a Analog Devices Business Planning Process

BPP Table of Contents

q Section I: Executive Summary

q Features & Benefits
q Summary of Steps
q Process of Planning
q Section II: Leading the Business Team Thorough the Process
q Overview
q Three Key Decisions
q Leading Team Processes
q After the Plan is Complete
q Sample Process Timelines
q Section III: Assessing an Organization’s Planning Performance
q A Tool for Self Assessment
q A Guide for Planning an Entity’s Development
q Criteria for Classifying Business Planning
Sophistication

q Sections IV, V& VI: Executing the Business Planning Process

q 10-Steps
q Tools and Templates
q Product and Technology Development

q Section VII: Adaptation to Different Environments

q Adaptation Introduction
q Planning In a Field Context
q Key Questions: Field Sales Operation
q Key Questions: Service Activity
q Potential Plan Contents
q Section VIII: Key Concepts
q Introduction
q Strategic Intent
q Value Proposition
q Market Segmentation
q Competitive Advantage
q Value Chain
q Industry Analysis
q Section IX: Resources

Analog Devices, Inc. Company Confidential

 I. Executive Summary

a Business Planning Process

Section I - Executive Summary

q Features and Benefits

q Summary of the Steps

q Process of Planning

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 I. Executive Summary

Features and Benefits of the Business Planning Framework

The principal features and benefits of the Business Planning framework are as
follows:

q It contributes to a strong team orientation. Developing a common

vision of the market and collaborating on a set of objectives and
strategies results in goal congruence and commitment among the
management team.

q It can serve as an organizational change agent. The issues addressed

during the process not only enable incremental improvement but real
breakthroughs if the team stretches.

q It provides the means to prioritize investments. When this ability is

combined with management discipline, an organization can focus its
resources and energies and win in the marketplace.

q It encourages creative application of appropriate technology. By

providing an unbiased, needs-based backdrop against which to consider
the application of technology, inventive "match-ups" can be assessed
and imaginative solutions proposed.

q It is linked to an implementation mechanism. By integrating

strategies from R&D, marketing, manufacturing, sales, finance, quality,
and human resources, all functions contribute to the formulation of an
action plan.

q The standard format provides a common basis for communication.

Particularly where multiple organizations must work in partnership, the
format facilitates discussion and negotiation of interdependencies. The
common format also makes it easier to roll up business plans at higher
levels in the organization.

q It has a "loose-tight" property. The process allows plenty of

flexibility in how an organization goes about gathering its data and
drawing conclusions. However, the format and the expectation of what
issues should be addressed are rigorously prescribed.
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 I. Executive Summary

Summary of the Business Planning Process Format

Step 1: Statement of Purpose

Describes the fundamental set of reasons for a business' existence. It

provides a context for decision making when evaluating business
opportunities by specifying users' needs, segments served, the value
proposition, and the basis for sustainable competitive advantage.

Step 2: Five-Year Objectives

Translates the Statement of Purpose into a specific "mission" for the

organization and a series of achievable milestones for each function. The
mission describes an achievable goal or finish line to work toward. The
key success factor milestones provide the basis for formulating function-
specific action plans.

Step 3: Description of Customers and Channels of Distribution

Defines and prioritizes the segments resulting from the users' needs
discovery process. Decisions are predicated on a fact-based analysis of
end-user, customer, and channel needs, together with a detailed
understanding of the purchase process and value chain.

Step 4: Description of Competition

Focuses on understanding different vendors' intentions regarding the

targeted segments and the strengths and weaknesses of their positions,
products, technologies, and services. The section projects potential
sources of competition, considers how differentiation would be achieved
in the context of a value chain, and looks at prospects' perceptions of
different suppliers.

Step 5: Description of Necessary Products and Services

Translates users' and customers' needs into a specified set of products and
services that imaginatively address the needs as well as prospects' value
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 I. Executive Summary

chains. Step 5 addresses what is to be provided from the customer point of

view (such as product requirements). It defines where in the value chain
the contribution will be focused and what utility, services, vendor
attributes, and technologies will be needed to meet prospects' expectations
and beat the competition.

Step 6: Plan for Development or Purchase, and Introduction of

Products and Services

Addresses how the product requirements specified above are to be

implemented. It defines both ADI and partner contributions in delivering
the value desired by the user. This section covers technology development
and acquisition plans, marketing and channel strategy, manufacturing
plans, and significant changes in human resources, facilities, or capital
equipment.

Step 7: Financial Analysis of Costs and Returns

Projects the financial consequences of the plan on the income statement,

balance sheet, and cash flow. A variety of business environment scenarios
are tested. Because of the need to plan with the field, this step specifically
analyzes sales by channel and the marketing cost envelope implications.

Step 8: Potential Problems Analysis

Considers possible external events and describes contingency plans to deal

with potential risks and opportunities. This section describes the principal
sources of risk, the probabilities of occurrence, and the consequences to
the plan. Likely competitive response to the plan is addressed also.

Step 9: Recommendations

Explicitly states the dependencies on, and the required actions of other
ADI entities or external organizations that are necessary if the plan is to be
successful. Particular emphasis is placed on clearly stating required new
technologies and manufacturing capacities.

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 I. Executive Summary

Step 10: Benchmark Plan

Describes functional-level tactical plans that address the key success factors
itemized in Step 2, and considers the implications on the next years' Hoshin and
Business Fundamentals plans.

The Process of Planning

The planning process collects and creates the information presented in the
plan following the format just described. It is by working through the process,
and through the insights it generates, that the real value of Business Planning
is realized. While both the format and process have ten steps, there is a
working order and a presentation order. The planning process begins at a
different point—with customers so that the understanding of users' needs
drives the rest of the thinking. (See Figure 2.)

Figure 2.
Business Planning Process
Presentation Order vs. Working Order

1. Statement of Purpose
2. Five-Year Objectives
Start
{ 3.
4.
Customers and Channels
Competition
5. Necessary Product & Services
6. Development/Introduction Plan
7. Financial Analysis
8. Potential Problems
9. Recommendations
10. Benchmark Plan

The order of the process steps, and the questions one should answer before
advancing to the next step, are shown in Figure 3, page I-7. As mentioned
above, the process begins at Step 3. Steps 3 and 4 are the heart of the process
because, through them, the needs of the customers and positions of the
competitors are understood. The strategy is derived from this insight. The

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 I. Executive Summary

activity then shifts to Step 5 where product (and service) proposals are
considered.

After completing these steps, most organizations find it helpful to return to

Steps 1 and 2 where purpose, mission, and objectives are first hypothesized.
The conclusions at this stage will either validate the assumed purpose and
objectives, or necessitate iterating back through some of the earlier steps.

The real profit from this activity results from designing products for customer
loyalty based on imaginative understandings gained in working through Steps
5 and 6. (The concept of loyalty here goes beyond customer satisfaction and
results in a significantly lower cost of doing business than that required to
attract new customers.)

The financial analysis, Step 7, may raise questions about the practicality of the
financial objectives or the viability of the functional plans. As a result, earlier
assumptions and conclusions will need to be revisited.

As you can see, iteration through the process is a typical occurrence and a
natural consequence of the self-corroboration mechanism inherent in its
design. Discoveries made and conclusions reached at any point in the
Business Planning Process might cause a previous step to be substantially
revisited. While the process ideally doesn't require frequent revisitations of
earlier Steps, experience with the Business Planning Process suggests
otherwise. Since the objective is to create a self-consistent business plan,
revisitations are typically required.

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 I. Executive Summary

Figure 3

Business Planning Process

Step Description Questions to answer before

advancing to the next step
3 Customers and Channels Have you identified which users’ needs offer
the best long-term market attractiveness?
4 Competition Have you targeted specific market segments
on the basis of where you can achieve a
sustainable competitive advantage?
5 Products and Services Have you identified what utility and
(functionality and performance), services, and
vendor attributes will be required to meet
prospects’ expectation and beat the
competition?
1 Statement of Purpose Has a plausible value proposition been
defined?
2 Five-Year Objectives Have you established realistic objectives for
all key success factors?
6 Development and Introduction Will the execution of the functional plans
Plan assure the key success factor objectives are
met?
7 Financial Analysis Does the plan support the financial objectives
in Step 2?
8 Potential Problems Have you developed contingency plans to
deal with unforeseen situations that might
impact the financial results?
9 Recommendations Do you have a process to ensure that the other
ADI organizations you rely on will meet your
expectations?
10 Benchmark Plan Are the plans sufficient to meet you first-year
goals?

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 II. Leading the Business team Through the Process

a Business Planning Process

Section II - Leading the Business Team Through the Process

q Overview

q Three Key Decisions

q Leading Team Processes

q After the Plan is Complete

q Sample Process Timelines

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 II. Leading the Business team Through the Process

Overview

Welcome to the Business Planning Process

Understanding the content of the Business Planning Process, with its emphasis
on rigorous, fact-based analysis, is a demanding undertaking. Just as
challenging, although easily overlooked, is the task of effectively managing
the process. How an organization approaches the process is as important as
the analysis itself because "planning" is the real goal of the exercise, not an
elaborate plan document. The most long-lasting benefits are derived from
achieving goal consensus, focus, and forming a basis for effective
implementation.

While it is logical to assume a data-driven process should flow smoothly from

one objective fact to another, in reality it is not so easy. The environment can
become highly charged as strongly-held opinions and basic assumptions are
challenged.

What You Should Expect from the Process

Like a lot of activities, an organization gets out of the Business Planning

Process what it puts in. Business teams that are committed to fact-based
business strategy decisions and believe in the importance of tightly-coupled
functional plans get a big return out of following the process. The return can
go well beyond incremental improvement and result in real breakthrough
insightif the business team stretches.

But bewarethe greatest benefits are derived out of continuous process

improvement. When viewed most constructively, the activity becomes a way
of looking at the market on a routine basis rather than as an event that happens
once a year.

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 II. Leading the Business team Through the Process

Also, in following the process, one has to have faith in its self-corroborating
qualities. A business team will never have all the data it wants, but at some
point it is important to cut off debate and make decisions. The plan and its
assumptions can be fine-tuned later as more information is gathered. The
logic and flow of the process significantly reduce the risk of making a "wrong
turn" along the way.

Finally, as demanding as the task may be, the benefits of a well-managed

process are enormous: team building, goal consensus, opportunity
prioritization, and focus. They, in turn, all lead to tangible business results in
the form of improved profitability and increased market share. The plan can
even become a "real-time" tool to evaluate new market developments and
opportunities.

Before initiating the process, there are several key decisions the general
manager and functional staff need to make. These will each be described and
then the mechanics of getting the planning team started will be discussed.

Three Key Decisions

Decision #1: What's Your Strategy for Planning?

A business team will be confronted with two different situations when

approaching the planning process: following the Business Planning Process to
develop a plan for the first time or using the process to update an existing
plan.

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 II. Leading the Business team Through the Process

In Following the Process for the First Time, Two Basic Options are Available:

1. The incremental approach is appropriate when the present business is

reasonably successful and significant market changes are not expected to
occur in the next two to three years.

Following this method, the organization adheres to the intent of the steps
but uses existing or readily accessible data to develop a provisional plan
for the first year. Learning from the process, the group institutionalizes
new data gathering processes to validate the Benchmark plan assumptions
and to support a more sophisticated analysis the second year.
This technique may also be used when the functional staff is unable to
commit sufficient resources for original research.

2. The alternative could be described as the full-scale approach, which

should be seriously considered when an organization is a new one, the
business is not performing well due to major changes in the market, or the
management team suspects its basic assumptions about the business may
no longer be valid.

In this approach, the functional staff makes a significant investment of its

time and the time of key managers throughout the organization by pulling
people "off-line" from routine responsibilities in order to do research and
study the market.

Updating an Existing Plan

The process of updating an existing plan is basically one of validating or

revising prior assumptions by incorporating data gathered since the prior
plan. The self-corroborating and iterative properties of the Business Planning
Process ensure the planning team reaches a consistent set of conclusions,
provided they make a focused effort to refine research methodologies and
prove or disprove assumptions.

A certain amount of planning time will be needed to update a plan, but it

seldom requires intense effort unless the underlying assumptions, for whatever
reason, have been disproved.

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 II. Leading the Business team Through the Process

Decision #2: How Comprehensive Should Your Process Be?

Besides drawing high-quality conclusions and building goal consensus among

the team members, the question arises of how ambitious the organization
should be in the creating a comprehensive plan.

The most successful practitioners of Business Planning say the process should
be considered as a tool for continuous process improvement. It can take three
or more years of business planning iterations to reach the point when the full
value of the benefits are realized. According to their experience along the
way, an organization:

q Learns more each year and gets more efficient in the process.
q Gathers better quality data.
q Achieves finer resolution and greater accuracy in testing hypotheses.

While the team should touch on all the process steps the first year, certain
steps should be given priority. The amount of effort put into the remaining
steps depends upon the extent of existing plans and how much time the staff
has available. A typical scenario for an ongoing business might be to
emphasize Steps 3/4, 2 and 8. (This assumes the organization already has a
purpose, product plans, and functional plans of some kind.) The second year
the majority of the effort would be on Steps 3/4, but additional emphasis
would be put on doing a more rigorous job with Steps 1, 5, 6, and 9.

The point is to decide what steps to emphasize given the team's experience
and the resources it is willing to commit. The other parts of the plan can then
be refined in future years.

Refer to Section III, "Assessing an Organization's Planning Performance," for

the description of metrics for planning proficiency.

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 II. Leading the Business team Through the Process

Decision #3: Who Should Be Involved and How Should the

Planning Team Be Organized?

The ideal Business Planning team would be composed of representatives from

all relevant functions and from other organizations upon which the entity
depends. This would typically include R&D, marketing, manufacturing, sales,
finance, quality assurance, and human resources.

How the team is organized and functions depends to some extent on the
situation. Those entities involved in one business typically organize one
planning team with the general manager and functional managers making the
key decisions as a unit, with extensive collaboration from the extended staff.

Entities with multiple businesses, on the other hand, have found it helpful to
establish multi-disciplinary teams for each business, usually led by a
functional manager. These teams draw most of the conclusions themselves
and then make final plan recommendations to the combined functional staff.

Regardless of the approach, certain individuals or groups take on special roles

and responsibilities important to the success of the process.

The General Manager is the owner of the process and is responsible for the
quality of the results. He or she:

q Initiates and drives the process.

q Obtains and commits resources; removes obstacles.
q Chooses a facilitator.
q Leads the functional team in making decisions.
q Communicates the plan to all employees.

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 II. Leading the Business team Through the Process

A facilitator is critical to the success of the planning effort because he or she

ensures the process quality and produces the deliverables. The facilitator is
frequently a functional or section level manager from Marketing, R&D,
Finance, or Quality. He or she should possess expert knowledge of business
issues, group facilitation, and the Business Planning Process. The facilitator:

q Teaches the team about the process and coaches them through.
q Manages process mechanics (scheduling, communications, issue
escalation).
q Helps derive and test hypotheses through fact-based analyses.
q Guides the team through successive iterations as circumstances require.
q Encourages creativity and breakthrough thinking.
q Integrates thoughts and oversees the production of deliverables.
To accomplish much of the work and involve those people with the most
detailed knowledge of the markets, technologies, and operating processes, the
GM forms a planning team consisting of the functional staff and key
department heads. This team is frequently expanded to include peer level
managers from partner organizations and other individuals whose expertise is
helpful with specific tasks.

Working groups are organized to:

q Gather and analyze data.

q Define issues in assigned areas.
q Brainstorm solutions.
q Help make decisions; develop functional plans.
q Write sections of the business plan.
q Propose alternatives and recommend a course of action where business
teams have been formed.

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 II. Leading the Business team Through the Process

The Functional Staff, as a body, then:

q Guides the progress of the work groups, resolving resource issues as they
arise.
q Reviews the results and conclusions.
q Decides the classification schema used as the basis for research, user
needs segmentation approach, target markets, business strategy, and
objectives.
q Oversees functional plan development and goal congruence.
q Defines issues that form the basis for continued work and fine-tuning of
plan elements over the succeeding year.
q Integrates plan elements into a coherent aggregate-level plan for the
organization when multiple businesses exist within the entity.

Leading Team Processes (Refer to Figure 4)

Building a Foundation:

To start the process, the General Manager, functional team, and facilitator
need to meet and make some key decisions.

1. They should agree on the goals and scope of the process for the next
iteration:

q Is the strategy for plan development incremental or full-scale?

q What steps will be given the most emphasis?
q What should the deliverables encompass?
q How will the team measure the success of the process?
q How will the output link to the Division's business strategy?

Visualizing what the output of the process will be for example, a set of 20
slides documenting the conclusions or a detailed 100-page
documenthelps set everyone's expectations of what the end product
looks like.

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 II. Leading the Business team Through the Process

2. The staff needs to decide what resources are involved and how they are
organized:

q Who should be involved in the process (including partner

organizations)?
q Will the planning be done by business teams or directly by the
functional staff?
q What kind of time commitment is expected?
q What investment in resources is the staff willing to make? (This will
dictate how many steps can be emphasized in a given year and
ultimately how many years of plan iterations will be required to
achieve a validated, self-consistent plan.)

3. Finally, the staff should agree on a work plan including:

q A set of operating procedures.

q Work team assignments.
q Review and approval mechanisms.
q Project time line and budget.

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 II. Leading the Business team Through the Process

Figure 4
Flow Diagram of the Business Planning Process

GENERAL MANAGER
• Considers process objectives and strategy
• Chooses a facilitator

FUNCTIONAL TEAM
• Defines process objectives, strategy
• Time commitment, schedule
• Procedure, organization
• Participants

KICK-OFF MEETING
• Understand process structure and expectations
• Organize teams
• Review procedures and schedule
• Communicate assignments

WEEKLY WORK GROUP MEETINGS MONTHLY FUNCTIONAL STAFF REVIEWS

• Review data, work issues • Track progress, maintain pace
• Share insight • Provide advice, feedback
• Brainstorm solutions • Share insight
• Prepare draft materials for functional review

KEY MILESTONE REVIEWS BY FUNCTIONAL STAFF

• Decide schema
• Discover segments
• Target segments
• Decide business strategy elements
• Decide objectives
• Approve product strategy
• Integrate functional plans
• Review financials
• Review issues/recommendations

FACILITATOR EDITS DELIVERABLES GM APPROVES PLAN

GENERAL MANAGER AND FUNCTIONAL STAFF

Performance significantly
different from expectations • Communicate the plan to all employees
• Monitor performance against goals

Market changes invalidate

assumptions, bring into Track business environment for significant changes
questions ability to meet
objectives

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 II. Leading the Business team Through the Process

Starting Off on the Right Foot:

When the staff is clear on what they want to accomplish and how, the
next activity is to hold some sort of kick-off meeting or off-site meeting
to get the rest of the planning team behind the program.

For the first few years this meeting is very critical for building
commitment to the process and enthusiasm over the potential results.
Any equivocation on the part of the General Manager or the functional
staff will be quickly recognized. If this is perceived, then the activity
will be viewed as a "fire drill," and the process loses much of its
potency.

The discussion during the meeting should focus on achieving the

following goals:

q Creating a common understanding of how the overall planning process

will work and faith that data inadequacies early in the process will be
addressed in later stages.
q Setting expectations about how the plan will be used, what benefits
should result, and what the deliverables should look like.
q Making visible strongly-held opinions and "hidden agendas."
q Communicating the overall schedule and everyone's expected time
commitment.
q Describing the organization and roles of the work groups or business
teams, announcing leaders, and assigning members.
q Defining preliminary high-level work plans and assigning tasks for next
review meetings.

In later years the emphasis shifts to reinforcing commitment and

establishing improvement goals for the previous year.

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 II. Leading the Business team Through the Process

Working the Process:

The work teams then define their own work plan and schedule. They
meet regularly, perhaps weekly, to track progress, share insights,
brainstorm solutions, and develop alternatives. Some groups find it
helpful, at the beginning, to develop what are called "ghost charts" to
visualize what kind of findings (tables, pie charts, and so on) they would
like to work toward gathering as they proceed.

When tasks span a long period of time, then progress review meetings
with the functional staff are advisable to confirm direction, get feedback,
and share knowledge.

Achieving Consensus:

As the teams' work reaches key process milestones, discussions

involving all parties should be held to achieve consensus. One
approach is to hold offsite meetings where all members evaluate
alternatives and participate in the decision process. Alternatively,
the functional staff could sponsor review meetings.

The process milestones include:

q Agreeing on a schema to be used as the basis for preliminary research.

q Defining needs and discovering users' needs segments.
q Targeting specific segments.
q Deciding business strategy elements (such as the value proposition* and
basis for competitive advantage).
q Defining objectives.
q Approving product strategy.
q Integrating functional plans.
q Approving financials.
q Defining issues or recommendations.

* See Section VI, "Key concepts," for an explanation.

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 II. Leading the Business team Through the Process

While the team is working through the steps, the facilitator

maintains communications between teams and the functional staff
so they share knowledge and achieve synergy. The facilitator keeps
the program on schedule and escalates issues, as needed, to keep
the process on track.

During this period, the facilitator must behave in two apparently

conflicting ways. On one hand, he or she must encourage a
rigorous evaluation of needs hypotheses against the cold light of
objective data. On the other hand, at the stages when imaginative
understandings and creative applications are sought, the facilitator
must encourage brainstorming and breakthrough thinking.

Drafting the Conclusions:

As the steps are completed, even if the validation process is not complete,
the work groups should capture a rough draft of the conclusions in both
summary slides and supporting documentation. The material can be
revised, as needed, if conclusions change through successive process
iteration.

The facilitator then edits the final drafts into a single package as originally
agreed to by the functional staff.

As mentioned earlier, it is through the process of planning, not the document

itself, that the planning team really benefits. The decision on what level of
detail to put into a document is strictly up to the functional staff and what they
feel is helpful to them in managing the business or in communicating their
direction to others.

It can be especially helpful to document the plan with a set of approximately

20 slides. This format is useful for communication purposes and is easy to
update.

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 II. Leading the Business team Through the Process

After the Plan is Complete

Don't Forget to Communicate the Plan Throughout the

Organization

One of the most potent benefits of any planning exercise is to achieve a state
where each employee has internalized enough of the key concepts of the plan
so he or she understands the mission, and can personally relate their job
objectives to the value proposition. To reach this condition, it is imperative
the General Manager and functional staff personally communicate the plan to
all employees and help them understand what it means for their work.

You're Not Done Yet!

To be a useful, real-time management tool, the plan needs to be kept current.

To accomplish this, some form of performance and "environmental" tracking
mechanisms should be implemented to monitor changes that do one of the
following:

q Bring into question being able to meet the objectives.

q Invalidate the assumptions.

When such a situation occurs, part of the planning team should reconvene
to assess the situation, consider the implications, and recommend
appropriate adjustments to the plan. (An experienced Business Planning
team should be able to make such adjustments two or three times in a
single year, taking a couple of weeks for each "mini-turn" of the plan.)

The period between plans is also the time to follow through on issues raised
during the process that require ongoing work, such as gathering more data,
refining assumptions, or tuning the plan.

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 II. Leading the Business team Through the Process

Doing It Better Next Time

Fortunately, the self-corroborating nature of the Business Planning Process

assures, over a succession of years and if the process is rigorously adhered to,
the plan becomes more precise and focused. Don't expect perfection the first
year. In any iteration, it is important to learn what you want to do better the
next time. The goal when leaving the present planning cycle should be to
assess what went well and what should be improved in the next year. This
will likely include incorporating improved routine data gathering mechanisms
so by the next iteration the business team has better information on which to
base decisions.

Sample Process Timelines

Sample time lines are offered for two different planning scenarios. Figure
5 shows a schedule for a first time planning effort following the "full
scale" approach. Note that five weeks are allotted for primary research.
In contrast, Figure 6 depicts a schedule for an early update to a pre-
existing plan. This assumes research is done continuously during the year
so the planning process relates exclusively to revising assumptions and
making decisions.

