order to maintain their competitive advantage. Prospectors therefore have several characteristics of a Proactive new product development approach.
Analyzers are in between Prospectors and Defenders according to Miles. Their key characteristic is that they minimize the risks inherent to Prospectors by understanding the market better and going after actual market opportunities. This is what Cooper calls the Balanced Strategy firm. Its way of functioning is what we would call an ambidextrous organization: It's characterized by their ability to develop new products and markets while maintaining and improving its core line of product. They position themselves on all four quadrants of the well known opportunity matrix of Ansoff, and can therefore be labeled as both Proactive and Reactive at the same time.
The label gives it away: They're aim is stability in its market. They aim at maintaining market share and focus on responding to competitor’s treats and changes within the market through changes in their marketing mix. Their focused is on market penetration with their existing product or service portfolio and some mew product development
Defenders can therefore be associated to Cooper’s Defensive and focused or Conservative strategy. These types of firms face major risks in terms of market shifts, customer need and rapid technological change. Research indeed showed that these firms either have the lowest new product performance or barely maintain satisfactory ones. In short, they are prone to disruption. We can consider them as being mainly Reactive strategy firms, as it is well adapted to their market positioning.
Once again, the label gives it away. They adapt to new products introduced in the market. As such, "me too" products, imitation borderline intellectual property infringement sometime is going to be their focused. They can still however do a pretty good job at incremental improvements and responding to customer’s request as market shifts. In short, reactors need to dwell in markets where products are easily copied. This is very characteristic of a Reactive strategy.
Now, which one are you and which one will you be?
Yes, that is a trick question: The real question here is whether your strategy got applied by default and is one of the consequence of organizational inertia or whether it was applied deliberately. While one may cite many factors justifying the application of one versus the other, your direction and context is what matters most: short term survival or cash constraint on your business may dictate a reactive approach, but may not suit you on the long run.
Pick all approaches if need be, but apply them at the right time. Naming strategies doesn't get the job done but it is a start communicating and giving a direction to an entire organization.
extension Product development strategy