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 Figure 5
Sample Timeline - Full Scale Approach

ACTIVITY WEEKS
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

General Manager Objectives & Strategy

Pick Facilitator x

Functional Staff Decisions

Kick-Off Meeting/Planning Objectives ...
Secondary Research
Decide Schema
Primary Research
Discover Segments
User/Channel Needs (Customer) 3
4
Competitive Advantage (Competitors)
5
Necessary Products/Services
1

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Purpose and Mission
2
Objectives
6
Development/Implementation Plans
7
Cost Implications/Financial Analysis
Potential Problems 8
9
Recommendations
Plan Approval
10
Benchmark Plan

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II. Leading the Business team Through the Process
 Figure 6
Sample Timeline - Annual Update Process

WEEKS
ACTIVITY 1 2 3 4 5 6 7 8 9 10

Functional Staff Decisions

Lock-Off Meeting

Secondary Research Search

Organize Primary Research Data

Validate/Revise Segmentation
3
User/Channel Needs (Customers)
4
Competitive Advantage (Competitors)
5
Update Necessary Products/Service

Revisit Purpose 1
2

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Update Development/Implementation Plans
6
Cost Implications/Financial Analysis
7
Revise Potential Problems
8
Revise Recommendations

Plan Approval 9

10
Benchmark Plan

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 III. Assessing an Organization's Planning Performance

a Business Planning Process

Section III - Assessing an Organization's Planning Performance

q A Tool for Self Assessment

q A Guide for Planning an Entity's

Development

q Criteria for Classifying Business

Planning Sophistication

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 III. Assessing an Organization's Planning Performance

A Tool for Self Assessment

When a business team sits down to develop a business plan they frequently seek
out examples of best practices they can learn from and emulate. General
Managers often want a way to measure progress in their planning activities.

To support this, the following table has been assembled, based on the combined
experience of many different Business Planning Process users. The table provides
a series of (qualitative) metrics of planning performance. It describes three levels
of performance, beginner, intermediate, and advanced, along twelve dimensions:

q Two deal with the rationale of planning (Why create or review a plan?)
q Eight address the mechanics (What are the characteristics of a good plan?)
q Two describe the benefits (What value does the plan provide?)

In most instances, the criteria are additive as you read from left to right on a given
dimension. While the concepts are admittedly imprecise and there are shades of
gray between levels, the intent is to provide a benchmark for organizations
involved in the planning process, and a means by which they can learn what
would be required to advance to a "higher level" of planning sophistication.

A Guide for Planning an Entity's Development

Understanding where you are is the first step toward moving to your next
destination. Therefore, the suggested way to use these criteria is to determine
which category best describes your organization for each dimension. You may
discover you fall in the beginner category in many instances, but in the
intermediate or even advanced category in others.

Once you have calibrated where you are, the question arises whether this is where
you want to be. Consider the costs and time required to move to the right on the
mechanics dimensions and weigh this against the value of becoming more
advanced in the benefits dimensions.

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 III. Assessing an Organization's Planning Performance

While the self-corroboration property of the process to some extent naturally

pushes organizations from left to right on successive iterations, the migration can
be significantly sped up by conscious planning and goal-setting.

Criteria for Classifying Business Planning Sophistication

Dimension Beginner Intermediate Advanced

RATIONALE
Motivation to • Driven by events • Focus efforts of team. • Continuous process
do planning (e.g. BMP) with • Driven by events but improvement (events
little continuity planning results become snapshots).
in plans between cumulative.
occurrences.

Planning • Seldom revisit • Some review of • Results used to drive

PDCA results. results after the fact. future plans.
• Attention to • Emphasize under- • Living (organic) plan.
accuracy of data standings (getting • Focus on creativity.
and drawing into customers'
sound minds).
conclusions.
MECHANICS
Approach to • Segments based • Segments based on • Segments based on
Segmentation on common common usage common preferences
background or environment, i.e., and purchase behavior
demographics application or (variables inferred
(e.g. industry, attribute requirements from chooser clusters).
company size). (e.g. high speed or • Match value
low power). proposition to "value
segments."

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 III. Assessing an Organization's Planning Performance

Criteria for Classifying Business Planning Sophistication (con’t)

Dimension Beginner Intermediate Advanced

MECHANICS
Insight to • Use anecdotal • Conduct specific • Develop rigorous
User's needs information research into user quantitative model of
(trip reports, needs (customer chooser behavior.
customer interviews, choice • Understand target
visits). modeling, focus prospects' value chain.
groups).

Extent market • Hold data and • Information centrally • Widely share

knowledge understandings accessible. knowledge and insight.
shared individually. • Implement an on-line
database to record and
sort needed
information.

Understanding • Track market • Regularly search • Systematically gather

of competition moves and secondary sources and competitive data from
product piece together distribution channels.
strategy. competitive • Understand cost
• Collect data on intelligence. implications of
competitors' • Reverse engineer competitors' value
shares. products to derive delivery systems.
manufacturing costs. • Predict competitors'
• Estimate other moves.
elements of cost • Understand
structure such as R&D competition globally.
expenses, sales costs,
etc.

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 III. Assessing an Organization's Planning Performance

Criteria for Classifying Business Planning Sophistication (con’t)

Dimension Beginner Intermediate Advanced

MECHANICS
Insight into • List competitive • Conduct an early stage of • Perform best in class
competitive strengths and product bench-marking benchmarking.
advantage weaknesses. (incorporate direct • Understand competitive
customer feedback). advantage in context of
• Link each strength and customers' value chain.
weakness to user needs • Model implications of
and prioritize. competitors' strategies
on chooser shares.
• Have a system for
continually developing
new competitive
advantage.

"Imaginative" • Plan in terms of • Extrapolate usage • Project future utility

understanding present patterns to define next needed to solve user
of necessary competitor parity generation needs. problems.
products or superiority. • Track customer priorities • Consider alternative
for performance levels ways of providing
and feature sets. utility in context of
• Use basics of Quality customers' value chain.
Function Deployment • Understand what
(QFD) -- 1st House. customer "dreams of"
• Explicitly recognize for a solution.
necessary core • Use deployment
competencies as an attributes of QFD.
organization.

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 III. Assessing an Organization's Planning Performance

Criteria for Classifying Business Planning Sophistication (con’t)

Dimension Beginner Intermediate Advanced

MECHANICS
Quality of • Produce: Product • Produce: Product & • Produce: Product &
implementation & Marketing Services, Sales & Services,
planning plans. Marketing, • Channel & Marketing,
• Understand basics Manufacturing & Quality Manufacturing &
of cost, time-to- plans. Quality, Skills/Training
market, and • Discuss plans with & Technology plans.
functionality partner organizations. • Integrate plans with
tradeoffs. • Consider make vs. buy. partner organizations.
• Evaluate partnering • Match value delivery
options (external and system to value
internal). proposition.
• Anticipate risks of • Develop contingency
possible external events. plans for risk scenarios.
• Work issues to fine-tune
strategy decisions on a
continuous basis.

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 III. Assessing an Organization's Planning Performance

Criteria for Classifying Business Planning Sophistication (con’t)

Dimension Beginner Intermediate Advanced

MECHANICS
Scope of • Extrapolate • Forecast based on • Forecast based on
financial revenues. market model. industry life cycle model.
analysis • Project • Produce income • Analyze cost of value
departmental statement. chain activities.
costs based on • Project capital • Implement cost-drive
ratios or investments. based interactive
headcount. • Understand cash flows. modeling tool.
• Produce pro forma
financial statements
under various risk
scenarios.
• Evaluate present value of
future cash flows.
BENEFITS • Organization • Functional plans linked • Employees understand
Internal focus objectives directly to meeting mission and can relate
achieved understood and Hoshin and key success their job objectives to the
key success factor objectives. value proposition and
factors tracked by strategic intent.
functional staff. • Key success factors
• Key elements of widely recognized and
plan com- tracked.
municated widely • Channels directed at high
to employees and probability prospects.
partners.

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 IV, V, & VI – 10-Step Planning Process, Tools/Templates, Product/Technology Development

a Business Planning Process

Section VI, Product and Technology Development was added to the ADI
Business Planning Process (BPP) in June of 1998. This section was designed to
explain the important linkages between the BPP and the New Product and
Technology Development Processes. In addition, nine new tools have been
added to Section V, Tools and Templates. These tools are based on the
research, “Revolutionizing Product Development,” by Wheelwright and Clark of
Harvard Business School and the Marketing Skills training material presented by
Chris Halliwell of The California Institute of Technology.

The numbering sequence of the BPP sections has changed to reflect the
addition of the Product and Technology Development section.

q Section IV - Executing the Business Planning

Process

q Section V - Tools & Templates

q Section VI – Product and Technology Development

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 IV & V. Executing the 10-Step Process & Tools & Templates

a Business Planning Process

Section IV - Executing the Business Planning Process
Section V - Tools & Templates

q Steps 3/4: Customers and Competition

q Step 5: Products and Services
q Step 1: Statement of Purpose
q Step 2: Five-Year Objectives
q Step 6: Development / Introduction Plan
q Step 7: Financial Analysis
q Step 8: Potential Problems
q Step 9: Recommendations
q Step 10: Benchmark Plan
q Tools & Templates

Executing the Business Planning Process

There is a difference between the working order and the presentation order of
the steps. The following section takes each step, in working order, and:
describes its goals and objectives; recommends process objectives; lists
references or tools to assist in the process; and concludes with a suggested set
of self-audit questions.

Note:
The terms "users" and "customers" are frequently used interchangeably
although they are different. "Users" are the individuals who apply the product
to solve the end problem, while "customers" are the economic buyers
responsible for approving the purchase. For simplicity in this document, we
will employ the word "users" to mean both users and customers.

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 IV & V. Executing the 10-Step Process and Tools & Templates

Step 3 and 4: Description of Customers, Channels of

Distribution, and Competitors

Goal:
To define and prioritize market segments on the basis of market demand and
then to target specific segments on the basis of sustainable competitive
advantage.

Note:

It is strongly recommended Steps 3 and 4 be approached simultaneously

because real contribution derives from imaginative understandings of
users' needs and users' measures contribution relative to the competition.
You will also find market research efforts can very logically focus on
both at the same time. For these reasons, the recommended process
description for these steps will be combined.

Objective:
The purpose of Steps 3 and 4 is to target market segments that are financially
attractive and in which ADI has a high probability of achieving a leading
market position. Doing this will involve four activities:

1. Imaginatively understanding customers' and users' needs.

2. Identifying the most attractive global market segments.
3. Determining ADI's basis for competitive advantage.
4. Choosing the most appropriate channels of distribution.

Specifically, the objectives of Step 3 are:

o To develop a thorough understanding of users' current and future needs.

o Tentatively select a limited number of attractive market segments.
o To generate an understanding of alternative channels' business needs and
customers' needs related to distribution.

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 IV & V. Executing the 10-Step Process and Tools & Templates

The objectives of Step 4 are:

o To determine competitor positions in the targeted segments.

o To identify competing vendors' strengths and weaknesses.
o To understand ADI's potential basis for achieving competitive advantage.

For both the customer and competitor analyses, it is important that all of the
following issues are examined:

q Strategic Perspective

• Market Structure and Dynamics

• Strategies of Major Players
• Organization and Relationships
• Products and Technologies

q Operational Perspective

• Quality – Requirements, Standards, and Capabilities

• Cost – Leaders and Structures
• Delivery – Backlogs, Capacities, and Requirements
• Innovation – Processes, Manufacturing Technologies, Life Cycles,
Hit Rates, Recent Successes and Failures, and Time-to-Market
• Responsiveness – Information Flow and Logistics

q Financial Perspective

• Profitabilities
• Capital Intensities
• Investment Histories
• Risks
• Leverages
• Breakevens
• Economics

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 IV & V. Executing the 10-Step Process and Tools & Templates

As stated earlier, two of the major objectives of Steps 3 and 4 are to segment
the market based on users' needs and then to target specific segments based on
ADI's ability to sustain a competitive advantage. In other words, the goal is to
match ADI's strengths and weaknesses to users' needs. To better understand
these objectives, an understanding of segmentation, competitive advantage,
and the concept of a value chain are particularly important. If the reader is
unfamiliar with these topics, refer to Section VIII, "Key Concepts".

Recommended Process:
Business Planning is an iterative process of data collection, hypothesis
generation, and validation. The information gathered in Steps 3 and 4 will
help the business team to tentatively select global market segments on which
to focus and to begin developing a strategy for competitive advantage.
However, as specific product ideas are tested, as ADI's strengths and
weaknesses are assessed, and as the financial consequences are understood,
these initial hypotheses may need to be reconsidered.

The outline for the process of Steps 3 and 4 is as follows (refer to Figure 8):

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 IV & V. Executing the 10-Step Process and Tools & Templates

Figure 8

A Collect Existing
Information-Custom ers,
Channels, Competitors

B Analyze Market,
Pick Focus for
Investigation
la ter iteration

C Conduct Research
into N eeds, Buying
Factors, Purchase F Perform Quantitative
Process Research to Develop
Deeper Understanding
of Target Segments
(Ongoing)
D Discover M arket
Segm ents

E Analyze Market
Attractiveness and
Target Segments

Steps 1, 2

A. Collect and Organize Existing Information on Customers,

Channels, and Competitors.

Collecting and organizing existing (secondary) information on the

market and competition is a cost-effective way to begin the process.
Insights gained from this information will help focus future research
efforts.

1. If yours is an existing business, begin by gathering data about the

market for the present product offering. This should include both
the demand side (customers and channels) and the supply side
(competitors) of the business.

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 IV & V. Executing the 10-Step Process and Tools & Templates

2. Consider substitute products or technologies. Are technology

discontinuities possible or likely? Are new ways of solving the
same customer problems emerging? If so, expand your research
focus to this (larger) served market.

B. Analyze the Market and Pick a Focus for Investigation.

Based on previously collected market data, the idea is to narrow the

scope of the investigation of market attractiveness.

In approaching this activity, business teams are often tempted to try to

segment the market along dimensions they think explain differences in
product need. The trap here is that segments are not something a
business defines. Market segments as defined here are categories
prospects put themselves into as a result of exhibiting similar purchase
behavior when confronted with product alternatives.

1. The goal of the first step is, therefore, to define a useful schema for
classifying potential customers with the objective of focusing the
business team's energies on those categories that seem the most
attractive. The rationale used for picking a classification schema
should include: it offers a fair probability of being a first-order
determinant of purchase behavior, and it lends itself to data capture
and quantification. (See Tool 1.)

2. Use this schema to analyze the data and quantify market size and
growth rate by category. Consider the geographical and
distribution dimensions. Where possible, compare several sources
of information to validate the estimates. (See Tools 1, 2.)

3. Similarly, quantify vendors' share by category as well as the

dynamics of their positions. Assess the strengths and weaknesses
of their positions. (See Tool 3.)

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 IV & V. Executing the 10-Step Process and Tools & Templates

It is not uncommon to find incomplete data or contradictory sources. In

these circumstances the team will need to make an educated guess to fill
in the blank spaces. While this makes some people uncomfortable, the
self-corroborating property of the Business Planning Process makes
accuracy at this phase less critical since key decisions are based on
primary research.

4. At this point, the business team reviews the findings and prioritizes
those market categories that offer the most promise in terms of
market size, growth rate, and competitive position. The bottom
line criteria are ability to win and size of return. (See Tool 4.)

C. Conduct Research into Customer and Channel Needs, Key

Buying Factors, and Purchase Process.

After selecting groups of potential customers for further investigation,

the goal at this stage is to gain insight into user needs and purchase
processes based on primary research.

1. Begin by creating a framework for organizing and analyzing data.

Part of this step involves visualizing how the team will want to
analyze the data and depict the findings. To the extent these
qualitative research techniques will be employed on a continuous
basis, serious consideration should be given to an automated
database.

The scope of the research should span at least four areas:

a. Customer and User Needs. For example: What problems are

users trying to solve? What activities do they emphasize in
their value chain that present an opportunity for a supplier to

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 IV & V. Executing the 10-Step Process and Tools & Templates

make a contribution? What utility do they expect from a

solution? What do they "dream" about? What attributes do
they desire from the product, services, or vendor? What is
needed to qualify as a supplier? Meeting what needs would
really differentiate a supplier in the customer's mind? (See
Tools 5, 6, 7, 8.)

b. Purchase Process. For example: What are the key factors

that influence the purchase process? Who are the decision
makers and influencers in the buying process? How is
budgeting handled? (See Tools 8 and 9.)

c. Spending Plans. For example: What is the annual budget for

this kind of product? How is this spending rate expected to
change in the future? (See Tool 8.)

d. Vendor Positions. For example: What are the strengths and

weaknesses of the different vendors in meeting the users'
needs? How are different vendors perceived by customers?
What share of their business do they give different suppliers?
Why? How is this changing? (See Tool 8.)

In addition to explaining the situation today, this primary research is

critical to develop an understanding of changes or trends in these areas.

2. Within the defined framework, start the information collection by

transcribing existing primary data from customer visits, trip
reports, focus groups, trade show discussions, and so on, into the
data template. This exercise essentially captures present working
assumptions which are valuable to document and important to test.
(See Tools 10 and 11.)

3. Gather the appropriate research instruments, conduct the research,

and begin building a fact-based model of the market to validate
prior assumptions.

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 IV & V. Executing the 10-Step Process and Tools & Templates

New organizations, or organizations lacking a satisfactory data pool,

typically undertake an intensive customer interview and survey program
covering a "strategically significant" sampling of potential buyers in all
the market areas defined in B above. Other organizations with a wealth
of prior data usually take a more incremental approach and install a
process of interviewing customers on an ongoing basis. If this latter
group has insufficient coverage or out-of-date information in certain
market areas, these areas would be the immediate focus of their
investigations.

At this stage the research can include both qualitative techniques, such
as interviews and focus groups, and more quantitative methods, such as
choice modeling. Because statistically valid research is a longer term
proposition, it is typically addressed as an ongoing implementation issue
and will be addressed more directly under F. (See Tool 12.)

4. In addition to exploring customer needs with respect to

distribution, it is also important to understand the needs, business
requirements, and decision criteria of specific channel
organizations. Although they are not the end users, understanding
needs of alternative channels is critical in developing an effective
product offering and channel strategy.

D. "Discover" Market Segments.

This phase of the process involves using the qualitative and quantitative
needs information to segment the market along the lines of chooser
preferences.

1. Analyze the data and identify clusters of prospects with common

choice criteria. These groups constitute true benefit segments.
(See Tool 13.)

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 IV & V. Executing the 10-Step Process and Tools & Templates

Look for "common denominators" (demographics, usage

environment, purchase process, and so on) that would enable you
to predict where the prospects in these segments are found.

Relate these conclusions to the original schema in B to verify if it

is a useful framework for explaining purchase preferences.

2. In qualifying segments, the following issues should be considered:

each identified segment should be characterized by a set of
common customer requirements; each should have measurable
characteristics; each should have identifiable competitors; each
should be small enough to reduce competition or to protect a
position against competition; and each should be served by a
common sales or distribution channel. (For more information refer
to Section VIII "Key Concepts.")

3. Finally, consider the communications and distribution implications

of reaching these end user segments. Now that you know where
they are found, what is the best way to tell prospects your story?
What value proposition will be most appealing?

E. Analyze Market Attractiveness and Target Specific

Segments.

Based on factual information, the goal here is to prioritize the

attractiveness of the various segments and then to focus limited
resources on a few market opportunities where ADI has a high
probability of winning.

1. Apply the data gathered in A to the objective of quantifying or

verifying the market size and growth rate for the newly-defined
segments. (See Tools 2 and 14.)

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2. Do the same in deducing competitors' relative shares in these

segments. A complete competitive analysis should include the
following for each segment:

o Competitors' strengths and weaknesses relative to their ability

to deliver the key benefits desired by each segment.

o Competitors' business and market strategies relating to these

segments. (How much of their revenue and profit derives
from these segments? What is their value proposition? What
are their distribution approaches?)

o What positions do the competitors hold in the minds of the

customers in these segments?

o What technological core competencies do competitors possess

that give them competitive advantage?

(See Tools 15, 16, 17, 18 and 19.)

(In addition to analyzing ADI's traditional competitors, consider

potential threats from other organizations that are delivering benefits
similar to those desired by the target market.)

To the extent that the discovered ''benefit segments" differ markedly

from the classification schema used in B, you may need to gather new
data to quantify their size and competitors' shares.

3. Assess the probability of successfully competing in the market

segments. Are there grounds to believe that a number 1 or 2
position is achievable over a five year period? Is this position
sustainable? If not, can the market be further segmented in a way
to find a niche with an increased probability of success?
(See Tools 4, 9, 18, 19, 20 and 21.)

If sub-segments are defined in this way, be sure to iterate back through

Steps 1 and 2 to quantify the market parameters in this narrower context.

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4. Model which channels serve these segments and the amount of

product that flows through each. In order to choose market
segments and devise an appropriate marketing strategy for each,
understand:

q Purchase and distribution preferences of customers.

q Cost of sales in the channel.

q Channel strategies of competitors.

q ADI's strengths and weaknesses in each channel.

(See Tool 22.)

5. Analyze industry attractiveness from the standpoint of long-term

profitability. The question here is: to what extent will the structure
of the industry make it an attractive market to invest in? Five key
factors should be considered (refer to Section VIII, "Key
Concepts"):

q Rivalry among existing competitors.

q Bargaining power of buyers.

q Bargaining power of suppliers.

q Threat of entry by new competitors.

q Threat of substitute products or services.

6. As a business team, prioritize the segments on the basis of at least

three criteria: Size and growth rate, ability to make a profit, and
ability to compete successfully. (See Tools 23 and 24.)

7. Based on the resources available and the leverage between

segments, conclude by tentatively targeting specific segments for
the business.

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F. Perform Quantitative Research to Develop a Deeper

Understanding of Target Segments.

The ongoing phase of Steps 3 and 4 is the process of refining the team's
understanding of the target segments in a statistically projectable way.
This is helpful in fine-tuning segment definitions, developing a
quantitative basis for prioritizing solution requirements, testing value
propositions or product concepts, and learning how to reach prospects.

While qualitative research can be used to gain an understanding of

customers' decision criteria, the findings will not lend themselves to
quantification and are not readily projectable. In order to predict
behavior, quantitative research, such as surveys or choice modeling, is
desirable.

1. Begin by defining a research methodology to support your

objectives. Potential areas of investigation might include: product
concept testing, prioritization of product benefits or attributes,
vendor perceptions, and distribution preferences. (See Tools 12
and 25.)

2. Conduct the research in a rigorous and statistically reliable fashion.

3. When a large number of alternate distribution channels are

involved in a market, consideration should be given to developing
a statistically valid model of their business needs that enables
predicting channel behavior when confronted with various supplier
business proposals.

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Audit Questions:

Step 3: Customers and Channels

q Do you have a thorough understanding of what problems customers and

users are trying to solve, and how they are likely to evolve over the next
five years?
q Do you have data on the criteria individuals involved in the buying
process use to make purchase decisions?
q Have you used appropriate secondary and primary research techniques to
discover benefit segments? Have you researched global opportunities?
q Have you identified customer satisfaction measures?
q How different are the needs in the segments you've discovered? What are
the differentiating needs in each segment? To what extent do the buying
forces and processes differ?
q Have you segmented the market narrowly enough to reach the point
where you can confidently predict achieving a number one or two
position by the end of the five-year period?

Step 4: Competitors

q What are the competitors' strategies for the segments? What barriers to
entry and exit have they created? What is truly unique about their actions
or behaviors relative to the rest of the pack?
q Have you quantified different vendors' strengths and weaknesses relative
to each buying factor in the target market segments?
q How committed or focused is each competitor in the segment? What are
the differences, if any, between what they say and what they do?

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Audit Questions (con’t):

Step 4: Competitors (con’t):

q Have you defined a basis for sustainable competitive advantage for ADI?
For differentiation through the value chain? Do you have a strategy for
circumventing and exploiting barriers to entry?
q Do you know what positions different vendors hold in the customers'
minds today? How will their perceptions of ADI need to change in order
to meet your goals?

q What conclusions have you reached about the likelihood of a given

competitor's future success in a given segment? What actions stem from
these conclusions?
q Does your plan include and fully comprehend key technology
discontinuities which could radically alter the competitive landscape?

Resources:
Books and Articles:

o "The House of Quality" - An article by John Hauser and Don Clausing,

Harvard Business Review, May-June 1988.
o Competitive Advantage by Michael E. Porter, Free Press, New York,
1985.
o Competitive Strategy by Michael E. Porter, Free Press, New York, 1980.
o How to Gain (and Maintain) The Competitive Advantage in Business by
William E. Rothschild, McGraw-Hill, New York, 1984.

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Step 5: Description of Necessary Products and Services

Goal:
To specify a set of products and services that imaginatively address users'
needs and prospect organizations' value chains and, thereby, win customer
loyalty.

Objective:
The purpose of Step 5 is to describe what benefits or uses are to be provided
to customers, not how. These benefits are described from the potential buyers'
point of view and in their terms. Step 5 should generate the right answers
from the customer's point of view, using whatever level of abstraction
customers feel most comfortable with. (Product implementations are the
subject of Step 6.) The concepts should be considered in the context of the
prospects' value chain since this way of thinking helps define the scope of the
benefits to be addressed, and also encourages creativity in considering related
services that may increase the perceived value of the supplier.

In this step, creativity joins with imaginative understanding. As such, thinking

should be unconstrained. Ultimately, the goal is to specify what utility,
services, and vendor attributes will be required to imaginatively meet users'
needs and build a sustainable basis for competitive advantage and customer
loyalty.

Recommended Process:

A. Review the Needs Data and Internalize the Customers' Point

of View.

In the first step of the process, review the needs data as a business team
to assure everyone understands what was learned and to internalize the
customers' points of view. Draw a picture of the problem and what the

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customers' environment will look like in five years. The goal here is to
try to project how the customer thinks. (See Tool 30 and 30A.)

In the spirit of encouraging creativity in the next few process steps,

judgment should be suspended and evaluative behavior discouraged so
unconventional ideas receive a hearing.

B. Brainstorm What Customers Should Want.

Once the team is in the right frame of mind, the idea is to first
brainstorm what customers really need or, in other words, should want.

To do this, project what problems the customers will face over the next
five year period and anticipate where these problems are likely to lead
users in terms of desired solution utility. Ask yourselves what users
"dream of" to help solve their problems? What benefits will they expect
the solution to deliver? What attributes should it have? The goal of this
exercise is to predict what a customer should want if their vision of the
alternatives was unlimited. (See Tool 30A and 31.)

C. Brainstorm What Customers Will Likely Say They Want If

Asked.

Recognize that customers' perceptions of what is feasible will color what

they think they will need. As a point of comparison to Step B,
brainstorm what the customer will likely say they want if asked. These
conclusions should be based on interview data, as well as extrapolating
previous usage patterns.

D. Develop a Hypothesis of Needed Utility.

The task of the group then becomes sorting between the conclusions in
Steps B and C to develop a hypothesis of needed product utility.

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E. Look for Creative Applications of Technology.

Against this backdrop of needed product utility, the opportunity exists to

apply technology in imaginative ways and potentially lead to new classes
of solutions.

One analogy that can be useful when thinking about this process is of
two side-by-side amusement park carouselsÑone tracks users' needs, and
the other monitors technology developments. As the carousels pass, if
they travel in opposite directions, various combinations of needs and
technology come together and occasionally result in matches that
represent real breakthrough opportunities.

F. Anticipate Competitors' Behavior.

Forecast the outcome of competitors' market and product strategies.

How close are the competitors likely to come to meeting the wants
described in C? The dreams in B? What will the competitive landscape
look like during the five-year period? (See Tool 32.)

G. Consider Alternative Ways to Deliver the Benefits in the

Context of the Prospects' Value Chains.

To avoid the trap of assuming the business should provide its products
and services in the same way as in the past, consider alternative ways of
delivering the benefits defined in Steps B and C in the context of the
prospects' value chains.

For example:

o Should the offering be focused in the historical area of contribution

or should it span new value activities?
o Can linkages between ADI's and customers' value chains be
established that add value and gain competitive advantage?
o How will the customers address other parts of their value chains?
What is ADI's role? What is the competition's role?

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H. Create a Competitive Product Strategy.

Once a hypothesis of needed utility is established, opportunities for

changing the focus for the value chain have been explored, and
competitors' intentions are understood, the business team must create a
competitive product strategy. (See Tools 33 and 34.)

This should be based on a ruthlessly objective assessment of ADI's

strengths and weaknesses and, ultimately, on its ability to meet these
needs competitively.

I. Validate Imagined Solutions Through Quantitative Testing.

Up to this point the thinking has been based on assumptions of need.

Once working hypotheses for necessary products and services have been
defined, it is important to validate these "imagined" solutions through
quantitative testing. Research tools, such as choice modeling or
controlled experiments, can test prospective buyers' responses to these
proposed solutions. Testing at this point in the process can prevent
costly development activities that will not meet users' needs. However,
because of the time involved, it frequently becomes an "issue to be
worked" over the period between plan updates.

The data resulting from this testing should enable the organization to
prioritize product and service offerings, as well as attributes within
product offerings, and to identify segments where chooser perceptions
are the same. (See Tools 6 and 35.)

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J. Consider What Attributes ADI Needs to be Perceived as

Having in Order to Gain Prospects' Confidence and Hold
Customers' Loyalty.

Since the customer "buys" not only the products and services of a
vendor, but also a series of intangible qualities, such as their reputation,
"look and feel," and so on, you should consider what attributes ADI
needs to be perceived as having in order to gain prospects' confidence
and hold their loyalty.

Based on these conclusions, think through the implications for business

practices, customer communications, and operating processes.

Audit Questions:
o Do the proposed product offerings meet the customers' and channels'
future needs in an imaginative way? A complete way?
o Will ADI's offering be unique in the marketplace? How will it likely
compare to where competitors are headed?
o Have you identified localization requirements to meet the market needs of
the countries you have targeted?
o Have several possible offerings been quantitatively tested with customers
to help select the best?
o Have you identified what it will take to make the prospect believe ADI
offers the preferred solution?

Resources:
o Article: "The House of Quality" by John Hauser and Don Clausing,
Harvard Business Review, May-June 1988.
o Books: Conceptual Blockbusting and The Care and Feeding of Ideas by
James L. Adams, Addison-Wesley.

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 IV & V. Executing the 10-Step Process and Tools & Templates

Step 1: Statement of Purpose

Goal:

To provide a clear sense of direction for the organization and its partners.

Objective:
Step 1 describes the fundamental set of reasons for an organization's existence.
As such, it provides a context for decision-making when evaluating business
opportunities, as well as a framework individuals can use to direct their work.
If a strategic intent has been defined, the purpose statement describes the
strategy for moving in this much longer-term direction over the next 3 to 5
years.

Recommended Process:

A. Determine What Boundary Conditions the Strategic Intent

Imposes on the Statement of Purpose.

To the extent a "strategic intent" has already been defined, it will provide
a set of boundary conditions or constraints that should influence the
organization's purpose.

B. Create a Provisional Statement of Purpose.

It is often helpful to create a "provisional" statement of purpose

immediately after completing Steps 3, 4, and 5. At this point, a sense of
a market strategy has emerged which can be used to guide the rest of the
plan.

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To be complete, the statement of purpose should cover these basic

elements of a business strategy:

q What users' needs segments will you serve?

q What is your value proposition?
q What is your basis for sustainable competitive advantage?

It should also explain how the organization defines its charter.

(See Tools 26 and 27.)

Once the statement of purpose is finalized, it needs to become a tangible

guide for individual employees' activities. For this to be the case, the
statement should be succinct, easy to personally relate to, and be widely
communicated.

C. Test the Strategy in the Course of Conducting Steps 6 and 7.

The provisional plan created in Step 1 is tested later in the process. The
later definition of necessary products and services and attendant
development plans may prove or disprove the viability of the strategy.
Of course, the cost of executing the program, which is analyzed in Step
7, may also bring about a re-examination of the provisional thinking.

D. Articulate a Vision of the Future World.

Research into user needs and necessary products and services (Steps 3
and 5) is frequently translated into a "vision of the future world" which
is incorporated into Step 1 on a later iteration.

E. Tune the Strategic Intent.

Finally, the conclusions drawn in Step 1 may be a source of ideas for

tuning the previous strategic intent.

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Audit Questions:

q Does the vision statement provide clear and inspirational direction to

employees?
q Has a value proposition been defined? Is it consistent with customers'
perceptions and prejudices?
q Do you have a plausible and sustainable basis of competitive advantage?
How is it similar or different from other vendors?

Resources:

q Article: "Making Impossible Dreams Come True," James C. Collins,

Jerry I. Porras, Stanford Business School Magazine, July 1989.
q Article: "Six Basics for General Managers," Andrall E. Pearson, Harvard
Business Review, July-August 1989.
q Article: "Strategic Intent," Gary Hamel, C.K. Prahalad, Harvard
Business Review, May-June 1989.
q Book: Thriving on Chaos, Tom Peters, Borzoi Books, New York, 1988,
Chapter L-2, "Develop an Inspiring Vision."

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Step 2: Five-Year Objectives

Goal:
To define a clear point of focus, a "finish line" to work toward.

Objective:
Step 2 is intended to translate the statement of purpose into a series of
measurable objectives for each function. The idea is to identify "key success
factors" and then define what results are required for each by the end of the
planning period. The resulting list of objectives should be short enough to fit
on one slide so all employees can easily remember them and know what they
imply for the employees' activities.

Recommended Process:
A. Develop a Tentative Set of Financial and Market Objectives.

After completion of Steps 3, 4, 5, and 1, define objectives covering such

topics as profit, revenue, return on assets, share of served market, and
customer satisfaction. (See Tool 28.)

B. For Each Objective, Define "Key Success Factor" (KSF)

Metrics.

The goal is to understand what underlying requirements must be met in

order to guarantee performance and then establish a set of KSF metrics
and objectives that are necessary and sufficient to meet the financial and
market goals. (See Tool 29.)

On the first iteration, the conclusions drawn in Steps A and B should be

considered preliminary. After the financial analysis is completed in Step
7, the conclusions will either be validated or refuted, and changes may
be required.

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C. Test the Reasonableness of Achieving the Key Success

Factors.

Once the KSF objectives are defined, an important step is to test the
reasonableness or plausibility of meeting them.

o Given the market environment, can you realistically expect to

achieve what you hope to achieve?
o Can customer perceptions or buying behavior change fast enough
to support achieving these goals?
o What will the likely competitive response be to your initiatives?

D. Specify Pivotal Functional Department Goals.

The next phase of the process is to specify pivotal functional department

goals that are necessary to support achieving the KSF objectives.
Functions to cover include: R&D, manufacturing, marketing, sales,
support, and human resources. It is also important, at this point, to
itemize dependencies on other organizations in order to achieve these
goals. This will be addressed more fully in Steps 6 and 9, and may
necessitate revision on a later iteration. (See Tool 29.)

E. Finally, Consider Whether the Financial Results are in Line

with Division or Function Expectations and Goals.

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Audit Questions:

o Are the objectives realistic in terms of your present position in the

marketplace and competitors' intentions?
o Do they address a sufficient number of the key success factors to provide
an adequate planning and management framework?
o Will you meet your division or function expectations?

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Step 6: Plan for Development, Purchase, and Introduction of

Products and Services

Goal:
To define a "value offering" stream and establish functional plans
that will meet key success factor objectives.

Objective:
Step 6 addresses how the "value offering" requirements (products, services,
and vendor attributes) specified in Step 5 are to be implemented. It assesses
the broad organizational capabilities and requirements in the areas of
technology development, marketing and channel strategy, manufacturing
strategy, and resource planning.

Recommended Process:
A. Revisit the Key Success Factors

A useful starting point is to consult the KSFs itemized in Step 2. On the

basis of what has been decided in Step 5, these factors should be
validated or revised. Then, for each, a complete set of functionally-
oriented milestones can be defined.

B. Look at Deficiencies in the Organization's Value Delivery

System.

It is also helpful to look at deficiencies in the value delivery system

relative to your intended value proposition in order to identify areas for
improvement.

(See Tool 36.)

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C. Each Function Should Then Define its Strategy, Priorities

and Major Programs.

In support of meeting the milestones and organization's objectives, plans

should be developed in at least the following areas:

Product Development:

o What is the plan for developing or acquiring the technology

required to implement the value proposition and product strategy?
o What role will intellectual property play in product strategy?
o Is exploratory research into advanced architectures or processes
needed to answer questions with empirical results?
o What is the roadmap and schedule for introducing new products
and services over the planning period?
o How will the organization design for product quality? For
manufacturability?

(See Tools 6, 34, 37 and 38.)

As mentioned in Step 5, it is the imaginative matching of technology

against users' needs that results in new classes of solutions. This
process, by definition, is a spontaneous and unpredictable one;
breakthrough products seldom result from "designing to plan."

Marketing:

o What is the marketing strategy?

o What does it imply for sales, support, distribution?
o What orders are forecast?
o How will the organization communicate the value proposition to
the prospect? What specific marketing communication vehicles
will be used?

It is very important the channel strategy and plans be developed in

collaboration with the sales organization.

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Manufacturing:

o What is the strategy for meeting cost, volume, and quality

objectives?
o What is the plan for developing or acquiring process and
manufacturing technology?
o How will the organization use strategic (external) relationships in
product sourcing?
o Are extraordinary investments in facilities or capital equipment
anticipated?

Human Resources:

o What changes in the organization structure are expected over the

plan period? How will these changes improve customer
satisfaction?
o What changes are needed in recognizing and rewarding employee
or team performance?
o What new organizational capabilities will need to be developed to
execute the plan? Will the right people be ready in time to achieve
your business goals?
o What changes in staffing levels or employees' knowledge and skills
is expected? Do you have emerging needs that are different from
your skill-mix?
o What are the best opportunities for employee development through
improvement activities?
o What is the plan for managing the transition in an integrated way
for the entity? For developing the skills in pivotal jobs to ensure
success?
o What is the plan for acquiring new talent and developing new
skills? Are these plans specific, actionable, and owned by
particular people? Who is going to do What about college and
university recruiting?

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o How will employee satisfaction be determined? Acted upon?

o How much staff turnover can be experienced in critical skill areas?
What specific countermeasures are needed to minimize the impact
of such turnover?

D. Identify Capability Gaps and Dependencies on Other

Entities.

As the functional plan questions suggest, the process should include the
identification of capability gaps and, therefore, dependencies on other
entities (inside or outside ADI). If you are relying on outside
organizations, give careful consideration to what kind of relationship is
desired.

E. Verify the Plan Results in the Right Differentiators and

Vendor Attributes.

Finally, when this step is completed, it is important to "stand back" from

the plans to verify the sum total will deliver the right products (properly
differentiated) as well as the kind of vendor attributes the organization
wants to project.

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Audit Questions:
o Do the action plans support the implementation of the value proposition
and the key differentiators?
o Are the functional strategies linked directly to the business strategy?
o Do the plans emphasize quality, productivity, and reduction of costs?
o Is the channel plan consistent with the marketing strategy? Was the Sales
organization involved in the planning process?
o Do the plans address how to communicate the value proposition to and
through the distribution channels?
o Have you fully examined the use of strategic alliances or third-party
agreements in development, manufacturing, marketing, and distribution?
o Are you developing the organizational capability and individual
competencies to succeed?
o Do you have a roadmap that is convincing?
o Will the plan really allow you to win?

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Step 7: Financial Analysis of Costs and Returns

Goal:
To determine if the financial objectives can be met under the present
development plan.

Objective:
The purpose of Step 7 is to evaluate the financial consequences of the plan and
to verify if it meets the objectives defined in Step 2. The financial models that
are developed can also be used to quantify the risk inherent in the potential
problem scenarios identified in Step 8.

Recommended Process:

A. Project ADI Revenues Based on Expected Market Size and

Competitive Position.

Consider industry life cycle factors and potential existing product

cannibalization when making assumptions. (See Tool 39.)

B. Revenues by Geography (U.S., Europe, Asia-Pacific, and rest

of the world) and by Channel, if Applicable.

C. Develop a Range of Revenue Projections based on

Optimistic, Pessimistic, and Best Guess Success Scenarios.

Take care to document the assumptions underlying each.

(See Tool 40.)

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D. Develop a Model of ADI's Cost Structure.

Project ADI's cost of goods sold and expenses, both direct and indirect.
Items to consider include costs associated with any start-up or
obsolescence plans. A shift to or from external suppliers of parts,
products, or product development should also be examined.

Understand the cost drivers and dynamics of ADI's proposed value

delivery system. If a variety of channels are utilized, pay attention to
channel marketing costs in development of the model. Also, evaluate
extraordinary capital expenditures (facilities, machinery, and equipment)
implied by the plan. (See Tools 41, 42 and 43.)

E. Produce Pro-Forma Income Statements to Understand the

Profit Consequences.

Also use this tool to forecast the financial implications of various

business scenarios including the revenue possibilities projected in C.
Consider the sensitivities to changes in the variables.

F. Analyze the Cash Flow Implications of the Plan.

Perform a business valuation analysis based on the present value of

future cash flows. (See Tool 44.)

G. Test the Results and Model Assumptions for

Reasonableness.

Are the revenue projections consistent with what is likely to happen in

the world economy? Are the assumptions realistic given the evolution of
the product category through its life cycle? Is the share reasonable given
competitors' expected behavior and customers' perceptions? Are there
large "step function" changes in revenue? How do the financial
statements compare with the competition? Are the differences
explainable?

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Audit Questions:
o Does the structure of the industry (as analyzed by Porter) and business
plan support the assumptions underlying the profitability objectives over
the five-year period?
o How attractive is the return on assets and investment relative to other ADI
businesses?
o Does the return compare favorably to the competitors' return? How do
R&D investment levels compare with competitors?
o Have you considered the financial implications of the plan on ADI's
balance sheet? Return on assets? Earnings per share?
o How does the business valuation compare to shareholder perceptions? To
market values of competing firms?
o How do the market and revenue projections reconcile with third-party
economic forecasts for targeted industry and geographic markets? How
reasonable are the assumptions inherent in the plan? Have you allowed
for cannibalization of existing products?
o Have you fully estimated the total costs needed to adequately answer
exploratory research questions that you need definitive answers to?
o Have you considered time-to-market requirements and revenue and profit
sensitivity to late introductions?
o Have you identified and assessed the financial impact on other ADI
entities associated with the business plan?
o Are there financial implications of your plans on other ADI Divisions or
Product Lines? What is the best way to highlight these implications?
o Have you projected sales and marketing costs by channel?
o Are any significant changes in human resources, facilities, or capital
equipment anticipated? Major third-party investments or acquisitions?

Resources:
o Article: "Must Finance and Strategy Clash?," Patrick Barnise, Paul
Marsh and Robin Wensley, Harvard Business Review, September -
October 1989.

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 IV & V. Executing the 10-Step Process and Tools & Templates

Step 8: Potential Problem Analysis

Goal:
To develop contingency plans to deal with potential risks and opportunities.

Objective:
The aim of Step 8 is to anticipate potential problems, assess their impact, and
create contingency plans for any major event that would require a
reformulation of the plan. The step should result in a set of offensive and
defensive action plans that would eliminate or minimize the adverse
consequences.

Recommended Process:

A. Draw Up a List of Potential Problem Situations.

Begin by creating a list of potential situations (positive or negative) that

would call into question the underlying assumptions of the plan or cause
a serious deviation in results.

1. Consider external occurrences that might influence:

o Customer spending levels, such as recession or expansion.

o Change in rivalry among competitors, such as takeover,

bankruptcy, or competitive reaction to an ADI initiative.

o Shift in usage towards substitutes, such as new technology

development.

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(In addition to inhibitors to business, be sure to consider the

consequences of a product that becomes a runaway success, such
as capacity loading or cash constraints).

2. Also think through the risks of internal situations that might effect
the organization's ability to execute:

o Delays in product development leading to missed windows of

opportunity.

o Cost overruns leading to excessive manufacturing cost.

o Problems with deliverables from another ADI organization

you depend on.

o Inability to perform because of an inappropriate organizational

structure or an inadequately trained work force.

(See Tool 40.)

B. Assess the Probabilities of Their Occurrence.

Analyze the probabilities of these situations happening and their impact

on the plan's return and market success. (See Tool 45.)

C. Develop Contingency Plans.

For each external situation, develop a series of potential defensive and

offensive tactics to contend with the eventuality. (See Tools 40 and 45.)

If a choice modeling study has been conducted, it may be possible to

simulate the impact of the entrance of new competitive products,
changes in existing products, and the development of improved
technologies. This will allow for the testing of possible responses.

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D. Identify Owners for Internal Issues.

For each internal "issue" identify an owner and recommend a series of

actions (and a timeline) for execution. (This evolves into Step 9.)

Audit Questions:
o What market, economic, or financial situations could arise to put the plan
at risk? What is their probability of occurrence? Do you have a
contingency plan for each eventuality?
o Have you assessed the potential competitive response to this plan?
o Under what conditions would you exit the business?
o Where does the greatest upside potential exist? Do you have a plan to
deal with this situation?

Resources:
o Books: Competitive Advantage, Michael Porter, Free Press, 1985,
Chapter 14, "Defensive Strategy."

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Step 9: Recommendations

Goal:
To identify which interrelationships must function effectively if the plan is to
be successful.

Objective:
The purpose of Step 9 is to recognize what critical linkages exist and to
devise processes for managing relationships to achieve the desired results.
Part of the task involves itemizing key dependencies. The rest addresses
mechanisms for negotiating agreements, tracking progress, and resolving
issues when they arise.

Recommended Process:

A. Draw up a List of Dependencies.

Review the Key Success Factor objectives in Step 2, and the plan in Step
6, and draw up a list of dependencies (for example, deliverables, support,
and information) the business will need from other organizations, both
internal and external.

For each significant dependency:

o Define an internal owner.

o Clarify what entities are involved.
o Identify open issues.

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o Develop an action plan covering:

• reporting relationships

• the negotiation and agreement process

• a method for tracking progress

• procedures for resolving issues or escalating them

o Specify a time-line for execution.

B. Identify an Owner for Dependencies on Your Organization.

Recognize other entities may be dependent on your organization and, in

a similar fashion to A, define an internal owner and action plan.

Audit Questions:

o Have you negotiated critical dependencies on other organizations inside

and outside ADI? Do you have a process for managing execution?
o Is this plan supportive of meeting other organizations' dependencies on
you?
o Does the Sales Force know what is expected by region and/or account?
Does the Product Line know what the Sales Force is expecting from the
Product Line?
o Has your product line explicitly stated type and quantity of manufacturing
capacity required during the planning period? Does this explicitly state
possible upside/downside variations in unit or wafer volumes? Has an
explicit agreement been reached with your manufacturing supplier?
o Is there a schedule for accessing new technologies? Does the schedule
have an owner? Is it clear that the technology development has been fully
funded and properly resourced?
o Are exploratory research projects fully funded? Are there any critical
loose ends on these projects?

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Step 10: Benchmark Plan

Goal:
To develop an action plan for the next twelve months that executes the
strategies and works towards meeting the goals of the plan.

Objectives:
The purpose of Step 10 is to translate the plan intent, described in Steps 6, 7,
8, and 9 into a specific series of tactical actions for the next year that fit within
the financial plan. The scope of the actions should span meeting both
breakthrough (Hoshin) objectives and Business Fundamentals.

Recommended Process:

A. Translate Key Success Factor Goals Into Hoshin or

Business Fundamental Plans.

For the Hoshins and the Business Fundamentals, create the next year
objective, goal, strategy, owner, performance measure and deadline. Be
sure to establish linkages down and across all levels of the organization,
including field sales and external entities, as appropriate (refer to Hoshin
Planning Process, which can be obtained from the TQM Office). Hoshin
and Business Fundamentals referred to are Quality, Cost, Delivery,
Innovation, Profitability, Sales Growth, Responsiveness and Morale.

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B. Develop Plans to Address Ongoing Operational

Requirements.

Similarly, develop a plan that addresses the ongoing operational

maintenance requirements in the following broad categories:

o Financial Performance Success

o Market Success
o Effective Business Strategies
o People Contribution (including people management strategies and
an integrated education plan).

C. Develop Functional Departmental Tactical Plans.

These plans in A and B identify the interests, resources and

accountability of every business function and department for effective
execution. For Hoshins and Business Fundamentals, these plans utilize
the "Implementation Plan" format. Other plans should follow a format
most appropriate to the category (e.g., sales plans).

D. Verify Financial Consequences Meet Goals.

Confirm the financial consequences of these activities support the profit

goals and are within this year's target. Note what the plan implies for a
required target for the next fiscal year (finalized in Step 2).

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Audit Questions:

o Have breakthrough objectives been defined? Have plans been agreed to

by all contributing entities?
o Are functional departments' plans in place to support these strategies and
objectives?
o Has a sales plan been worked out with the sales channels to supply the
orders? Is there agreement on the most important design wins? Is there
agreement on what they need from you to obtain the orders?
o Do these plans, taken together, guarantee meeting the key success factor
objectives?
o Have key milestones been defined to enable you to tell if execution is off
course.

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a Business Planning Process

Section V - Tools & Templates

q Tool Index

q Tools

The following material consists of a set of data acquisition, presentation, and

analysis tools culled from the best practices of many organizations that have
successfully used the Business Planning Process. Our objective is to provide
the reader with as wide a choice of thought-provoking suggestions as possible,
fully recognizing there are far too many for any one organization to use.

The basic format for each tool describes the questions addressed by using the
tool, explains the strategic significance, references where in the process the
tool is used (step number and paragraph), outlines how to use the tool (if it is
not intuitively obvious), and references other resources if more information is
needed.

The tools are listed by the steps in the process.

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Tool Index

The information in parentheses references the step number and paragraph as described
in the "Recommended Process" section for each step.

1. Classification Schema Examples: examples illustrate how different variables can be

used to classify customers as an initial basis for focusing research. (Steps 3/4-B(1,2))

2. Company Growth versus Market Growth Matrix: a technique for depicting the history
of investment in a series of markets. (Steps 3/4-B(2)-E(l))

3. Competitor Share Histogram: a technique for describing how vendors' shares have
evolved over time. (Steps 3/4-B(3))

4. Relative Share versus Growth Rate Matrix: an analytical technique pioneered by

Boston Consulting Group to identify attractive markets and understand which markets
are cash generators and which are cash consumers. (Steps 3/4-B(4)-E(3))

5. Ranked Importance of Product Attributes Histogram: a way to depict what product,

service, or vendor attributes are most important to the user. (Steps 3/4-C(la))

6. Quality Function Deployment "House of Quality" Table: a tabular structure for

recording customer wants and vendor performance. (Steps 3/4-C(la), 5-I, 6-C)

7. Attribute Importance and Value of Improvement Matrix: a technique for determining

which attribute investments offer the greatest payback. (Steps 3/4-C(la))

8. Customer Interview Guide: a guide for structuring and conducting interviews covering
business needs, installed base, purchase decision criteria, and spending profile. (Steps
3/4-C(I))

9. Buying Process Coverage and Win Ratio Table: an approach to understand how
different vendors fare at each successive stage of the product investigation and purchase
process. (Steps 3/4-C(lb)E(3))

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 IV & V. Executing the 10-Step Process and Tools & Templates

10. Major Customer Data Table: a table for summarizing ADI's status and prospects in an
account. (Steps 3/4-C(2))

11. Research Findings in Major Account Interview Summary: a format for summarizing
research findings relating to usage trends, needs, investment plans, and ADI's position.
(Steps 3/4-C(2))

12. Choice Modeling Sensitivity Analysis: a technique for analyzing which attributes have
the greatest leverage in improving chooser share. (Steps 3/4-C(3), F(1))

13. Segment Discovery Techniques: techniques for comparing prospect groups to learn
which clusters share a common set of choice criteria and needs. (Steps 3/4-D(l))

14. Segment Fact Sheet: a table for summarizing the major market parameters delimiting
each segment. (Steps 3/4-E(1))

15. Vendor Financial Data Table: a table to compare vendors' financial positions and cost
structures. Useful in understanding how growth may be constrained by capitalization
and cash flow. (Steps 3/4-E(2))

16. Competitor Profile: a format for summarizing competitors' strategies, strengths and
weaknesses. (Steps 3/4-E(2))

17. Competitor Segment Dependency Analysis: a technique for deducing how a competitor
would likely react to ADI initiatives in a particular segment. (Steps 3/4-E(2))

18. Key Buying Factor Vendor Ranking: an approach for comparing vendors on their
perceived ability to meet customers' needs
(Steps 3/4-E(2,3))

19. Users' Needs and Satisfaction (Radar) Diagram: a technique for diagramming vendors'
satisfaction of customer needs. (Steps 3/4-E(2,3))

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 IV & V. Executing the 10-Step Process and Tools & Templates

20. Competitive Advantage Matrix: a matrix for mapping how ADI compares to a
competitor in providing the specific attributes the customers find most important.
(Steps 3/4-E(3))

21. Addressable Market Analysis: a technique for analyzing what portion of the total
market provides the highest potential for ADI and what share can be projected. (Steps
3/4-E(3))

22. Channel Flow by Segment Table: a table for summarizing how segment purchases flow
through each channel (by geography) and determining which channels are most
important. (Steps 3/4-E(4))

23. Segment Attractiveness Table: a table for summarizing, on a comparative basis, which
segments offer the greatest potential and probability for success. (Steps 3/4-E(6))

24. Segment Attractiveness Matrix: a technique for analyzing which segments appear most
attractive in terms of size, growth, and profitability. (Steps 3/4-E(6))

25. Vendor/Attribute Perception Profile: an approach for understanding how strong a

consensus (or wide a distribution) exists in customers' perceptions of vendors' ability to
deliver an attribute. (Steps 3/4-F(l))

26. Statement of Purpose Template: a template specifying the kinds of topics a well-
rounded statement of purpose might address. (Step 1-B)

27. Value Proposition Checklist: a list of criteria to test the completeness and utility of a
value proposition. (Step l-B)

28. Forward Looking Vintage Chart: a graphical framework for projecting the sources of
revenue growth. (Step 2-A)

29. Objectives Planning Table: a table for describing what key success factors must be met
to achieve the objective, and for translating them into departmental goals. (Step 2-B)

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 IV & V. Executing the 10-Step Process and Tools & Templates

30. User Needs 'Imagineering' Diagram: a framework for describing a customer's problem,
the present solution, and imagining creative alternate approaches to solving the
problem. (Step 5-A) 30A - "Imagineering Chart"

31. Necessary Products 'Imagineering' Table: a structure for systematically inferring

necessary products, service, and vendor attributes from the customers' problem
environment. (Step 5-B)

32. Competitor Product Family Analysis: an approach to visualizing the likely

consequences of a competitor's product strategy. (Step 5-F)

33. Product Concept Positioning Chart: a graphical framework for depicting the
relationship between products. (Step 5-H)

34. Product Program Chart: a timeline approach to depicting the roll-out plan for new
products over the planning horizon. (Steps 5-H, 6-C)

35. Benefit Trade-Off Simulations: an example illustrating how choice modeling can
facilitate decision making by providing chooser share reactions to alternative product
proposals. (Step 5-I)

36. Value Delivery System Deficiency Analysis: a framework for describing critical links
in the value chain and identifying areas where ADI needs to focus improvement. (Step
6-B)

37. Technology Leverage Matrix: a structure for analyzing the degree to which technology
is leveraged across product lines and identifying new leverage opportunities.
(Step 6-C)

38. Family Tree of Technology Usage: a technique for analyzing how technology (product
or process) is leveraged within a product family. (Step 6-C)

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 IV & V. Executing the 10-Step Process & Tools & Templates

39. Revenue Projection Analysis: a method for objectively projecting revenue by methodically
evaluating several product life cycle factors. (Step 7-A)

40. Contingency Matrix: a method for considering potential external and internal occurrences
that may impact performance, and then evaluating the consequences and developing
contingency plans. (Steps 7-C, 8-A, C)

41. Cost Driver Tables: material from Michael Porter describing primary "drivers" of unit cost
of purchased inputs and asset utilization for "value" activities. (Step 7-D)

42. Channel Economics Analysis: an approach to analyzing the cost impact of changes in
channel mix. (Step 7-D)

43. Revenue and Profit by Segment Chart: a technique for comparing revenue and profit by
segment, highlighting major differences in cost structure. (Step 7-D)

44. Valuation Analysis: a sample analysis of market value based on key financial variables.
(Step 7-F)

45. Contingency Plan Prioritization: an approach to determining which situations to focus on

for contingency planning. (Steps 8-B, C)

46. Whole Product View: a graphical representation of the entire product offering or product
needs. (Steps 3 & 4)

47. Technology Adoption Model: a model representing the adoption of new technologies by
different user groups. (Steps 3 & 4)

48. Camp Development: a tool to help identify what partners need to be “recruited” into the
ADI camp to make the product successful. (Steps 3 & 4)

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 IV & V. Executing the 10-Step Process & Tools & Templates

49. Competitive Differentiation Process: a framework for evaluation and development of

competitive differentiation. (Steps 3 & 4)

50. Value Based Market Segmentation Methodology: a step by step process to help determine
what are possible segmentation strategies. (Steps 3 & 4)

51. Product Type Matrix “Bubble Chart:” a tool to help graphically depict the product
development. (Step 5)

52. Product/Technology Roadmap: describes the sequencing and rhythm of new product
introductions. (Step 5)

53. Business Plan Interrelationship Diagram: describes the interrelationship between the
development, financial, and competitive goals. (Steps 1 & 2)

54. Resource Gap Analysis: identifies resource requirements and possible resource gaps in the
product development planning. (Steps 6, 7, 8, & 9)

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 1: Classification Schema Examples

Variable
1 2 3 4 5 6 Total
Variable

•Size
•Growth
C •Rela tive
Share

Total

Questions Addressed:

• What market areas offer the greatest business potential and should be a focal point for
research?
• What variables offer a fair probability of being a first-order determinant of purchase
behavior?

Strategic Significance:

Providing a focus for more detailed user need and competitor research.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Where Used:

Steps 3/4 - B(1,2)

How To:

1. Consider a variety of market models that could serve as a basis for prioritizing areas
for further investigation.

2. The schema chosen should lend itself to data capture and quantification as well as
offer a fair probability of being a first order determinant of purchase behavior.

Examples that have proved helpful are:

• Applications versus Demographic Matrices, such as Application versus Industry.

• Product Attributes versus Product Attributes Matrices, such as Functionality
versus Performance.
• Another useful variable is purchase process.

3. Once a matrix is constructed, the goal is to gather market size, growth rate, and
relative share data for each cell.

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Tool 2: Company Growth versus Market Growth Matrix

30%

Size indicates ADI

Revenue in Segment
5

MARKET
GROWTH RATE 4
BY SEGMENT 2
15%

0%
0% 15% 30%
ADI GROWTH BY SEGMENT

Questions Addressed:
• What is the history of investment in these markets? Where is company growth
exceeding market growth?
• What investment strategies are appropriate for each market?

Strategic Significance:
Assessing the consequences of ADI's investment strategy.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Where Used:
Steps 3/4 - B(2), E(1)

How To:
1. Create a square matrix scaled to the largest growth rate.
2. Draw a diagonal line representing ADI growth equal to the market rate.
3. Size circles proportional to ADI revenue.
4. The analysis could be at the aggregate worldwide, regional, or business levels.
5. Improved share positions are represented below the diagonal and typically represent
greater than average investment.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 3: Competitor Share Histogram

Total $
in Category)
1 00% O
O O
O O
OTHERS O

B B
B
B
B
B
COMPETITOR B
A
A
A A

A
COMPETITOR A A

ADI
ADI ADI
ADI ADI
ADI ADI

Y-5 Y-4 Y-3 Y-2 Y-1 Present

Year

Questions Addressed:
• How does ADI's share compare to the major competitors?
• How has the position evolved over time?
• Who is growing? At whose expense?

Strategic Significance:
Understanding the dynamics of market position and the probabilities of improving it.

Where Used:
Steps 3/4 - B(3)

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 4: Relative Share versus Growth Rate Matrix

"Stars" "Questions"
Size indicates ADI's
Revenue in Market
5 4
Growth Rate
(constant $,
compound average
growth rate)
3
2

"Cash Cows" "Traps"

10 1.0 0.1

ADI's Relative Share

Questions Addressed:
• What is the operating portfolio? What market areas are Stars, Cash Cows, Traps, and
Questions?
• Which markets are cash generators versus cash consumers? Which cash consumers
have the highest potential for providing value to ADI?
• What investment strategies are appropriate for each market?

Strategic Significance:
Defining the mix of the businesses ADI should strive toward.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Where Used:
Steps 3/4 - B(4), E(3)

How To:
1. Construct the horizontal axis by dividing ADI's market share by the share of the
largest competitor in each market.
2. Divide the vertical axis at the average of the market growth rates (in constant dollars).
3. Size the circles in proportion to served available market or ADI revenue.
4. Optional: Use colors to distinguish between various levels of cash flow or
profitability.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 5: Ranked Importance of Product Attributes Histogram

Bar length indicates average Relative

Attributes ra nk of factor Importance

A X%

B
C Percent of sample
D including attribute
in top 5
E
F
G
H
I Arrange attributes in
descending average
J
importa nce
K
L
M

Questions Addressed:
• What product, service, or vendor attributes are most important to the user?
• What is the relative worth of each of the attributes?

Strategic Significance:
Determining what combination of attributes (at what price) will result in a winning
product strategy.

Where Used:
Steps 3/4 - C(1a)

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 IV & V. Executing the 10-Step Process & Tools & Templates

How To:
1. Gather relative ratings of product attributes by importance to the customer from
market survey data and customer visit information.
2. Arrange data in histogram form, arranged with attribute receiving the highest average
importance ranking to that receiving the lowest.
3. At the end of each bar, indicate the percent of the sample including the attribute in the
top five attributes.

Other Resources:
o Books: Market Research and Analysis, Donald R. Lehmann, Irwin, Boston, 1989.
o Consultants: Decision Research, Lexington, MA., Mars & Co., Greenwich, CT.
o Consultants: Dr. Paul Green, The Wharton School, University of Pennsylvania,
Philadelphia, PA.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 6: Quality Function Deployment "House of Quality" Table

Made-up Example: Not Actual Data

Correlation Type:
Strong positive
Positive
x Negative
* Strong Negative
x

x x

Engineering Characteristics

of Competitors
Full Pwr. BW

Perceptions
Full Lin. BW
Importance

Customer
Reference
Die size

Process

Voltage
S/N +D

Internal
of want

Supply
THD

Customer Wants - +

Four Channel 10
Conversion x

High Resolution 7 x
High Speed 6
x
Low Price 3

1 x
Low Power

Column Importance 121 28 69 21 21 21 61 10

Weight
Relationship
Degree of Technical 4 4 5 5 3 2
5 4 Strength:
Difficulty
=9
ABCMOS 3
10,000 Mils

400KHz
1MHz
80dB
-90dB

3V

Yes

=3

Target Values =1

- x
ADI
x
Engineering
Competitive Maxim
Assessment x x x x x
Crystal x
+
x

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 IV & V. Executing the 10-Step Process & Tools & Templates

Questions Addressed:
• What do buyers perceive as important about products?
• What engineering characteristics are critical for improving product performance in
areas identified as important to the customer?
• How do ADI's products compare to competitors' both with respect to buyer
perceptions and in terms of relative performance on engineering characteristics?
• Where should product development efforts be focused to improve ADI performance?

Strategic Significance:
Assuring that product design and manufacturing process specifications focus on meeting
customer priorities.

Where Used:
Steps 3/4 - C(1a), 5-I, 6-C

How To:
Consult TQM office.

Other Resources:
q Book: Concept Engineering, The Key to Operationally Defining Your Customer's
Requirements, Document 7I, CQM, Cambridge, Sept. 1992.
q Article: "The House of Quality," John Hauser and Don Clausing, Harvard Business
Review, May-June, 1988.
q Book: The VOC Reference Guide, Fred Pouliot, ADI, May 5, 1993.
q Book: Quality Function Deployment – Integrating Customer Requirements into
Product Design, Yigi Okeo, ed., Productivity Press, Cambridge, 1988.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 7: Attribute Importance and Value of Improvement Matrix

High (Invest-Biggest
(Maintain
Position) Payoff)

F
E
Importance

Average
B

C
G

D (? - Contradictory
Situation Requires
(Trade off to Focus on Case-by-Case
Low Investment Opportunities) Analysis)

High Average Low

Current Satisfaction
(A-G are product attributes (Value of Improvement)
or user needs)

Questions Addressed:
• What is the relative satisfaction level with those attributes perceived to be most
important?
• Investments in which attributes offer the greatest payback?

Strategic Significance:
Maximizing return on R&D investment in terms of impact on customer satisfaction.

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Where Used:
Steps 3/4 - C(1a)

How To:
1. Gather relative ratings of user needs by importance to the customer and by value of
improvement from market survey data, customer visit information, choice modeling,
and so on.
2. Determine midpoint lines by taking the average of importance ratings for each axis.
3. Plot points based on importance and improvement of each attribute.
4. Most points should fall in the invest, maintain, or trade off segments.
5. Question marks are contradictory situations that need to be re-evaluated on a case-by-
case basis.

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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 8: Customer Interview Guide

(see the following pages)

Questions Addressed:
• What to cover in a customer interview.
• How to record feedback on the following:

– Business needs

– Installed base

– Purchase decision criteria

– Spending profile and vendor shares

Strategic Significance:
Learning the differentiating needs that should be the focal point for product strategy.

Where Used:
Steps 3/4 - C(1)

How To:
The template shown on the following pages should only be viewed as a suggestion. You
will note that many of the questions asked are similar to those typically asked in VOCs.
This questionnaire is not as image-oriented as VOC, but does address the customer's
needs and wants. In addition, it helps to quantify ADI and competitors share histories and
potentials.

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Customer Interview Guide

(Page 1 of 6)

Date: Interviewer:

Interviewee:

Title:

Company Name:

Division or Operation Name:

City/State/Zip:

Category/Segment:

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 IV & V. Executing the 10-Step Process & Tools & Templates

Customer Interview Guide

(Page 2 of 6)

1. What are the top priority goals of your organization?

2. What are the industry and company issues that are affecting the
business environment and the economics of purchase decisions?

3. Regarding your next major purchase decision, what do your business

goals and these issues imply?

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 Customer Interview Guide
(Page 3 of 6)

Spending Profile

Next I would like you to estimate your shipments of products using ADI (or competitor’s) products.
(Estimates should be in units, if not, then $, if not, then rank, where 1 is the highest.)

Product/ This Year Last Year Next Year Vendor

Product Family Total
Units $M Units $M Units $M % ADI %___ %___ %___ %___

100%

100%

100%

100%

100%

100%
Total 100% 100% 100%

Analog Devices, Inc. Company Confidential

Questions:

A. What will your total shipments of ___________________s be this year?

B. What was your total shipments of ___________________s last year?
C. What will your total shipments of ____________________s be next year?
D. How is this year’s spending distributed over the various functions?
E. How was last year’s spending distributed over the various functions?
F. How do you anticipate next year’s spending will be distributed over the various products or product families?
G. What is each vendor’s share of this year’s spending in each product or product families?
H. How is each vendor’s share distributed over the various products or product families?
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 IV & V. Executing the 10-Step Process & Tools & Templates

Customer Interview Guide

(Page 4 of 6)

Users' Needs Tables

A. Current Needs

I would like you to recall a recent (or currently planned) purchase. Based on that
experience, I'd like you to answer some questions that will help me understand the
key needs and decisions criteria that influenced your purchase decision.

B. Future Needs (If time permits)

Think ahead to the future for a moment. Assuming continued growth in your
company, and the changes you foresee in the technology and usage environment, if
you were making a similar purchase decision three years down the road, what changes
would you expect in the needs and criteria you have identified?

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 Customer Interview Guide
(Page 5 of 6)

Users’ Needs (Check One) Metric Rating (10-High) Rank (1-Best)

A. Describe the prod. or serv. needs and wants that influence your selection. F. Which are properly considered as differentiating needs or wants
B. What tests or decisions criteria do you apply to tell if the need is satisfied? (i.e., not an absolute but much desired)?
C. What measurement do you use to determine if a vendor’s system satisfied G. How do you rank you wants?
these criteria? H. If you had $100 with which to purchase your wants, how much
D. How would you evaluate ADI on each of these dimensions? would you be willing to pay for each want?
E. Which of these needs are classified as musts? (i.e., needed to I. In terms of wants, evaluate your largest vendor?
qualify for the business?) Evaluate the vendor who seems to be growing fastest.

E/F (G) (H) Other Vendors (i)

Product/ Quantification
Must Want $100 ADI Fastest
Product Family Largest
Test (B) Measurement (C) or Want Rank Test (D) Growing

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IV & V-68
 Customer Interview Guide
(Page 6 of 6)

Purchase Decision Process

For the same purchase or a planned purchase, describe the decision process.

% Purchase Vendor
Name Title Role Decision Preferences

Technical Buyer

Economic Buyer

Influencer

User

Other

Analog Devices, Inc. Company Confidential

Corporate Approval Requirements “=100%”

Additional Questions:

A. What information is used by the decision makers at each stage? What are the sources of the data?
B. How and when is cost considered?
C. How long does the buying process take?
D. How will the process change over the next five years?
E. What is the influence of standards, vendor preference, or applications on buying process?
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 IV & V. Executing the 10-Step Process & Tools & Templates

Tool 9: Buying Process Coverage and Win Ratio Table

Top Vendors at Each Stage For each row list in

descending order

Vendor 1 Vendor 2 ADI Vendor 3 Vendor 4 Vendor 5

Information % % a% % % %
Gathering

Product ADI
Comparison b%

Product ADI
Trial c%

Percent ADI
Purchasing d%

Win Ratio
d%
(% purchasing/
% considering) a%

Questions Addressed:
• How do different vendors fare at each successive stage of the product investigation
and purchase process?
• How often is ADI considered? How often does ADI win?
• At what stages is ADI at the greatest disadvantage? What does this imply for the
marketing strategy?

Strategic Significance:
Understanding what ADI needs to do in its marketing programs in order to achieve a
higher win percentage.

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Where Used:
Steps 3/4 - C(1b), E(3)

How To:
1. During customer interviews, discuss the different stages of the buying process and for
each stage inquire (relative to some past purchase decision):

• Which vendors were considered?

• What information sources were used?

• Which managers participated as influencers or decision makers?

2. Calculate the percent of respondents considering, testing, and purchasing each vendor
at different stages.
3. Place vendors in rank order from left to right.

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Tool 10: Major Customer Data Table

XYZ Corporation

Major Groups ABC Div ision DEF Division GHI Division JKL Division

Major Product
Line

Sales Forcecast
for Acct for Last
3 Years

Product Type 1

Product Type 2

Product Type 3

Total

ADI Position

ADI Trend

Questions Addressed:
• For each major area of activity, what is the customer's purchase history and what is
ADI's position?
• How has ADI revenue from the account evolved over the last few years?
• What is the overall trend for ADI business in the account?

Strategic Significance:
Understanding ADI's position in an important account and the prospect for the future.
(This tool is most applicable to businesses with significant customer concentration –– for
example, if 90% of revenue is derived from ten customers.)

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Where Used:
Steps 3/4 - C(2)

How To:

1. Based on customer and sales representative interviews, gather the information to

profile ADI's performance in each significant division or group of a major customer.
2. Within each location, divide the customer product needs into functional areas (for
example, DSPs, amplifiers, sensors, and so on).
3. For each category, quantify the past three years' purchases of ADI and other
vendors' products. Also track trends in recent purchases.
4. Summarize ADI's position in each category as one of the following: "the strategic
vendor," achieving a "functional beachhead," being a "niche supplier," "not a
player."

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Tool 11: Research Findings in Major Account Interview

Summary

Category/Segment

Category/Segment

Account Function

Usage Trends in Views on Key Trends? User

Account? (Across Issues? Needs?
Applications)

Customer
Needs?

ADI Position? Key Success

Where is Customer ADI's (share, prospects, Factors?
Investing? Position? perceptions (for ADI to win)

Situation Dynamics

(Metric - Account
Market Share)

Implication for ADI Areas of Comments

Doing Business with Investment
Account (by Product focus for
Line) Customer?

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 IV & V. Executing the 10-Step Process & Tools & Templates

Questions Addressed:
• What is the overall trend for usage of a product type in the account?
• Where is the customer investing and what is ADI's position?
• What are the implications for ADI doing business in the account?

Strategic Significance:
Understanding the key success factors to winning business in those areas where the
customers will be investing.

Where Used:
Steps 3/4 - C(2)

How To:

1. Use these templates to record findings from multiple interviews within a major
account spanning several functions.

2. For the account, as a whole summarize:

• Overall usage trends.
• An analysis of where the customer will be investing the most.
• A description of the trend in business by product type.
• Implications for doing continued business in the account.

3. Then for each function (area) where the products are used, distill the user needs
interview information into an account profile. Describe:
• Specific usage trends.
• User and customer needs.
• ADI's current position.
• Key requirements for winning follow-up or new business.
• Specific areas (programs or projects) planned for future investments.

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Tool 12: Choice Modeling Sensitivity Analysis

Potential
% Market Share Potential
Product Total lost if attribute % Market Share
Attributes Leve rage * becomes worst gained if attribute
possible were greatly improved

B (14.2) -6.2 8.0

C ( )

A ( )

( )
D

*Sum of lost and gained. Listed in descending order.

Questions Addressed:
• What attributes have the greatest leverage in improving potential market share if ADI
is perceived as superior? Which would have the greatest negative impact if ADI's
performance drops?
• Considering the probabilities of ADI differentiating itself, investments in which
attributes offer the greatest payback?
• Along what dimensions is ADI most at risk to competitors' moves?

Strategic Significance:
Evaluating what combination of attributes (at what price) promises the greatest chooser
share.

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Where Used:
Steps 3/4 - C(3), F(1)

How To:

o Article: "Redesigning Product Lines with Conjoint Analysis: How Sunbeam Does
It," Albert L. Page and Harold F. Rosenbaum, Journal of Product Innovation
Management, 1987, Nov. 4, pp. 120-137.

o Article: "Commercial Use of Conjoint Analysis: A Survey," Cattin and Wittink,

Journal of Marketing, Summer, 1982.

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Tool 13: Segment Discovery Techniques

Key
Buying
(KBF)
Fa ctors Ca tegory 1 KBF Ca tegory 2 KBF Ca tegory 3

A A A
%
%
B B B

C C C

D D D

E E E

F F F

G G G

H H H

I I I

J J J

Percent
Percentincluding
including Box length indicates
attribute
attributeon
in top
top 10
5 average rank of factor

$100 I H I
Maximum H
to spend H
G G
on all G
attributes F
F F
E
E E

D
D D

C C
C

B B

A
A
$0 A
Category 1 Category 2 Category 3

A to I = Attributes

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Questions Addressed:
• What groups of prospects share a common set of choice criteria and attribute
weighting?
• How do these groups differ in their needs? How do they differ along other
dimensions (for example, demographics, and so on)?
• How should users' needs segments be defined?

Strategic Significance:
Determining the parameters that describe prospects who share a common set of needs.

Where Used:
Steps 3/4 - D(1)

How To:

1. The process involves stratifying the sample into clusters with common sets of
needs.
2. Techniques, such as the key buying factor analysis, or the $100 test, help by
summarizing needs in a way that allows sorting groups of prospects.
3. Once "segments" are identified, look for variables that help explain how these
buyers are characterized and located.
4. Test to make sure differences between segment needs and characteristics are
significant.

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Tool 14: Segment Fact Sheet

Characteristics Segment 1 Segment 2 Segment 3

De finition/Description

Size

Present Year (y)

y –3
y +5

Ne eds

Musts
Differentiating
($ 100 Test weighting)

Price Sensitivity

Trends in Usage

Co mpetitors

ADI Relative Share

Largest
Fastest Growing

Prima ry Channels

Distrib ution Trends

Target Accounts

Questions Addressed:
• What are the major market parameters delimiting each segment?
• How do the segments compare?

Strategic Significance:
Understanding relative opportunities and risks of segment alternatives.

Where Used:

Steps 3/4 - E(1)

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Tool 15: Vendor Financial Data Table

Y-4 Y-3 Y-2 Y-1 Current Year

Sales
GM
Eng.
Mktg.
Sales
G&A
Operating Profit
Net Profit

Assets
Equity
Debt

Return on Sales
Asset Turnover
Return on Assets
Return on Equity
Debt Equity

Sales by Line
Prod Line 1
Prod Line 2
Prod Line 3

R&D Investment
A1 A2
(mm) by product
Program A B1 B2
Program B
Program C C1 C2

A1 A2 + B1 B2 + C1 C2
Total Engr. Months

Engr. Months Avail. Z

New Product Reserve Z - A1

Questions Addressed:
• How do vendors' financial positions and cost structures compare?
• How do they fund growth? How is their ability to grown constrained by their
capitalization and cash flow?
• What is their strategy for investment of R&D resources? How are their resources
committed and what kind of resources are available for new initiatives?

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Strategic Significance:
Understanding to what extent the financial position and capitalization of the competing
vendors limit their flexibility in pursuing strategic options.

Where Used:
Steps 3/4 - E(2)

How To:

1. Gather financial information from publicly available sources, such as annual reports
and 10Ks.
2. Estimate engineering man-months expended on each major product program.
3. Compare these estimates to that of the total staff to determine resources available
for new product development.
4. Reconcile this difference with the vendor's history of new product initiatives.

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Tool 16: Competitor Profile

Competitor

Segment

Overall Product Strategy:

Sales/
R&D Manufacturing Distribution Marketing Support

Functional
Strategy

Strengths

Weaknesses

Opportunities Threats

Questions Addressed:
• What are the competitors' product and functional strategies in each segment?
• What are their strengths and weaknesses relative to the leader? To ADI?
• What are ADI's strengths, weaknesses, opportunities and threats?

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Strategic Significance:
Understanding a competitor's strategy for a market and points of vulnerability.

Where Used:
Steps 3/4 - E(2)

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Tool 17: Competitor Segment Dependency Analysis

Share of vendor
Percent of total revenue
in segment
derived from segment sales

Estimated Market Share

3% 6% 9% 12%

0%

Segment 3 $37M
20%

% of Revenue
$20M 40%
Segment 1

60%
Segment 2 $18M

Segment 6 $13M
80%
$9M
Segment 4
$7M
Segment 5 100%

Revenue derived from segments

in descending order

Questions Addressed:
• How is a competitor likely to react to ADI initiatives in a particular segment?
• Are major competitors too dependent on declining segments or are they well
positioned in high growth segments?
• Which segments provide the best opportunity for ADI from a competitive intensity
standpoint?

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Strategic Significance:
Deducing how aggressively a competitor will resist an initiative by ADI in specific target
segments.

Where Used:
Steps 3/4 - E(2)

How To:

For each vendor:

1. Using vendor financial statements, research-firm data, and primary research try to
estimate revenue by segment.
2. Portray segment revenue, in descending order, with the vertical axis representing
share of revenue.
3. Scale the bar width (horizontal axis) by share of market.

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Tool 18: Key Buying Factor Vendor Ranking

Segment 1 ADI Competitor 1 Competitor 2

(KBF) A %

C
D
E
F
G
H
I
1 2 3 4 5 1 2 3 4 5 1 2 3 4 5
Percent including
attribute on top 10
Bar size represents
average rating of vendor

Questions Addressed:
• How are vendors perceived with regards to their ability to meet customers' and users'
needs in each segment?
• How is ADI ranked relative to other vendors?
• In what segments is ADI strongest? Weakest?

Strategic Significance:
Understanding the perception customers have of ADI's ability to meet their needs relative
to the competition and the challenge this represents as far as success in the market is
concerned.

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Where Used:
Steps 3/4 - E(2,3)

How To:

1. Sort previously obtained market research and customer interview data, eliminating
data on customers not in target segment.
2. Arrange attribute ratings within this segment in order of decreasing average
importance.
3. Indicate ADI's and competitors' ratings on these attributes.

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Tool 19: Users' Needs and Satisfaction (Radar) Diagram

A
100%
B
H

0%
G C

D
F

ADI E
Competitor A
A to H are attributes of users' needs.

Questions Addressed:
• How are vendors perceived as far as their ability to meet customers' and users' needs
in each segment?
• How close does the leader come to satisfying the customer? How is ADI ranked?

Strategic Significance:
Evaluating ADI competitiveness.

Where Used:

Steps 3/4 - E(2,3)

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Tool 20: Competitive Advantage Matrix

High

E
Importance of D
Attribute
to Customer
A G
B
C
F

Low
Weak 0 Strong

ADI ADI
Disadvantage Advantage
(When customers rated (When customers rated
competitor higher than ADI) ADI higher than competitor)
A to G are attributes or users' needs

Questions Addressed:

• How does ADI compare to a competitor in providing the specific attribute the
customer in a segment find most important?
• Overall, who is the strongest position?

Strategic Significance:
Assessing the true extent of any competitive advantage ADI might have.

Where Used:
Steps 3/4 - E(3)

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How To:

1. Gather data from focus groups, customer visits, and benchmarks.

2. Determine the midpoint line for the importance axis by taking the average of the
relative ratings of all user needs.
3. Subtract the competitor's performance rating from ADI's to get the value for the
advantage axis (or use the performance difference facts from the radar diagram
worksheet).
4. There should be approximately the same number of points above and below the
importance midpoint line.

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Tool 21: Addressable Market Analysis

Step 1: Of the total market, what is ADI's addressable market?

Customer
needs not
Total addressed
Market by ADI
products
Captive
$ to other
vendor
Do not buy
from ADI
$ channels

$ Addressable
market

Step 2: Of the addressable market, which portion is ADI's share?

Difficult to Win
Addressable Reach Coverage Ratio Share
Market (describe)
25% 5% 1.25%
Na tural Toward
$
ADI (describe)
70% 10% 7%
Fa vors ADI
$ (describe)
90% 25% 22.5%

Expected Share of Addressable Market 11.9%

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Questions Addressed:

• What portion of the total market provides the highest potential for ADI?
• Why are the remaining portions less attractive? How does accessibility differ by
segment? Are there means for expanding the addressable market?
• What share can be projected for ADI in its addressable segments?

Strategic Significance:
Understanding what share of a market ADI can reasonably expect to attract.

Where Used:
Steps 3/4 - E(3)

How To:

1. Gather data from research sources, outside experts, and interview findings.
2. Estimate portions of the market not addressed due to product fit, strategic
relationships, distribution coverage, and so on, to determine addressable market.
3. From the coverage and win ratio analysis conclusions, assess ADI's ability to reach
and ultimately appear to customers. Use vendor and product benchmark
information to determine competitive capability at this point.
4. Compare the conclusion from number 3 to present share, or share in similar
markets, as a test of reasonableness. Consider what has to happen in the
marketplace to cause purchase behavior to change to this degree? Is it likely?

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Tool 22: Channel Flow by Segment Table

CHANNELS
DIRECT DISTRIB OTHER TOTAL

ADI
%
$

Comp. A.
%
$

Comp. B.
%
$

TOTAL

U.S.

Europe

Japan

ROW

Questions Addressed:

• How much of the segment purchases flow through each channel?

• Is this approach to buying consistent around the world or does it vary by geography?
• What channels are most important to each competitor? What are their channel
strategies?

Strategic Significance:
Understanding which channels are most important to success in a given market.

Where Used:

Steps 3/4 - E(4)

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Tool 23: Segment Attractiveness Table

Relative Competitive Opportunity Intangibles

Segment Size Growth Share Situation to Change & Linkages
Game

Questions Addressed:

• On a comparative basis, which segments offer the greatest potential and probability
for success?
• What linkages exist between segments?

Strategic Significance:
Choosing a set of segments that offer an attractive financial return and a good probability
of competitive advantage.

Where Used:
Steps 3/4 - E(6)

How To:

Under "Opportunity to Change Game," consider Porter's five industry factors: rivalry
among existing firms, threats of new entrants, bargaining power of buyers, bargaining
power of suppliers, and threats of substitute products.

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Tool 24: Segment Attractiveness Matrix

Circle size indicates

relative segment
Large profitability

Segment 1
Vertical axis repre-
sents relative size Segment 3

Segment 4
Small Segment 2
Growth
Low High

Placement on the horizontal axis

represents relative growth rate

Questions Addressed:
Which segments appear most attractive in terms of size, growth, and profitability?

Strategic Significance:
Choosing segments on the basis of most attractive financial return.

Where Used:
Steps 3/4 - E(6)

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How To:

1. Gather information as best you can from secondary and primary sources. When
segment-specific figures are not readily available, extrapolate from closest available
data points.
2. Profitability may be inferred by searching for companies that generate a majority of
their revenues from these segments. ADI's profitability is also a useful point of
reference.

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Tool 25: Vendor/Attribute Perception Profile

(From Choice Modeling Study)

Key Product Attribute

ADI

Vendor A

Vendor B

Vendor C

Extremely Very Neutral Negative Very

Positive Positive Negative

Questions Addressed:

• How are vendors perceived on their ability to deliver a product attribute?

• How strong a consensus (or how wide a distribution) exists in the perception?
• Which vendor is perceived as superior? How competitive is ADI?

Strategic Significance:
Objectively evaluating how ADI is perceived by customers and the degree of difficulty in
changing their opinions.

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Where Used:
Steps 3/4 - F(1)

How To:
1. Books: Market Research and Analysis, Donald R. Lehmann, Irwin, Boston, 1989.
2. Consultants: Decision Research, Lexington, MA., Mars & Co., Greenwich, CT.
3. Consultants: Dr. Paul Green, The Wharton School, University of Pennsylvania,
Philadelphia, PA.

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Tool 26: Statement of Purpose Template

The purpose of the XYZ Division is to provide

to customers who need to when

primary attributes of interest are best viewed as

The major business focus is characterized by:

– Product Types

– Customer Types

– Differentiation Variables

– Price Points

– Distribution Channels

Questions Addressed:
• How to describe a Statement of Purpose?
• What topics to cover?

Strategic Significance:
Providing a succinct description that can be internalized by all employees.

Where Used:
Steps 1-B

Other Resources:

q See "Strategic Intent" and "Value Proposition" in Section VII, Key Concepts.

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Tool 27: Value Proposition Checklist

1. Benefits explicit, specific, clearly stated?

2. Price explicitly stated?

3. Target customer clearly identified?

4. Clear how this value proposition is superior for target segment?

5. Evidence of adequate demand?

6. Evidence of acceptable returns?

7. Viable in light of competitors' value propositions?

8. Achievable with feasible changes in current business system?

9. The best of several value propositions considered for this company?

10. Clear and simple?

Questions Addressed:

• What to consider when crafting a value proposition?

• When is a value proposition effective?

Strategic Significance:
Providing a common focal point for the organization's efforts.

Where Used:
Steps 1-B

Other Resources:

q See "Value Proposition" in Section VII, Key Concepts.

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Tool 28: Forward Looking Vintage Chart

6
Revenue in each year is
disaggregated by year product
was introduced
Yearly Revenue $

5 5

4
3
3
4
2 3
Yr 2
1
1 2
3
Yr 2
Yr
0 1
0
0
2
0 1 1
Yr-1 Current Yr+1 Yr+2 Yr+3 Yr+4 Yr+5
Year

Questions Addressed:

• Where will the projected revenue growth need to come from?

• Is the growth plausible?

Strategic Significance:
Setting expectations for product generation activities.

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Where Used:
Steps 2-A

How To:

1. Study past experience (both ADI's and competitors') to gain an understanding of

product life cycles.
2. Begin by modeling this behavior in a forward looking "vintage chart" showing
revenue in a given year, by year the product program was introduced.
3. Draw inferences about the number of new programs and the success required
(market share achieved) in order to fulfill expectations of total revenue over the
period.

Other Resources:

q Refer to the Hoshin Planning Process Manual, which can be obtained from the TQM
Office, for additional formats and planning models.

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Tool 29: Objectives Planning Table

Page of

Objectives:

Key Success Factors Metrics Departmental Goals

Questions Addressed:

• What are the key success factors (KSFs) in achieving the objectives?
• How do the objectives translate into constituent departmental goals?

Strategic Significance:
Verifying if a sufficient number of the underlying requirements to achieving the
objectives are addressed in order to guarantee program success.

Where Used:
Steps 2-B

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How To:

1. Consider long-range objectives under the categories of: growth, profit, return on
assets, market share, customer satisfaction, operating effectiveness, and new
products.
2. For each objective established, define what underlying requirements must be met to
guarantee performance. These are key success factors (KSFs).
3. Translate each KSF into a series of specific goals, as appropriate, for R&D,
manufacturing, marketing, sales support, human resources, and so on.

Other Resources:
o Refer to the Hoshin Planning Process Manual, which can be obtained from the TQM
Office, for additional formats and planning models.

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Tool 30: User Needs "Imagineering" Diagram

Made-Up Example: Not Actual Data

Voiceband Codec & Base Band Converter

Algorithm Signal Processor

Physical Layer Processor (PLP) Up-converter

Microphone
Antenna
Speech Channel Interleave
ADC Encode Encode Encrypt Modulator

Baseband
Synthesizer Switch
Converter
Speech Channel De- Decrypt Channel
DAC Decode Decode Interleave Equalizer De-
modulator
Speaker Down-converter

Embedded H8 Microcontroller

512K * 8 128K * 8 Keypad &

RAM ROM Display

Questions Addressed:

• What new approaches could be used to solve the customers' problems?

• How would they be an improvement over present solutions?

Strategic Significance:
Developing a unique approach to solving a problem (not obvious to competitors) that may
provide a strategic advantage.

Where Used:
Steps 5-A

How To:

1. Define the underlying problem statement.

2. Develop a flow diagram of the present usage situation (see example).
3. "Imagineer" alternative approaches to solving the problem in as many different
ways as possible. Encourage brainstorming.

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 Imagineering Chart

Next X Years
Target Job Title: Environment:
(B4) What forces will be
Diagram Present Usage Situation influencing change in the
(A) How does the present solution nature of the work or
fit into the context of the customer’s problems?
Today
environment?

Forces
(B1) Why does this job exists?
What business problems consume
the majority of the person’s time?
(B5) How will these problems
Key Differentiators What issues keep them awake at
change given the dynamic
(D) What could be the key differentiators night?
nature of this person’s
of you as a vendor in this future business?

Problems
environment?
Tool 30A: "Imagineering" Chart

Product (B2) How does the person spend their

(C1) Given what could occur with time? What priorities would you (B6) How will the activities and
technology and new processes, infer from their behavior? distribution of time likely
what product attributes can you change?
conceive of that could deliver

Activities
these benefits?

Analog Devices, Inc. Company Confidential

Services
(C2) What services could contribute? (B3) Judging from the problems and
(B7) What different kind of
activities above, what benefits
Other Vendor Traits benefits will be needed
would be most sought by the
(C3) What other attributes of you as X years from now to
person? What end results would
cope with the new

Benefits

Value Delivery System

a vendor could contribute to most improve “a day in the life” of
delivery of the benefits and environment?
this person?
customer satisfaction?
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Questions Addressed:

• What products or services might a given customer in a particular segment need in

the future?
• How would we have to change in order to deliver such products or services?

Strategic Significance:
Enabling teams to imagine what product or services customers might want and why they
might want them.

Where Used:
Steps 5-B

How To:

1. In a team setting, step through each questions in sequence, starting with (A) and
moving through to (D).
2. Pick a particular account and a person in the account; the more specific, the easier
the visualization process about problems, needs, and trends.
3. Repeat several items for different jobs and/or different accounts, until the team feels
that the most important decision makers or consumers of the product or service have
been covered.
4. It is not necessary to get the team's discussion onto the Imagineering Chart as
shown; writing up the conclusions or summaries from (C) and (D) for all the charts
generated is key in capturing the possible needs for the rest of Step 5 and for Step 6.

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Tool 31: Necessary Products "Imagineering" Table

Market Segment: Segment A Segment B

Problems Addressing Today:

Problems Facing in 5 Years:

Solution Benefits Required to

Address Future Problems:

Product Attributes:

Service Attributes:

Vendor Attributes:

Channels:

Questions Addressed:

• What benefits will be required to address the users' problems in five years?
• What product, service, and vendor attributes are implied by these benefits?

Strategic Significance:
Visualizing what customers should want to solve their problems in the future.

Where Used:
Steps 5-B

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How To:

1. Begin by describing what problems the user is trying to solve today with the product.
2. Contrast this with the problems the user and organization will likely face in their
business in five years.
3. Deduce what benefits will be desirable from a product/solution in order to address this
future usage environment.
4. Infer the product, service, and vendor attributes which, taken together, would deliver
these desirable benefits.
5. Consider what channels would be the logical ones to purchase or obtain support for
such a solution.

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Tool 32: Competitor Product Family Analysis

Product Development Plan Vintage Chart

High

YR 4

$ 3
Med YR 3
2
YR 2
2
1 1
YR 1
1
0 0
Low 0 0
YR2 YR3 YR4 YR2 YR3 YR4
Current Current
Year Year

Questions Addressed:

• What is a competitor's likely product strategy in the face of the customer needs
situation?
• How is it different from ADI's?
• What revenue will the program produce?

Strategic Significance:
Comparing a competitor's strategy against ADI's to test degree of differentiation.

Where Used:
Steps 5-F

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Tool 33: Product Concept Positioning Chart

Need Dimension X
X1 X2 X 3

Product
Concept A
2
Y
Need Dimension Y

Product Concept C
1

Product Con cept B

Y

Questions Addressed:

• How does a product concept fit relative to customer needs?

• How do a combination of product concepts relate to one another?

Strategic Significance:
Clarifying thinking about focus of product (and product line) strategy.

Where Used:
Steps 5-H

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Tool 34: Product Program Chart

Y- 1 Current Year Y +1 Y +2 Y+ 3 Y+ 4
High

• • •
• •
•
Price/Performance Categories

Med
• • •
•
• • • •
•
Low • •
Questions Addressed:

• What is the roll-out plan for new products over the planning horizon?
• How are the products positioned relative to one another?
• What gaps exist that could be exploited by the competition?
• What possible or likely technological discontinuities could occur? What effect
would they have on product coverage?

Strategic Significance:
Verifying product coverage and determining technology linkages and synergies.

Where Used:
Steps 5-H, 6-C

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Tool 35: Benefit Trade-off Simulations

Choice modeling collects information from prospective customers on what attributes are most
important to them and how they see differences between competitors in in their ability to deliver
these benefits. This informa tion becomes a database which can be used to run simulations.

Example 1: If the speed of product A was doubled, what market share would
be gained?
Possible share goes from
4.9 to 7.1. There is a
Product A 4.9 large benefit segment that
wants high speed.
Product A
with twice 7.1
the speed

Example 2: If product A was available with either single or dual supply, what market share would
be gained?
"Single Supply Only" loses
share, but combination
Single Supply Only increases share from 3.8 to
3.8 9.2. We can gain from
serving two benefit
segments.
Both single and dual
9.2
supply

Questions Addressed:
• What bundle of attributes promises the greatest chooser share?
• What combinations of products offer the greatest share potential?
• How sensitive is chooser share to specific competitor initiatives?

Strategic Significance:
Providing a rigorous basis for trade-off decisions related to product (and product line)
strategy.

Where Used:
Steps 5-I

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How to:

1. Article: "Redesigning Product Lines with Conjoint Analysis: How Sunbeam Does
It," Albert L. Page and Harold F. Rosenbaum, Journal of Product Innovation
Management, 1987, Nov. 4, pp. 120-137.

2. Article: "Commercial Use of Conjoint Analysis: A Survey," Cattin and Wittink,

Journal of Marketing, Summer, 1982.

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 Value Proposition:
Gap in ADI's
Current Value
Delivery System

Key Products Post Sales

Target Pre-Sales Support and
Customers Buying Applications Pricing Communications Channels
Factors Support Maintenance
Made Up Example: Not Real Data

Platforms

- Small/medium - Applications - Compatible --Implementation - Within 10% - "ADI provides - Disti 25%
- Third party - Demonstrated
companies fit growth path services/assist of superior total
SW support knowledge of
serving PC add- competition solution & - Software
business,
in market - Vendor - High reliability - Capacity for initial assistance to suppliers 50%
- Cross industry,
Knowledge functional application planning tools/ price & insure better &
- Design of business - Multiple consulting on-going faster decisions
integrated
engineer configuration cost of in your business,
applic. S/W - FAE
I/O parts Consulting - Ease of ownership now and in the
- Marketing

Analog Devices, Inc. Company Confidential

-Vendor - Ability to integration future."
executives reputation develop tools - Excellent
on PC disti/vendor - Tailor messages/
- References team marcom to
approach to target industry/
Tool 36: Value Delivery System Deficiency Analysis

- Cost of sales & application

ownership support segments

- Multiple -ADI awareness

standards
support
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Questions Addressed:
• What are the critical "links in the chain" to deliver the value proposition to the
customer?
• In what areas is ADI deficient?
• How can the organization fill this gap?

Strategic Significance:
Assuring that the key success factors in delivery of the value proposition are explicitly
addressed in an integrated fashion.

Where Used:
Step 6-B

How To:

1. Define the links in ADI's value chain.

2. For each link, itemize the critical elements. Test that each is necessary and, in
combination, sufficient to fully deliver the value proposition.
3. Identify those elements that are weaknesses or gaps in ADI's delivery system.

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Tool 37: Technology Leverage Matrix

Generic Product Families

Technology
Building Blocks Family 1 Family2 Family N

Building Block 1 A G J N, M Q
Block 2 B D H, I M P
Block 3 H L P
Block 4 A D P, R
E G M, N
C J, K Q, R
C J
N
Block N J Q

Letters = Products Within Family

Questions Addressed:
• What "generic" technologies are used throughout the product line?
• To what extent is the investment in technology leveraged from product family to
product family?
• What new opportunities exist for utilizing the technology?

Strategic Significance:
Increasing the return on technology investment.

Where Used:
Step 6-C

How To:

1. Identify significant technology development activities.

2. Within each product family, define which technologies are currently employed by the
"parent" product.
3. Review the matrix for opportunities to reduce the variety of independent technology
development activities by leveraging others.

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Tool 38: Family Tree of Technology Usage

Product Line Family Tree Produc t 4

New Product 4A
Technology

Produc t 1 High Performance

Product
1A 1B

3B
General Purpose
Products Produc t 3
Specialized
3A Version
New Process
Transitions ( ) Technology
in corporate new product Low Cost
and/or process technology Produc t 2 Products 2B

2A
Imp roved
Reliability
Nich e Product Version

Questions Addressed:
• How has the product line evolved over time?
• How is technology leveraged within a product family? Among product families?

Strategic Significance:
Increasing the return on technology investment.

Where Used:
Step 6-C

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How To:

1. Starting with "parent" products, map the evolution of the product line.
2. At transition points, note the role of new product or process technologies.
3. Consider the opportunities to leverage technology for future product strategy.

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Tool 39: Revenue Projection Analysis

Direct

t t t t t t

Cumulative Yearly Unit ADI % ADI Yearly Average ADI $

Unit Sales Sales Share Unit Sales Sales Price Revenue

Distribution

• • •

Questions Addressed:
• What ADI revenue can be expected for the product program?
• How will life-cycle dynamics (such as average sales price erosion) effect ADI share
and revenue?
• How is the revenue generated by geography? By channel?

Strategic Significance:
Evaluating business potential over the life cycle.

Where Used:
Step 7-A

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How To:

1. Project cumulative unit volume, by channel, over the period to product maturity.
Based this projection on the user need segment size estimates developed in Step 4.
Take into consideration price-volume relationships.
2. Deduce yearly sales volume.
3. Forecast ADI's potential share of the unit volume from ADI's expected competitive
position. Use the results of existing quantitative market research.
4. Construct a growth curve for ADI sales over the period of maturation. Take into
consideration cannibalization of existing products.
5. Consider the evolution of prices over the industry (product category) life cycle when
calculating revenue.

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Tool 40: Contingency Matrix

Favorable Market
Scenario 1 Scenario 2

Favorable market Favorable market

ADI executes poorly. ADI executes well.

summarize the
major assumptions
Scenario 3 Scenario 4 for each scenario

Unfavorable market Unfavorable market

ADI executes poorly. ADI executes well.

Unfavorable Market
ADI does not ADI executes
execute well. well.

Revenues

Fa vorable Market Re venu es Scenario 1 R even ue s Scena rio 2

$1 .2 58 $1 .2 58
$.18 $.18

$.75 8 $ .7 58

$.58 $.58 Plo t the reve nue

94 89 94 trend s for ea ch
89
scen ario d escrib ed
on the sce nari o
Reven ue s Sce nario 3 Re venu es Sce nario 4 de scriptio n slid e.
$1 .2 58 $ 1.25 8
$.18 $ .1 8

$ .7 58 $ .7 58

$.58 $.58
89 89 94
94
Unfavorable Market
ADI does not ADI executes
execute well. well.

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Profits

Fa vorable Market Reven ues Scenario 1 Reve nue s Scenario 2

2 0% 20%

10% 1 0%

0% 0%

-1 0% -1 0% Plot th e profit leve ls

89 94 89 94 fo r e ach scen ario
descri bed o n th e
Reve nue s Scenario 3 Reve nue s Scenario 4 scena rio de scriptio n
20% slid e.
20 %
1 0% 10%

0% 0%

-10% -10%
89 94 89 94
Unfavorable Market
ADI does not ADI executes
execute well. well.

Questions Addressed:
• What external and internal situations might occur that would cause a serious deviation
in results?
• What is the likelihood of their occurrence?
• What are the financial implications of these scenarios?
• What actions should be taken if the situations happen?

Strategic Significance:
Understanding the range of performance possible as a result of the plan.

Where Used:
Step 7-C, 8-A, C

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How To:

1. Define the scenarios, or a range of possible situations within each. Be sure to

consider any possible technological discontinuities or likely access to required
technologies.
2. Estimate the likelihood of various situations occurring, including the underlying
assumptions of the plan.
3. Project the financial consequences.
4. Analyze the "expected value" of the return as well as the range of possible returns.
5. For each scenarios, define a set of action steps to react to the condition.

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Tool 41: Cost Driver Tables

Illustrative Drivers of the Unit Cost of Purchase Inputs*

Cost Driver
Cost Applied to
Driver Procurement Description

Economies of scale Purchasing scale. The volume of purchasing with a given supplier
affects bargaining power.

Linkages Linkages with supplier. Coordinating with suppliers on specifications,

delivery, and other activities can lower total costs.

Interrelationships Shared purchasing with other Combining purchases with sister business units can
business units. improve bargaining power with suppliers.

Integration Make versus buy. Integration may raise or lower the cost of an input.

Timing History of supplier Historical loyalty to our problems. Relationships

relationship. with suppliers may affect input costs, access to
inputs during tight periods, and services provided
by suppliers.

Policies Purchasing practices. Purchasing practices can significantly improve

bargaining power with suppliers and the willingness
of suppliers to perform extra services, for example:
• Selection of the number and mix of suppliers.
• Hedging procedures.
• Investment in information on supplier costs and
availability.
• Annual contracts versus individual purchases.
• Utilization of by-products.

Location Supplier location. Location of suppliers can affect the cost of inputs
through the cost of transportation and the ease of
communication.

Institutional factors Government and union. Government policy can restrict access to inputs or
affect their cost through tariffs, taxes, and other
means. Unions may affect the ability to out-source
or whether nonunion suppliers can be used.
* See Other Resources

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 Illustrative Drivers of Asset Utilization for Selected Value Activities
Operations Physical Distribution Order Processing
Driver Raw Work-In- Finished
Materials Process Production Logistical Goods Computer Accounts
Inventory Inventory Facilities Facilities Inventory Systems Receivable

Scale Purchasing Plant Scale. Scale of Scale of Regional scale. National Order scale.
scale (that facilities. facilities. scale.
determined
influence
over supplier
delivery.)

Learning Experience in Experience in

constructing construction
plants. of facilities.

Linkages Supplier Location of Channel Channel

delivery channel stocking levels. payment
schedule and warehouses. policies.
packaging.

Pattern of Seasonality/ Seasonality/ Seasonality/ Fluctuations in

Capacity cyclicality of cyclicality of cyclicality of demand.
Utilization production. production. production.

Integration Vertical Vertical Vertical Vertical

integration. integration. integration. integration.

Analog Devices, Inc. Company Confidential

Timing Date of Timing of Timing of
construction. technology technology
choice. choice.

Policies Safety Safety stock. Production Logistics Aging and Systems Payment
stocks, Aging and technology. technology. curing technology. terms. Credit
Payment curing Speed of requirements. policy.
Schedule to requirements. construction Delivery time Accounts
suppliers. of facilities. customers. Receivable
monitoring
technology.
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Questions Addressed:
• What are the primary cost drivers affecting procurement and asset utilization?
• What are the greatest contributors to product cost?
• Where should cost reduction efforts be focused?

Strategic Significance:
Enabling cost competitiveness in value activities.

Where Used:
Step 7-D

Other Resources:

* From Michael E. Porter, Competitive Advantage, Chapter 3.

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Tool 42: Channel Economics Analysis

Plans to Meet Sales &

Marketing Cost Envelope Goals
Projected Change
in Channel Mix
(% of net revenue)
Target SMCE %

% Distributor
Third % Distributor
Margin
Party %
% Imp rovements:
•
•
Distributor % Factory Mktg
Factory
Marke ting % Imp rovements:
% •
%
•

Field Marketing Field Mktg. &

% and Selling Cost Selling cost
Direct % % %
Imp rovements:
•
•
Expected total SMC E Expected SMCE
co st in FY96 i f no FY96 co st structure,
imp rove ment is Inco rpora ti ng
a chie ved in FY94 Impro vemen ts.
costs b y ch ann el

Questions Addressed:
• How is channel mix expected to change over time?
• what impact could these trends have on e Sales and Marketing Cost Envelope
(SMCE)?
• What actions are needed to meet SMCE objectives?

Strategic Significance:
Developing a cost-effective channel strategy.

Where Used:
Step 7-D

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How To:

Calculate current SMCE percent by channel using the following formula:

Field, Marketing & Sales Costs + Distributor Margin + Factory Marketing
SMCE % =
Gross Shipments + (Net Trading Income - Currency Effects)

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Tool 43: Revenue and Profit by Segment Chart

Segment revenues Cost as a percent of

as a percent of segment revenue
total revenue
FFC R&D Sales Mktg. G&A Profit

Segment A

Segment B

Segment C

Segment D

Segment E

Segment F Loss

Segment G
100% Revenue

Cost Structure by Segment or Product

Questions Addressed:
• What are the cost issues by market segment?
• Which markets match ADI's abilities and provide the most profitability? The least?
• Can profitability be improved by existing (or downsizing) some of the less profitable
segments and/or expanding those that are more profitable? To what extent do shared
costs have an impact on these decisions?

Strategic Significance:
Defining most desirable mix of markets.

Where Used:
Step 7-D

How To:
Consult Division Controller for relevant data.

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Tool 44: Valuation Analysis

Made-up Example: Not Actual Data

ASSUMPTIONS: INPU
T
Rev. Growth Rate 20.00 * Fixed and working capital
% requirements are
Oper Margin 12.00 defined as incremental asset
% investments as
CapEx % Rev. Chg* 25.00 a percentage of incremental revenue
% growth
W/C % Rev Chg* 15.00 (that is, to generate $1 in
% incremental
Cash Tax 34.00 revenue, what must be invested in
Rate % fixed
Cost of 14.00 and working
Capital % capital?).
Period O Revenue (Actual) $1,00
0
Period O Oper Profit $120
(Actual)
Number of Shares Out (M) 240

Period O
89 90 91 92 93 94 95 96 97 98 99

Revenues 1,000 1,200 1,440 1,728 2,074 2,488 2,986 3,583 4,300 5,160 6,192
Op Profit 120 144 173 207 249 299 358 430 516 619 743
•Capital Exp -50 -60 -72 -86 -104 -124 -149 -179 -215 -258
•WC Investments -30 -36 -43 -52 -62 -75 -90 -107 -129 -155
•Cash Taxes -49 -59 -71 -85 -102 -122 -146 -175 -211 -253

Oper Cash Flow 15 18 22 26 31 37 45 54 65 78

PV of Cash Flows 168

Terminal 945
Value
+Mkt Value Inv. 0 T TOTAL 1,113
VALUE
-Mkt Value Debt 0 Price per $4.64
Share

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Questions Addressed:
• What market value should result from the financial projections and variability in
potential returns?
• How does the value conclusion compare with market expectations?

Strategic Significance:
Evaluating what actions should be taken to increase shareholder value.

Where Used:
Step 7-F

How To:

Consult Division Controller.

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Tool 45: Contingency Plan Prioritization

Danger Probability Importance

Issue (A= 1 to 10) (B= .1 to 1.0) (C= A X B)

1.

2.

3.

4.

5.

6.

Questions Addressed:
• What situations should be emphasized in contingency planning?
• What situations represent the greatest danger? What situations are most likely to
occur?

Strategic Significance:
Focusing the team's energies on the highest priority problems.

Where Used:
Step 8-B, C

How To:
Consult Division Controller.

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Tool 46 (“new”): Whole Product View

Potential Product

Augumented Product

Expected
Product

Generic
Product

“What Customer Problem Are We Solving”

Questions Addressed:
• What are the critical customer problems that ADI intends to solve?
• How can/should ADI differentiate its product offering from its competition?
• What market partnerships are required to gain a leadership position?
Strategic Significance:
The Whole Product View illustrates the intended economic or business value that will be
delivered. This tool allows you to graphically represent the business as a complete customer
solution.
Where Used:
This tool should be used in BPP Steps 3, 4 and 5. For Steps 3 and 4, this tool can be used to
define what the customer requires from ADI and what ADI’s competition is offering. For
Step 5, it can be used to illustrate ADI’s entire product offering.
How To Use This Tool:
Generic Product is the device or basic product you are selling
Expected Product is determined by other factors relating to your product. These factors
include competition, alliances, pricing, standards, service and support, distribution or the
sales cycles.
Augmented Product can be determined by understanding your customer’s businesses. What
markets? Who is my customer’s competition and on what basis do they compete?
Augmented product usually involves increasing integration or defining new delivery or
packaging.
Potential Product describes all the traditional marketing activities that increase the value of
your offering. Marketing communications, branding, distribution channel support are all
examples.

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Tool 47 (“new”): Technology Adoption Model

Early Majority
Late Majority

Early Adopters
Late Adopters/
Laggards
Innovators

Time

Questions Addressed:
• What customer applications offer the best match to Product Line capabilities and where
are they in their Technology Adoption Process?
• What is the likelihood and extent of adopting the new product idea with respect to the
community of customers and their needs?
• What are the barriers to the customer to integrate the new idea (technology) into a
practical application? What chasms need to be over come for the customer/community?

Strategic Significance:
Helps provide a focus on user needs and determine the likelihood that a customer will use the
new product/idea. In addition, this tool helps determine efficient use of Marketing and
Development resources by focusing on only the attractive Segments/Channels/Customers.

Where Used:
BBP Step 3 in conjunction with the Classification Schema Examples tools graphically depict
where customers are in their Technology Adoption Process. It also can be used with Tool 9,
Buying Process Coverage and Win Ratio Table.

How To Use This Tool:

1. The Technology Adoption Model is one of a variety of market models with the objective
of focusing the PL team’s energies on those customers that appear to provide the best
return on the R&D investment.
2. The tool provides a visual perspective of when it is best to engage with the Segment /
Channel / Customer based on the value proposition that ADI is considering. Too early or
too late engagement could significantly the reduce the return.

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Tool 48 (“new”): Camp Development

Customer

Customer’s Customer

Press / Analysts

Industry Luminaries

Distribution Partners

Source:
Key Customers
McKenna
The Regis Touch
Company

Questions Addressed:
• Who are the market influencers, educators, information sources, and luminaries?
• Who are the partners that will fundamentally enable the market, help drive standards, and
lower overall adoption costs?
• What users will provide leadership for the mainstream market in adopting your product?
Strategic Significance:
Products developed with “Camp” relationships should have less risk and lower adoption
costs.
Where Used:
BPP Step 3. This tool should also help in Step 5 by considering alternative ways to provide
value to the customers. This tool also can help address the PSD factors.
How To Use This Tool:
1. Define the target segment and whole product requirements
2. Identify who are the targets of each partner type
3. Identify what is the perspective, business model and the alignment of each target
4. Program definition and resource commitment
• Recruitment, support and vision definition
• Joint Sales and market development
• Infrastructure communications and evidence building
5. Assign ownership and track program milestones

Camp Partner Evaluation Criteria

1. Mutuality of strategic objectives
2. Match to segment customer solution requirements
3. Ability to leverage platform into multiple market segments
4. Wherewithal to educate and influence the market

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Tool 49 (“new”): Competitive Differentiation Process

Competitive Positioning
Step 2 Step 3
Step 1

Review elements of Build value profile for Summarize

whole porduct target customer segment comparative ranking
differentiation

Step 4 Step 5 Step 6

Map competition and self Take appropriate

Validate/Adjust
against top values action

Questions Addressed:
• How can ADI differentiate its product offering to maximize the benefit for its customers.

Strategic Significance:
This tool provides a framework for developing competitive differentiation in ADI’s product
offerings.

Where Used:
This tool should be used in BPP Steps 3 and 4 to facilitate an understanding of customers
require.

How To Use This Tool:

Step 1 - Review the elements of whole product differentiation, trying to understand all the
elements of the generic, expected, augmented, and potential product.

Step 2 - Build a description of the value profile of the target customer segment. Include all
aspects of the whole product identified in Step 1.

Step 3 - Rank each of the competitive products against your product offering. Summarize
the results. (Are we good at what is important to our customers?)

Step 4 - Validate the findings using third parties or other analysis tools. Adjust based on
this validation.

Step 5 - Map the competitive positioning strategy against your competitors.

Step 6 - Take the appropriate action based on this mapping. Do we have a winning
position? Can we fix problems in the appropriate time? Can we change or
redefine the market? Can we educate the segment to value other attributes?

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Tool 50 (“new”): Value Based Market Segmentation Methodology

Value-Based Market
Segmentation Methodology

Step 1 Step 2 Step 3 Step 4 Step 5

Brainstorm Characterize Evaluate, Map initial

possible promising rank target target
users and opportunities; segments, Validate segments,
Data uses generate consolidate set up
application “Domino”
scenarios strategy

Questions Addressed:
• What target market segments should ADI focus its efforts on?

Strategic Significance:
This tool provides a framework for segmenting a target market. Target customers are
selected and serviced within the context of a technology adoption cycle.

Where Used:
This tool should be used in BPP Steps 3 and 4 to determine what are possible market
segments to target.

How To Use This Tool:

Each of the five steps described in the flow chart above help focus the analysis to determine
how to segment the target customers. The approach described focuses on understanding
customer/user characteristics, and mapping those needs into a segmentation strategy.

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Tool 51 (“new”): Product Type Matrix “Bubble Chart”

Process Changes
New Core Next Generation Single Dept. Tuning and
Advanced Process Process Upgrade Incremental
Development High Low
Risk Risk

New Core Breakthrough

Product
Product Changes

Next Generation
Core Product
Platform /
Next Generation
Addition to
Product Family
Enhancements
/ Derivatives
Add-ons and
Enhancements

Low Risk

Questions Addressed:
• What is the breakdown of products in development into the three categories,
Breakthrough, Platform, Derivative?
• Is this the right balance to win in our chosen markets?
• Are resources available and focused in the right areas?
• Are the core competencies in place to develop the projects?

Strategic Significance:
The Bubble chart helps to ensure that the development projects are vehicles for executing the
Business Strategy…. i.e. The development projects list and the BPP should be mirror
images..

Where Used:
This tool should be considered in BPP Steps 5 and 6. It also facilitates linkages to the New
Product Development process, specifically factors 1, 5, 6, 7,10, 11 and 12 of PSD0.

How To Use This Tool:

• Each Product Line will create their definitions of the two axes.
• Using the blank template above, represent each of the products under consideration by a
“bubble”.
• The size of the bubble can represent resources, return factor, revenue depending on the
needs of the Product Line.
• Breakthrough, Platform, and Derivative categories are defined on the following page.
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Tool 51 (“new”): Product Type Matrix “Bubble Chart” (cont.)

Product Type Classifications:

The three classifications used in the Product Type Matrix have been defined to assist in
planning and tracking of time and cost to market metrics. These classifications are defined as
follows:

Breakthrough Products - Those products that encompass or require dramatic improvements

in performance of the end product. Typically, multiple (3-4) “process innovations” are
needed for product realization; new process used, new circuit architecture used, new testing
technology required, and/or new packaging technology required. Test chips are often needed
to prove feasibility of these products. Over time, breakthrough products would typically
spawn multiple platform products. Development risks are high to very high.

Platform Products - Those products that achieve new levels of performance but do so by
using only 1 to 2 “process innovations”. Examples include process migration of existing
architectures, new levels of integration, new functions or architectures on existing
manufacturing processes. These products normally form the basis for creating derivative
products. Development risks are moderate to high.

Derivative Products - are low risk variants of proven products. Examples include a new
feature, a different pin-out, metal mask changes, trim or test variants, and package variants.
Over the product life cycle, redesigns to reduce costs, improve reliability, and increase
performance levels would fall into this category. Development risks are low.

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Tool 52 (“new”): Product / Technology Roadmap

Year 1 Year 2 Year 3 Year 4 Year 5

Platform 1
Leveraged Platform

Derivative

Next Generation
Platform 2
Cost Reduction

Cost Reduction
Platform 3

Platform

Questions Addressed:
• How to proactively manage the evolution of the Product Line Architecture i.e. derivative
strategy, through use of the product/process road map?
• How often to introduce a new platform and/or derivatives so that scarce financial,
technical and human resources are successfully leveraged?
• What are the critical path innovations that gate a new product development?

Strategic Significance:
Describes the product or technology roadmap indicating the sequencing and rhythm of new
product introductions. This tool can also highlight key organizational interdependencies.

Where Used:
• This tool is useful in BPP Step 5, and helps link the BPP to Factors 1, 2, 5, 6, 7, 10,
11and 12 of PSD0.
• This tool facilitates linkage between BPP Step 3 (customers and channels), Step 4
(competition), Step 5 (products and services), Step 6 (development and introduction plan),
Step 7 (financial analysis) and Step 8 (potential problems).

How To Use This Tool:

• Customize the tool to meet the needs of individual Product Lines
• On the roadmap, show breakthroughs, platforms and derivatives moving from generation
to generation, left to right.
• Overlay this road map with the necessary parallel process/technology developments and
show how they connect to the road map.
• Update the roadmap on a regular basis to account for unplanned opportunities

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Tool 53 (“new”): Business Plan Interrelationships Diagram

Financial Goals
Competitive Goals
• Earnings
• Market Share
• ROI
• Market Entry
• Growth

Development Goals
• Number and type of new products
• Sequencing of new projects
• Cycle times
• Project Costs

Questions Addressed:
• How can I summarize my overall business plan, including the linkage between
development and business planning

Strategic Significance:
This template helps summarize the interrelationships between development, financial, and
competitive goals.

Where Used:
This template can be used in BPP Step 2 as a summary of the organization’s 5-year business
plan.

How To Use This Tool:

The Financial section should contain summary information of projected revenue, expenses,
and income. The Competition section could include market or customer information, and the
Development section usually includes a summary of product / technology development
activities in summary form such as the Product / Technology Roadmap.

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Tool 54 (“new”): Resource Gap Analysis

ADI Part Project 9807 9808 9809 9810 9811 9812 9901 9902 9903 9904 9905 9906
Number Name MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR APR
AD1000 Project 1 3.5 2.5 4.0 4.0 3.5 3.5 1.0
AD2000 Project 2 3.5 3.5 3.5 3.0 3.0 3.0 3.0 3.0 2.0 1.0 1.0 1.0
AD3000 Project 2.1 4.0 4.0 3.5 3.0 3.0 2.0 1.0 1.0 1.0 1.0
AD4000 Project 3 1.0 1.0 4.0 4.0 3.0 3.0 3.0 3.0 2.0 2.0 2.0 1.0
AD5000 Project 3.1 1.0 1.0 3.0 3.0 2.0 2.0 1.0
AD6000 Project 3.2 1.0 1.0 2.0 2.0 2.0 1.0 1.0 1.0
AD7000 Project 4 4.0 4.0 4.0 4.0 3.0 3.0 3.0 3.0 2.0 2.0 2.0 2.0
AD8000 Project 5 2.0 3.0 4.0 4.0 4.0 4.0

Total Resources Required 16.0 15.0 19.0 19.0 17.5 18.5 18.0 17.0 15.0 12.0 10.0 9.0
Total Resources Available 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8 17.8
Figures are in person-months

Questions Addressed:
• Is the new product development capacity (resource availability) in balance with new-
product development plans? (Product / Technology Roadmap)
• Will time to market objectives of the new product development programs be met with the
current resource allocation plan?
• Should the Product / Technology Roadmap be revised to account for resource
constraints?

Strategic Significance:
This tool ensures that adequate resource levels are available to execute the new-product
development strategy as described by the product / technology roadmap. Ensuring adequate
available resources contributes to improved time to market performance in addition to
promoting stronger morale among development teams.

Where Used:
This tool should be considered during BPP Step 5 and completed in detail as part of Step 6.
The tool provides linkage to the PSD process by ensuring that sufficient resources are
available in aggregate before a new project is begun.

How To Use This Tool:

1. Resource requirements for each development program are estimated for each month of
the planning horizon (described in person-months per month), and entered into a
spreadsheet.
2. Resource requirements for all programs planned are then summed to determine the
aggregate resource level required to execute the product / technology roadmap.
3. The resource capacity (total number of product line resources available) is then compared
with the total resources required to determine if the product development plans are
achievable.

Analog Devices, Inc. Company Confidential IV & V -144

 IV & V. Executing to 10-Step Process & Tools & Templates

How to Use Tool 54 (con’t)

4. Imbalances are corrected either through revision of the product / technology roadmap, or
through development of a resource expansion plan.
5. Additional detail can be added to the resource gap analysis with respect to function (i.e.,
design engineering, test engineering, trim engineering, etc.) and experience level to
ensure the proper mix of resource types are available.

Analog Devices, Inc. Company Confidential IV & V -145

 VI – Product and Technology Development

a Business Planning Process

Section VI - Product and Technology Development

q Introduction

q Linking the Business Planning Process to ADI’s Product

and Technology Development

q Business Plan Example: µMachine Relay

q Tools & Templates

Analog Devices, Inc. Company Confidential VI-1

 VI – Product and Technology Development

Introduction

Section VI, Product and Technology Development, is designed to explain the

important linkages between ADI’s Business Planning Process (BPP) and the New
Product and Technology Development Processes.

Product and Technology Development is a critical vehicle for executing business

strategy. By linking the BPP to new development activities, ADI can build a
foundation of products and services that mesh with the overall strategic goals of
the organization.

The following diagram depicts how all the pieces of ADI’s business planning “fit
together”. Using BPP steps 1-5 as initial inputs into the process, technology and
market assessments help create the strategic plan and product / service portfolio.
The execution of this plan creates learning, from which subsequent business
planning is developed and refined.

Learning
Technology Strategy
WWMfg BPP

Technology
Assessment and
Forecasting

BPP Steps 1-5 WWMfg BPP WWMfg BPP

P
Creating the
Project Portfolio
Project Execution
PSD 0-3
S
Steps 6-10
D
Product Line BPP Product Line BPP Product Line BPP 4
Market
Assessment and
Forecasting

Product / Market Learning

BPP Steps 1-5
Strategy

Analog Devices, Inc. Company Confidential VI-2

 VI – Product and Technology Development

Linking the Business Planning Process to ADI’s

Product and Technology Development

Business Planning must be coupled with Product and Technology Development to

ensure the organization is creating product offerings that fit the overall business
and strategic goals. A tightly coupled Business Planning Process is the first step
toward increasing overall R&D effectiveness, one of ADI’s key improvement
initiatives.

This section describes the linkage between the Business Planning Process and the
Product and Technology Development Process. Also, this section identifies some
“new” tools to help facilitate this linkage.

The following matrix shows the relationship between the BPP Steps and the
Product Start Document Process (PSD). Recommended tools and where they may
be used are also described.

BPP Step Description PSD0 Factors Recommended Tools

Step 3 Description of Customers & Factor 2-User and Customer Needs
Channels of Distribution Factor 3-Regulatory Issues
Factor 8-Market Channels

Step 4 Description of Competitors Factor 4-Competitive Analysis Us vs

Them SEG
Step 5 Description of Necessary Factor 5-Product Positioning
Products and Services Factor 6-Product Priorities
ADI

Step 1 State of Purpose and Five Factor 1-Strategic Alignment

Step 2 Year Objectives Factor 11-Core Competencies

Step 6 Plan of Development and Factor 7-Risk Management

Step 7 Implementation of Products Factor 9-Leadership by
Step 8 and Services, Financial Management
Step 9 Analysis, Potential Factor 10-Resource Availability
Problems, and Factor 12-Dependency
Recommendations Management
Step 10 Benchmark Plan All Factors All Tools

Analog Devices, Inc. Company Confidential VI-3

 VI – Product and Technology Development

By creating a linkage between development activities and business planning, the

Business Plan becomes a “database” for information to be used by the
organization. For example, BPP Step 4 is an analysis of the competitive offerings
in the targeted market segments. PSD0 Factor 4 requires a competitive analysis
prior to initiating any development work. A review of Step 4 in the business plan
should provide a portion of the information needed for completing Factor 4 of the
PSD0 process. This information may be compiled using a traditional SWOT, i.e.,
Strengths, Weaknesses, Opportunities, and Threats analysis, and then rolled into
the product development planning possibly using the Competitive Differentiation
Process Tool.

All the tools described in this section help facilitate the linkage of ADI’s Business
Planning Process to product and technology development. These tools also help
direct the BPP to provide the necessary information to complete the PSD0
Factors.

Nine “new” tools have been identified to help assist in creating a linkage between
the BPP and product/technology development. These tools (Tools 46-54) are
described in more detail in Section V of this document. The tools identified are
only recommended, with individuals finding additional tools useful for
development of their business and development planning. When beginning the
Business Planning Process, please refer to the Business Planning Manual section
on Tools and Templates for a complete listing of all the tools available.

Analog Devices, Inc. Company Confidential VI-4

 VI – Product and Technology Development

BPP Steps 3 and 4 – Customers and Competitors

Tool 46 - Whole Product View The Whole Product View Tool can
be used to graphically illustrate the
intended economic or business
value that customers require. This
tool assists in helping identify the
complete customer solution.

Tool 47 - Technology Adoption The Technology Adoption Model

Model Tool is used to help provide focus
on different types of users needs.
This tool helps provide additional
insight into the likelihood of a
customer adopting a new product or
technology.

Tool 48 - Camp Development The Camp Development Tool helps

identify what partners need to be
“recruited” into the ADI camp to
make the product successful.

Us vs
Tool 49 - Competitive This tool provides a framework for
Them Differentiation Process evaluation and development of
competitive differentiation. The
process includes a six-step process
for determining a product's proper
positioning.

Tool 50 - Value Based Market This methodology assists with

SEG Segmentation Methodology segmentation of various target
markets. The tool provides a step
by step process to help determine
what are possible segmentation
strategies.

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 VI – Product and Technology Development

BPP Step 5 – Products and Services

Tool 51 - Product Type Matrix The Product Type Matrix “Bubble

“Bubble Chart” Chart” tool helps graphically depict
the product development mix. This
helps ensure that the desired mix of
product development activities is
planned.

Tool 46 - Whole Product View The Whole Product View Tool can
ADI
also be used to describe the “whole
product” offering by ADI. Ideally,
this should match the view that
customers require, as described in
Step 3.

Tool 52 - Product / Technology The Product / Technology

Roadmap Roadmap Tool helps describe the
sequencing and rhythm of new
product introductions. This
Product / Technology Roadmap
may need to be re-examined after
completing BPP Steps 6 - 9 due to
possible resource constraints.

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 VI – Product and Technology Development

BPP Steps 1, 2 – Purpose and Objective

Tool 53 - Business Plan The Business Plan

Interrelationship Diagram Interrelationship Diagram
helps describe the
interrelationship between the
Development, Financial, and
Competitive Goals.

BPP Steps 6, 7, 8, 9 – Implementation Plan

Tool 54 - Resource Gap The Resource Gap Analysis

Analysis Tool helps identify resource
requirements based on the
Product Line Architecture,
and identifies possible
resource gaps in the product
development planning.

Analog Devices, Inc. Company Confidential VI-7

 VI – Product and Technology Development

Business Plan Example: µMachine Relay

BPP STEP 2 - Five Year Objectives

a µMachine Relay Business Plan

Step 2 - Five Year Objectives

Cumulative Income Projection “ADI is already in the relay market.”
uMRelay Cumulative OPBT and Revenue - VP Engineering, National Instruments
$10 $25
ADI Prod. - ADI FY97 Switch and Multiplexer Sales by
OPBT
NEU Prod. Channel Count
$8 OPBT $20
Defer Prod. -
$16
NEU or ADI Prod. -
OPBT • Analog Switches and Multiplexers Channel Count
Revenue
Defer Prod. -
$6 Revenue – TAM $150 million (1996 sales) $14
16

Revenue ($ millions)
8
$15 – ADI has 21% market share (#2) 4
– ADI has ~60% GM 3
$12
$4 – CAGR ~ 3%
2

FY97 Sales [$ millions]

1
OPBT ($ millions)

• Application Segments: $10

$2 – Industrial - 45%
$10
– Comms - 20% $8

$0 – Computer - 20%
FY95- FY9 FY9 FY0 FY0 • µMRelay could service ~50% of $6

FY97 8 9 1 2 market
FY0 $5
– N/A for voltage switching $4
($2) 0
– Limited by activation speed
$2

$0
($4) $0
MUX SPST SPDT XPOINT
ADI Year Product/Function

µM Relay Product Roadmap

Wafer Level Cap High-speed Pkg. RF µWave Switch
(Flip-Chip, BGA) Switch (TRW)
(Ericsson
QUAD SPST QUAD SPST )
Differential/Octal Switch
(CDIP Pkg.) SM Pkg. (SO,
SOT,SC) Die Sales
Micromachined COMMS P.L. (Coto)
Only
SLIC P.L. Video Mux.
CMOS Integration 8:1 Multiplexer 8:1 Multiplexer Crosspoint Switch
(CDIP Pkg.) SM Pkg. (SO, SOT,SC)
Integrated w/ 16:1 Multiplexer
Another Process 8:1 Differential Mux.

High Integration Bipolar Integration ATE P/E (DCL) ASIC DCL w/ PMU ASIC
ASICs w/ µMRelay I/O
ATE P/E Std. Product
FY00 FY01 FY02
w/ µMRelay I/O

Analog Devices, Inc. Company Confidential

The Business Plan Interrelationship Diagram (Tool 53) summarizes the

interrelationship between the Development, Financial, and competitive goals for
an organization. The five-year plan for the µMachine Relay business is
summarized here, and should be updated yearly.

The graph in the upper left-hand corner describes the 5-year financial objectives
for the µMachine Relay project. Operating profit and revenue are plotted on the
Y-axis. Three production ramp options are provide because this is a start-up
business based on new technology.

The graph in the upper right hand corner is a plot of ADI’s current market share
for analog switches. The first two products will be a quad-switch and 8:1 MUX.
These products could service 50% of the market.

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 VI – Product and Technology Development

These products were selected to optimize the technology adoption rate described
in Steps 3 & 4 of the BPP. The µMachine Relay products provide a new solution
to an existing product. Once the visionaries have adopted this new technology,
increased integration of products will be offered. This is described in the lower
box, the Product Roadmap.

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 VI – Product and Technology Development

Business Plan Example: µMachine Relay

BPP Steps 3 & 4 - Customers and Competitors

a µMachine Relay Business Plan

Step 3 & 4 - Customers and Competitors

Initial Focus Market for µMRelay − $1 Billion
Low current segment (< 1A) Wet Reed Other Relay Application Segments
3% 3%
– $975 Million (1996 Sales) Military
1996 <1A RELAY SALES BY APPLICATION SEGMENT
11% PCB Mount
[1996 Total Sales $863M - excludes I/O Modules]
– CAGR ~ 8% 35%

– Fastest growth segment I/O Telecommunications

Low actuation voltages Modules
12% Industrial & Process Control
– Electromagnetic
70% 10 Vdc < VA < 20 Vdc Mil-Aero

– Solid-state SSR - ATE

60% VA < 10 V MOSFET Dry Reed

16% Instrumentation
20%
Other

Relay Suppliers and Customers Automotive

EDP/Business
Key Suppliers & ‘96 Sales Customers
Telecommunications Consumer
OMRON $680M
Siemens $500M Ericsson HVAC
Motorola
Matsushita $500M Appliances
Nokia
Fujitsu $270M Nortel Commercial Equipment
NEC $230M Mitsubishi
0 50 100 150 200 250 300 350 400

U.S. Suppliers & ‘96 Sales ATE Process Control / Instrumentation CONSUMPTION [$ millions]
Teradyne Honeywell
C.P. Clare $100M
Advantest Hewlett-Packard
Teledyne $35M ANDO Allen-Bradley • Top 10 represent 63% of
Coto $16M market ($2.9 billion)
Hewlett-Packard YEC
Foxboro / Siebe • 70% sold through reps.

Analog Devices, Inc. Company Confidential

This slide summarizes the µMachine Relay market segmentation. The upper left-
hand pie chart describes the target market for this technology with some key
attributes such as CAGR and key performance attributes. Customer and
competitor information is described below the pie chart. To the right of the slide,
there is a bar graph describing the application segmentation.
This information was extracted from industry sources and customer interviews.
Section V of the BPP Manual has more details on the tools and methods for
extracting and analyzing this type of data. In addition to the existing tools in
Section V, two new tools have been added by the SLT based on the work of Chris
Halliwell from California Institute of Technology. These are the Competitive
Differentiation Process (Tool 49) and the Value Based Market Segmentation
Methodology (Tool 50). Both of these tools provide frameworks or
methodologies to determine what customers may provide the greatest
opportunities.

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 VI – Product and Technology Development

Business Plan Example: µMachine Relay

BPP Steps 3 & 4 - Customers and Competitors (con’t)

a µMachine Relay Business Plan

Step 3 & 4 - Customers and Competitors

“Whole Product” View

Built in Self-Test

RF
Filters
Mech.
Interps
Products Containing µMRelays

DCL w/
Audio/Video
µMRelay I/O
Muxes
“ADI Inside”

Reliability ESD
Lower Isolation Reconf.
Discrete µWave
Cost
Delivery µ M Relay Switch
Analog
of Cell
Test RF Switch Generic
Arrays
Product Packaging
“Ideal”
Switch Channel
Expected Card
Crosspoint Product on a Chip
Arrays

Augmented
Product
µM Logic

Potential
Product

Analog Devices, Inc. Company Confidential

There are only two things you need to know about your product at any time. What
is needed by your customers and who is going to buy it! This slide summarizes
the “What” using the Whole Product View (Tool 46). The “Who” is summarized
in the following slide.

For the µMachine Relay business, the “What” is described starting with the center
circle of the Whole Product View - Generic Product. The Generic Product is the
minimum requirements or the core product or device you are describing. In this
case, it is the relay device.

The second layer, the Expected Product, describes any additional products needed
to complete the solution, e.g., ESD protection or packaging.
The third layer is the Augmented Product. This layer describes any additional

Analog Devices, Inc. Company Confidential VI-11

 VI – Product and Technology Development

differentiation. For the µMachine Relay business, the ability to provide post
processed relays to existing ADI products offers a level of integration other
µMachine Relay technologies can not support.

The fourth layer is the Potential Product. This layer describes additional aspects
of your product offering that may influence or affect your core product.
(Imagineering)

a µMachine Relay Business Plan

Step 3 & 4 - Customers and Competitors

Analog Switch/Mux Suppliers/Customers
Key Suppliers & ‘96 Sales Top Customers (ADI)
Vishay $36M – Siemens
Analog Devices $30M – Hewlett-Packard
Harris $21M – Solectron (subcontract mfg.)
Maxim $12M – Allen-Bradley
Mitsumi $7M – Matsushita
– Teradyne µMRelay Technology Adoption Model
• Top 5 have 70% share
Visionaries
• 60% sold through distribution
LTX
• Many high volume switch users Hewlett-Packard
are also high volume relay users National Instruments
Coto
C.P. Clare
Siemens
Enthusiasts EG&G
JPL
Foxboro (pre-Siebe) Pragmatists Followers
Lawrence Livermore AMP Laggards
Teradyne
Universities ANDO Allen Bradley
Advantest
Honeywell Fisher
Ericsson
YEC
OMRON

97 01 03 05

Analog Devices, Inc. Company Confidential

This slide describes the “Who” is going to buy your product. For the µMachine
Relay business, it is not obvious who will be the early adopters and who will be
the followers and laggards. This information is critical to rolling out new
technologies and products. Choosing the wrong customer, (i.e. followers or
laggards), at the beginning of the development process, will lead to frustration and
wasted effort. By using the Technology Adoption Model (Tool 47), we hope to
better understand which customers will be ready for the µMachine Relay
technology, when it becomes available.

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 VI – Product and Technology Development

Business Plan Example: µMachine Relay

BPP Steps 5 & 6 - Products, Services and Implementation Plan

a µMachine Relay Business Plan

Step 5 & 6 - Products, Services and Implementation Plan

Product Type Matrix

Advanced Development
Process Changes
µMSwitch/Relay Std. Cell
Next
Fab Process
New Core Generation Single Dept. Tuning and
Wafer Level Capping Process Process Upgrade Incremental
Breakthrough

New Core Quad SPST

Switch
Product ATE P/E+PMU
(ASIC) RF Switch
Platform
Product Changes

ATE P/E
Next Gen. (DCL ASIC)

Product
8:1
Multiplexer
Addition to Derivative
Family 8:1 Multiplexer Video
(SMT) Crosspoint/Mux

Crosspoint
Add-ons / Quad SPST
Switch
(SMT)
Enhancements Differential
Switch/Mux

Analog Devices, Inc. Company Confidential

The Product Type Matrix (Tool 51) or “Bubble Chart” helps ensure that the
development projects in the queue are in sync with the business strategy. The
advanced development requirements are listed in the box in the upper left-hand
corner. This research activity needs to be resourced, funded, and coordinated with
the technology development groups within ADI. The bubbles represent product
plans plotted in relationship to the level of innovation (Breakthrough, Platform,
Derivative).

Understanding the makeup of a product line’s risk profile is very important. The
Product Type Matrix helps describe this risk, and highlight possible mismatches
with overall business planning.

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 VI – Product and Technology Development

Business Plan Example: µMachine Relay

BPP Steps 5 & 6 - Products, Services and Implementation Plan (con’t)

a µMachine Relay Business Plan

Step 5 & 6 - Products, Services and Implementation Plan

µM Relay Product Roadmap
Wafer Level Cap High-speed Pkg. RF Switch
µWave Switch
(Flip-Chip, BGA) (Ericsson)
(TRW)

QUAD SPST QUAD SPST Differential/Octal Switch

(CDIP Pkg.) SM Pkg. (SO, SOT,SC)
Die Sales
Micromachined COMMS P.L. (Coto)
Only

SLIC P.L. Video Mux.

CMOS Integration 8:1 Multiplexer Crosspoint Switch

(CDIP Pkg.)
Integrated w/ 16:1 Multiplexer
Another Process 8:1 Differential Mux.

High Integration Bipolar Integration ATE P/E (DCL) ASIC DCL w/ PMU ASIC
ASICs w/ µMRelay I/O
ATE P/E Std. Product
FY00 FY01 w/ µMRelay I/O
FY02

Resource Gap Analysis

Sum of Person-Years Year
Product Function 1998 1999 2000 2001 2002 2003 Grand Total
mMSw itch/Relay Std. Cell 2.5 2.25 0.5 0.5 0.5 6.25
Fab Process Development 1.5 1.75 0.75 0.5 0.5 5
Wafer Level Capping 1 2 2 0.5 0.5 6
Quad SPST 1 1 2
8:1 Multiplexer 1 1
Quad SPST (SMT) 1 1 2
8:1 Multiplexer (SMT) 1 1 2
RF Sw itch 0.25 0.25 1.75 0.75 3
Crosspoint Sw itch 0.5 1.75 1.75 4
Differential Sw itch/Mux 1 0.5 1.5
Video Mux/Sw itch 0.5 1.75 1.75 4
ATE P/E (DCL) 0.5 2.75 2.75 6
ATE P/E + PMU 1 2.75 2.75 6.5
Grand Total 5 7.75 10.75 11.75 9.5 4.5 49.25

Analog Devices, Inc. Company Confidential

This slide contains two tools. The first is the Product / Technology Roadmap.
(Tool 52) The Product / Technology Roadmap describes the sequencing and
rhythm of new product introductions. This slide also highlights key organization
interdependencies such as the technology development required to support
product development. Well-planned technology and product development plans
will - “KEEP INNOVATION OUT OF THE CRITICAL PATH.”

For the µMachine Relay, the first product is a simple quad-switch in a ceramic
cavity package. This product is offered first to solve any new technology adoption
fears. As innovation progresses and technology becomes more stable, higher
levels of integration for the µMachine Relays will be offered. It is important to
note the interdependencies described. For example, Wafer Level Capping and
CMOS process integration are two technology development activities that would
be “show stoppers” if not developed ahead of product requirements.

Analog Devices, Inc. Company Confidential VI-14

 VI – Product and Technology Development

The second tool is the Resource Gap Analysis (Tool 54). The Resource Gap
Analysis describes the differences between the resources available and the
resources needed to support the product development requirements. The
Resource Gap Analysis is similar to a simplified manufacturing capacity plan,
with resource constraints clearly identified.

It is important to develop a realistic resource strategy. Even with infinite financial

support (as with NRE funded activity) it is extremely difficult to quickly staff a
project with the right people. This tool helps create a focus on only a vital few
projects within the existing resource constraints.

Analog Devices, Inc. Company Confidential VI-15

 VII - Adaptation to Different Environments

a Business Planning Process

Section VII - Adaptation to Different Environments

q Adaptation Introduction

q Planning In a Field Context

q Key Questions: Field Sales Operation

q Key Questions: Service Activity

q Potential Plan Contents

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 VII - Adaptation to Different Environments

Adaptation Introduction

The 10 Steps of the Business Planning Process constitute a fundamental set of

planning topics that can be applied to Field Sales, Sales Support, and Service
activities at large. Experience with this adaptation has highlighted the need to
change the approach taken for each step to more directly address the issues
facing field and service operations. Included herein are guidelines that
demonstrate how the 10 Steps have been adapted to different planning
environments. An outline of potential plan contents is included, as are
supplemental key questions that managers and planning teams can use to
stimulate discussion. Section IV contains a more complete treatment of each
step.

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 VII - Adaptation to Different Environments

Business Planning In a Field Context

Differences Between Tactical and Strategic Planning in a

Field Context

Tactical Strategic
Time Horizon 6 Mo to 1 year 1 to 3 years
Today Future

Decision Scope Optimizing Operations: Deciding Among:

*Controlling costs & *Customers/resellers to target
headcount *Products to distribute
*Customers to focus *Capabilities/services to
*Program priorities develop
*Local presence

Goal Meet Objectives: Adapt to Change:

*Quota/share *Customer loyalty/satisfaction
*Revenue/margin (needs & purchase behavior)
*Customer satisfaction *Efficient/flexible operations
*Service levels & cost structure
*Key contributor to local
economy

(Survival-Meet Expectations) (Prosper)

Planning Issues Customer & Channel Needs

Market Segmentation
Competitive Advantage
Necessary Service & Products

Core Competencies
Value Proposition
Development Priorities & Plan

Sales Plan
Support Operations Plan
Marketing (Communications) People & Organization
Plan
Financial Implications
Resources Plan

Financial Consequences

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 VII - Adaptation to Different Environments

Business Planning In a Field Context

Country
Step Field Sales Management

1) Purpose –Mission for ADI in

the country in next X
years
–Vision:
*day in the life of
customers and the
local community
interacting with ADI
*day in the life of a
Sales Representative

2) Objectives –(Business unit objectives & –Aggregate objectives

strategies) for the country
–Local financial, market, organization:
employee, etc. objectives, financial, market
KSF's and metrics presence,
environmental,
employee, etc.

3) Customers & –Situation analysis, market –Situation analysis

Channels potential *Economic picture,
–Prospect buying behavior spending plans
trends and channel *Political
expectations environment, impact
–Outbound market on trade, tariffs and
segmentation business regulations
*Currency stability
–Internal customer
"infrastructure" needs

4) Competition –Competitor marketing & –Cost and quality

distribution strategies competitiveness of
–Competitor cost structure infrastructure services
& compared to:
drivers *ADI competitors
*Best-in-class in
industry

Analog Devices, Inc. Company Confidential VII-4

 VII - Adaptation to Different Environments

Business Planning In a Field Context

Country Management
Step Field Sales

5) Necessary –Marketing program –Specification of

Products & requirements of requirements from
Services divisions/groups local infrastructure
–"Infrastructure" development efforts
requirements of field *Desired benefits
operations *Service features
*Cost envelope

6) Development/ –Multi-year departmental –Development plan for

strategies, initiatives and services
Implementation programs: *Deliverables
Plan *Distribution *Schedule
*Market development & *Cost & Resources
marketing *Alliances necessary
*Buying/selling process

7) Financial –Cost implications –Strategic financial

Implications *Field selling cost implications
*Field admin. cost *Balance sheet
*Headcount, space, *ROA
resources –Cost implications
*Field admin. cost

8/9) Potential –Potential problem –Scenarios, trigger

Problems assessment points
*Dependencies on others –Potential infrastructure
–Scenarios, trigger points development and
implementation
problems
*Dependencies on
other parts of ADI

10) Benchmark –12-month tactical –Hoshin & Business

Plan programs Fundamentals plans
–Hoshin plan

Analog Devices, Inc. Company Confidential VII-5

 VII - Adaptation to Different Environments

Key Questions:

Field Sales Operation

Questions to help frame Business Planning Process issues in the context of a

Field Sales Operation.

Preparation

• What are the value propositions (Step 1), objectives (Step 2), target
segments and customers (Step 3), necessary product, services and vendor
attributes (Step 5) from the business plans of the Product Line
Organization you support?

• What are their channel and market strategies (Step 6)?

Step 1 – Statement of Purpose

• Why do you exist as an organization? What "value" do you bring to your

customers?

• How do your services provide a measure of competitive advantage? How

do they improve operational effectiveness?

• What segments have you targeted to market the specific bundle of

customer benefits the Product Line Organizations are offering or
developing?

• What is your vision of ADI's role in the local market in five years? The
types of channels and services you will be required to provide the value
desired by your customers?

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 VII - Adaptation to Different Environments

Step 2 – Five-Year Objectives

• What are your financial and market objectives? People objectives?

• What necessary and sufficient activities (key success factors) must you
accomplish to be confident you will meet these objectives?

Step 3 – Customers and Local Market Assessment

• Who are your end-user customers today? What kind of customers

(segments) have been attracted by what you offer? Why? What could
affect this in the future?

• What segments do you target in your distribution and marketing

communications programs? What kind of future growth do you expect
from these segments?

• What are your customers' present "dissatisfiers" in terms of the services

you provide? The products the Product Line Organizations provide you?

• Why aren't you selling to other people who are buying these kind of
products from your competitors? Are their needs or expectations
different? How and why?

• How are the marketplace's needs and required benefits changing? Why?
What forces are causing the change? How will new product directions
impact this?

• Are there any unique customer segments or unaddressed market

opportunities that are overlooked by the Product Line Organization that
may warrant a local development effort?

• What kind of channels are you selling through today? Which ones are
attracted to what you offer? What are their dissatisfiers in terms of your
operations? How are their needs and required benefits changing? Why?
What forces are causing this?

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 VII - Adaptation to Different Environments

• Given how products and needs may be evolving, how will end-user
"prospects" want to buy products or services in the future? Through what
kinds of channels? With what kind of "delivery attributes?"

• What will be economic climate over the planning horizon? Currency

stability? Political stability?

• How are the Product Line Organizations' expectations of you likely to

change over the next few years?

Step 4 – Competitive Environment

• Who are your principal competitors and what are their strategies? What
segments do they target? What end-user customers do they seem to
attract? What channels do they distribute through?

• What do they do especially well in the customers' eyes? Do poorly?

• To what extent do ADI's competitors derive advantage from their field

operations? How do their local distribution and marketing strategies
compare to yours? Their cost structures?

• Where are they most vulnerable? What would their likely response be to
aggressive moves by you?

• What would it take for a new competitor to establish field or distribution

operations in your geography? What barriers to entrance exist? Barriers
to exit by existing competitors?

• From what alternative channels do you receive the most competition in

selling to your target markets? What are the channels' strategies for these
markets? What superior value do they deliver in their customers' eyes?

• Operationally, what are your strengths? Weaknesses?

• How cost- and productivity-competitive are your operations compared to

most successful sales or distribution businesses (of any industry) in your
geography?

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 VII - Adaptation to Different Environments

• Where are you most vulnerable to change in the market? What could you
do to minimize the impact of a competitor exploiting this or the
probability that they would want to try?

Step 5 – Necessary Services and Products

• What target end-user customers have you selected to make the focus of
your "value delivery system?"

• What do the changing needs of these customers imply in terms of services

you will need to deliver? Products you need to offer in the future? How
would the customers prioritize the importance of these factors?

• What do they imply in terms of new channels you should distribute

through? New services resellers will need to provide end-users? New
services you will need to provide the channel partners?

• What are the design requirements of the unique local market

opportunities described in Step 3? What benefits does the solution need
to deliver?

• What new cost structure do you need to evolve to in order to be

competitive and met your financial objectives?

• What initiatives to improve productivity and quality are suggested by

this?

• What should your "value proposition" be?

Step 6 – Development and Implementation Plans (Within the

context of the Product Line Organizations' strategies)

• What key "initiatives" will you undertake in response to the requirements

defined in Step 5?

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 VII - Adaptation to Different Environments

• What is your strategy for using other channels to maximize business

within your geography? To what customers, through what channels, at
what cost? How will you develop these channels?

• What is your plan for deploying the direct sales effort? What segments?

• What is your plan for enhancing existing marketing capabilities?

• What is your plan for making needed changes to other operational

processes?

• How will you develop and market the unique local solutions described in
Step 5?

• What new product lines will you need to complement what you presently
distribute and better meet customers' needs?

• Are there particular windows of opportunity for implementation?

• What new skills will be required to deliver these capabilities or

implement the programs suggested above? To meet the Product Line
Organizations' expectations?

• What does this imply as far as human resources, facilities or assets,

information technology and organizational structure?

Step 7 – Financial Implications

• What orders, revenue, costs and profit should result form this plan? What
return on assets?

• What investment levels will be needed to provide this revenue stream?

How will ADI recover the costs?

• How does the expense rate compare with ADI's competitors?

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 VII - Adaptation to Different Environments

Step 8 – External Situations Affecting Meeting Objectives

• In what areas is your plan most as risk? What is the probability of these
situations occurring? What might be the consequences? What actions
can you take to minimize their impact?

• What will the likely response be from your competitors when you plan is
implemented?

Step 9 – Problems Resulting from Interdependencies

• What internal dependencies or linkages exist that are the biggest cause for
concern?

• What external organizations are you dependent on that are most

problematic?

Step 10 – Benchmark Plan

• During the first year, what does each department need to do to implement
these plans? To address the key success factors described in Step 2?

• Do you have any "breakthrough" objectives requiring major change in

how you do things?

• What "business fundamental" metrics should you track to tell if

performance is according to plan?

• What are the planning implications of other entities' dependencies on

your organization?

Appendix

• What key assumptions (customer, competitor, economic and political) are

your plans based on? How will you track them?

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 VII - Adaptation to Different Environments

Important Questions for Organizations to Answer in the Course of

Steps 3 & 4

A. What is the Market? Where Do the Opportunities Lie?

• What have been the historical trends in consumption or investment in the

product area? What have been the dynamics of product and service
distribution?

• What is the profile of your present customers (users and economic

buyers)? What is the profile of your present resellers?

• Who are the competitors? What are their market shares? Among similar
customers, why do some buy from you and others prefer alternative
sources?

• What does your success suggest about what markets you best serve?
What position do you hold in customers' minds?

• What future trends may influence the patterns of consumption?

• What will be the economic climate over the next few years?

• Where are the most promising areas to conduct needs research?

B. What are the Customers' Needs?

• What are the customers' needs? Channels' needs?

• What problems are driving them? What benefits do they require? What
value are they trying to deliver to their customers?

• What relative importance do they place on the benefits? How satisfied

are they with present solutions?

• How will end-users want to buy products or services in the future?

Through what channels?

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 VII - Adaptation to Different Environments

C. What are the Segments?

• Are there clusters of customers who prefer similar benefits? What are
the differences between the clusters? The differentiating needs?

D. What Segments are Most Attractive to Target?

• With what segments will the demand be biggest? Grow fastest?

• Where is the profit potential greatest?

• Where do your strengths or competencies best fit?

Steps 3 & 4: Description of Customers,

Channels of Distribution and Competitors

Analyze market, develop hypotheses,

A pick focus for investigation

Conduct research into needs, buying

B factors, purchase process

C Discover market segments

Analyze market attractiveness and

D target segments

Steps 5, 1, 2

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 VII - Adaptation to Different Environments

What is the Business and Investment Climate in the Geography?

• What are the market growth plans over the planning horizon by industry?
Size of business?

• How are the fiscal and monetary policies expected to change?

• What will be the impact of currency fluctuations?

• What trade or tariff policy changes are expected that will affect
consumption? Pricing?

• Are changes in political control or stability likely to affect the business

picture?

• How will changes in distribution patterns affect ADI's access to

customers in the future?

• What will be the impact of greater ADI brand awareness and preference
on our ability to increase market penetration?

Step 3: Local Market Assessment

A
Assess Business &
Investment Climate in
B Geography

– Market Access
– Vendor Preference
C

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 VII - Adaptation to Different Environments

Key Questions:

Service Activity

Step 1 – Statement of Purpose

• What is your value proposition?

• What benefits are provided by your services to ADI's business units,

customers and shareholders?

• How do your services provide a measure of competitive advantage for the

company?

• How do you improve operational effectiveness?

• What is your vision of the type of services required in five years as ADI
evolves?

Step 2 – Five-Year Objectives

• What are the return on investment goals of your plan?

• What objectives or milestones have you set for key success factor
metrics?

Step 3 – Customers and Local Market Assessment

• What internal customers do you serve?

• What is your role in ADI's value chain? How has this changed over the
last year? How will it change over the next five years?

• What factors are influencing the requirements for services at these points
in the value chain? How are needs and expected benefits likely to
evolve?

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 VII - Adaptation to Different Environments

• What internal or external forces will affect your ability to deliver cost
effective services over this period?

Step 4 – Competitive Environment

• To what extent do ADI's competitors derive advantage in this service

area? How do their strategies compare? Their cost structure?

• How does your approach and cost structure compare to "best practices" in
the industry in general?

• Are there alternative sources of supply for these services? What are their
advantages and disadvantages?

• What are your customers' perceptions of the quality and cost effectiveness
of your services?

Step 5 – Necessary Services and Products

• For those points in ADI's value chain where you contribute, what services
and supplier attributes will be required to meet (internal) customer
expectations and make ADI more competitive?

• What new opportunities exist for your function to add value?

• How are these various potential activities prioritized? What assumptions

are inherent in this prioritization?

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 VII - Adaptation to Different Environments

Step 6 – Development and Implementation Plans (Within the

context of the Product Line Organizations' strategies)

• What are your plans for enhancing existing services? For developing new
services?

• Are there particular windows of opportunity for implementation?

• How will you leverage internal or external resources to get maximum

effectiveness and timeliness in implementation?

• What new competencies will be required to deliver these capabilities?

• What extraordinary changes in human resources, facilities or capital

equipment?

• To what extent do enabling technologies (such as information

technology) play a role in your plans? Is it strategic?

Step 7 – Financial Implications

• What investment levels will be needed to provide this capability? How

will ADI recover the costs?

• How does this expense rate compared with ADI's competitors?

• What extraordinary capital demands or balance sheet impacts are

expected?

Step 8 – External Situations Affecting Meeting Objectives

• In what areas is your plan most at risk? What is the probability of these
situations occurring? What might the consequences be to your plan?
What actions would you take?

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 VII - Adaptation to Different Environments

Step 9 – Problems Resulting from Interdependencies

• What internal dependencies or linkages exist in the creation and delivery

of these services that are a cause of concern?

Step 10 – Benchmark Plan

• What are your breakthrough (Hoshin) and Business Fundamental Plans?

• What are the Hoshin implications of other business units dependencies on

your organization?

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 VII - Adaptation to Different Environments

Potential Plan Contents:

Sales Operation Plan

Step One: Mission and Vision For Product Line in Country

Step Two: X Year Objectives

– Financial: Quota, Cost

– Market: Share, Channel/Customer Satisfaction

– Employees

Step Three: Customer & Local Market Assessment

– Customers, Channels, Needs and Segments

– Unique Customer Segments/Unaddressed Market Opportunities

Requiring Local Development Effort

– Business & Investment Climate in Country by Segment

Step Four: Competitive Environment

– Competitors, Alternative Channels and Vulnerabilities

– Cost, Quality and Productivity Competitiveness of Distribution &

Support Programs

Step Five: Necessary Services & "Products" From Local Initiatives

– Target End-User Customers

– Implications for Services & Channels

– Needs & Required Benefits Related to Unique Market Opportunities

Described in Step 3

– Program Requirements to Improve Competitiveness

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 VII - Adaptation to Different Environments

Step Six: Development & Implementation Plans

– Summary of Distribution & Marketing Plans

ØBy Segment

ØBy Function/Department

– Incremental Local Program Plans (external & internal focused)

ØDevelopment Plan

ØMarketing Plan

ØImplementation/Operations Plan

– Human Resources & Skill Development

– Facilities, Information Technology & Other Infrastructure

Requirements

Step Seven: Financial Implications

– Orders, Revenue, Costs & Profit

Step Eight: Potential External Situations That Could Affect Meeting Business
Objectives

Step Nine: Potential Problems Resulting From Interdependencies

– Country to Business

– Country to Country

Step Ten: First Year Tactical Plan

– Department Tactical Plans

– Organization Wide Breakthrough Objectives and Programs

– Business Fundamental Metrics

Appendix: Key Assumptions

– Market Assumptions

– Internal Operating Measure Assumptions

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 VII - Adaptation to Different Environments

Potential Plan Contents:

Support Operation Plan

Step One: Mission and Vision For Business in Country

Step Two: X Year Objectives

– Financial: Revenue, Profit

– Market: Share, Channel/Customer Satisfaction

– Employees

Step Three: Customer & Local Market Assessment

– Customers, Channels, Needs and Segments

– Unique Customer Segments/Unaddressed Market Opportunities

Requiring Local Development Effort

– Business & Investment Climate in Country by Segment

Step Four: Competitive Environment

– Competitors, Substitutes and Barriers to Entrance/Exit

– Unique Competitive Situations Requiring Local Development Effort

– Cost, Quality and Productivity Competitiveness of Support Programs

Step Five: Necessary Services

– Target End-User Customers

– Needs & Required Benefits Related to Unique Market Opportunities

Described in Step 3

– Local Program Requirements to Improve Competitiveness

– FESS Requirements

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 VII - Adaptation to Different Environments

Step Six: Development & Implementation Plans

– Summary of Operations Plans

ØBy Product Area (By Segment)

ØBy Function (e.g. Marketing, Sales, Admin. & Delivery)

– Incremental Local Program Plans (external & internal focused)

ØDevelopment Plan

ØMarketing Plan

ØImplementation/Operations Plan

– FESS Related Development Plan

– Human Resources & Skill Development

– Facilities, Information Technology & Other Infrastructure

Requirements

Step Seven: Financial Implications

– Orders, Revenue, Costs & Profit

Step Eight: Potential External Situations That Could Affect Meeting Business
Objectives

Step Nine: Potential Problems Resulting From Interdependencies

– Country to Business

– Country to Country

Step Ten: Benchmark Plan, Business Fundamentals and Breakthrough

Objectives

Appendix: Key Assumptions

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 VIII - Key Concepts

a Business Planning Process

Section VIII - Key Concepts

q Introduction

q Strategic Intent

q Value Proposition

q Market Segmentation

q Competitive Advantage

q Value Chain

q Industry Analysis

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 VIII - Key Concepts

Introduction

Throughout this document, references have been made to various key concepts.
These concepts, although not unique or inherent to the Business Planning Process,
are nevertheless, useful tools or perspectives for looking at the tasks involved in
various steps. In this section, we will briefly describe what the following concepts
mean and how they relate the Business Planning Process:

q Strategic intent.

q Value proposition.

q Market segmentation.

q Competitive advantage.

q Value chain.

q Industry analysis.

Figure 1 shows where, in the Business Planning Process, these concepts are most
relevant and can make the greatest contribution.

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 VIII - Key Concepts

Figure 1
Contributing Concepts

Business Planning Process

• Strategic Intent 1. Statement of Purpose

• Value Proposition 2. Five-Year Objectives

• Market Segmentation 3. Customer and Channels

• Competitive Advantage 4. Competition

• Value Chain 5. Necessary Products/Services

• Industry Analysis 6. Development/Purchase Plan

7. Financial Analysis

8. Potential Problems

9. Recommendations

10. Benchmark Plan

Strategic Intent

The concept of strategic intent has been described by Hamel and Prahalad* as "an
obsession with winning that encompasses an entire company and is sustained over
the 10 to 20 year quest for global leadership." The authors found that companies
that have risen to global leadership invariably began with ambitions that were out
of all proportion to their resources and capabilities.

These companies envisioned a desired leadership position and established the

criterion the organization used to chart its progress.

*"Strategic Intent," Gary Hamel and C. K. Prahalad, Harvard Business Review,

May-June 1989.

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 VIII - Key Concepts

Strategic intent can be articulated in terms of beating the competition, as in the

example of Komatsu, which set out to "encircle Caterpillar." But in a turbulent
technology industry, it may be hard to pick a single competitor as target, "so
NEC's strategic intent, set in the early 1970s, was to acquire the technologies that
would put it in the best position to exploit the consequence of computing and
telecommunications."

Strategic intent is the glue that holds the different facets of the company together.
It is the motivator to keep improving one's basic disciplines, developing and
protecting one's core competencies, and creating the competitive endurance to
establish the global infrastructure. Strategic intent fills the area between corporate
objectives and strategic business units plans.

Strategic intent has four characteristics:

q It captures the essence of winning. A company needs to define its concept of

winning and success before it can define its strategic intent.

q It is stable over time and requires a stable management team. Stable

management allows a company to pick an objective with the 10-20 year time
frame of strategic intent and develop the expertise necessary to achieve such
aggressive goals.

q It is deserving of personal effort and commitment, and capitalizes on

collective wisdom.

q It is NOT strategic planning. The question of how, or if, one can achieve
strategic intent should not inhibit its definition. The strategic intent lasts
longer than is successfully forecasted.

In general, strategic planning can be viewed as a vehicle for achieving a

company's strategic intent. Strategic intent is a contributing concept to the
statement of purpose in Step 1. To the extent that a strategic intent has already
been defined, then it will provide a set of boundary conditions that should
influence the statement of purpose.

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 VIII - Key Concepts

Value Proposition

A value proposition is a simple, clear statement of who the target customers are
and precisely what key benefits and price will be delivered to them. In order to
succeed, businesses must choose, deliver, and communicate a superior value to
target customers. The end product of choosing a superior value is the value
proposition.

In effect, businesses are seen as "value delivery systems." All elements of the
business are viewed as vehicles or support structures to deliver value to
customers. Value is defined as benefits minus price, as perceived by customers.
Benefits are the results desired by the customer. Price is the total cost of buying
and using the product or service.

In choosing a value proposition, the following questions should be considered:

q Are the benefits explicit, specific, and clearly stated?

q Is the price explicitly stated?

q Is the target customer clearly identified?

q Is it clear how this value proposition is superior for the target segment?

q Is there evidence of adequate demand?

q Is there evidence of acceptable returns?

q Is it viable in light of competitors' value propositions?

q Is it achievable with feasible changes in the current business system?

q Is it the best of several value propositions considered?

q Is it clear and simple?

An example of a value proposition would be Volvo promising to deliver the

safest, most durable wagon to safety-conscious, upscale families at a 20 percent
price premium.

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 VIII - Key Concepts

The concept of value proposition is specifically useful in Step I of the Business

Planning Process, the statement of purpose. A value proposition which clearly
identifies the target segments and the benefits ADI offers relative to competition
should be part of the statement of purpose. Later in the process, Step 6 focuses on
the plan to achieve the necessary value delivery system.

Market Segmentation

Segmentation is the process by which groups of prospects with similar purchase

preferences put themselves into definable clusters or "segments." A fact-based
analysis of users' needs and the key factors that influence purchase decisions
provides the foundation for this process.

Effective segmentation allows the business to prioritize and devote resources on

those segments where ADI can deliver what the customer wants and be
competitive in the process. Segmentation enables decisions to be made on the
level of product and service specialization. It also provides the key to how to
describe the benefits to the end user.

Hiavacek and Ames, in their article, "Segmenting Industrial and High Technology
Markets,"* describe a couple of examples of organizations who have used
segmentation successfully:

"Deere, a large farm equipment manufacturer, identified a market trend to fewer,

but larger, farms that required large horsepower tractors and equipment. Deere
designed and manufactured large horsepower machinery and subsequently
captured a market opportunity. The existing market leader, International
Harvester, was late to recognize and pursue the new and growing market segment
and lost substantial market share as a result."

*Journal of Business Strategy, Fall, 1986.

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 VIII - Key Concepts

"Xerox, the pioneer among photocopying machines, emphasized the high-speed

segment for very large customers. The Japanese competitors were the
first to identify and develop a desktop plain paper copier for a business's low-
speed needs. It rapidly became the fastest growing copier market
segment. According to the president of Canon U.S.A., 'It has been our strategy to
identify a market demand and then create a product to fill that demand.' Xerox
failed to resegment the marketplace and by so doing allowed Canon and other
Japanese competitors to do it for them."

To avoid having too few, too many, or unreachable market segments, Hiavacek
and Ames go on to suggest the following criteria for segmentation:

q Each identified segment should be characterized by a set of common

customer requirements.

q Each identified segment should have measurable characteristics (for example,

number of customers, annual purchases, and growth rate).

q Each defined segment should have identifiable competitors.

q Each identified segment should be "small enough" to reduce competition or

to protect a position against competition.

q Each identified segment should be served by a common sales or distribution

channel.

q For each identified segment, one should know the present and future key
success factors necessary to serve the segment effectively.

q For each identified segment, one should know what capabilities the company
has or needs to develop, or acquire, to serve the segment profitability.

These criteria should be used to ensure that you have examined your segments
carefully. They should not be applied rigidly.

The following "myths" should be considered carefully before segmenting new

markets and while examining current markets:
Myth 1: WE segment markets. Ultimately customers and users form
segments based on their needs and the problems they are trying to

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 VIII - Key Concepts

solve. It is ADI's challenge to discover these needs and map the

market appropriately.

Myth 2: There is ONE ideal segmentation variable. The only segmentation

variables that really matter are the benefit and price needs that users
and customers have. However, many other segmentation variables
are useful in stimulating an imaginative understanding of users'
needs. Examples include the following:

Variable Example

Application Product and Service Usage.

Industry Purchase Specification.

Company Size Solution Integration.

Geography Localization Requirements.

Product and Price Price Sensitivity.

Classes

Company Style Risk Aversion.

Users Age, Income, Religion,

Characteristics Education, and so on.

Ultimately, customer and user needs are influenced by the benefits

that ADI's customers are trying to deliver to their own

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 VIII - Key Concepts

client base. Therefore, understanding what problems ADI's

customers are trying to solve, and their value chain, can provide ADI
with important insights into customers' current and evolving needs.

Myth 3: Segments are TECHNOLOGIES (or Products). Segments are based

on users' needs, not technologies. Specific technologies may deliver
key benefits to a segment, but so may alternative technologies.

Myth 4: Segments are FOREVER. Segments change along with the needs of
customers. Therefore, it is critical that research on user and
customer needs is conducted continuously.

Competitive Advantage

Competitive advantage grows fundamentally out of the value a firm is able to

create for its buyers. It is achieved when a company is able to provide benefits to
its customers, at an attractive price, in a way that competitors cannot duplicate.
Determining what combination of utility, price, and company attributes produces
this differentiation is the purpose of Steps 3 and 4. It requires an understanding of
user needs, channels, the key buying process, and competitors' positions in each
target segment.

It is important to distinguish between a "business" advantage and a competitive

advantage. Any resource that appears to provide a potential advantage over
competition is a business advantage. Examples include more manufacturing
capacity, a more effective sales force, and lower labor cost. A competitive
advantage, however, requires that a business advantage be converted into a
tangible benefit, such as lower prices, or a perception of better service and
support.

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 VII I- Key Concepts

Value Chain

In architecting a basis for competitive advantage, it is important to consider all the

components that ultimately contribute to delivering value to the customer.
Michael Porter, in his book Competitive Advantage, introduces the concept of the
"value chain" as an analytical framework to do this.

The value chain concept facilitates a multi-level look at strategically relevant

activities in order to identify, analyze, and focus on sources of differentiation,
revenue, and cost behavior. Strategically relevant activities are those which have
a significant impact on competitive advantage.

In general, the value system consists of a global set of relationships (linkages)

involving the value chains of suppliers, manufacturers, and channels (see Figure
2). The generic value chain model identifies both the direct, or primary, activities
involved in providing the product (such as manufacture, assembly, distribution,
sales, and support) and the support activities which link to each of these activities
(such as procurement, technology, human resource management, and the business
systems and infrastructure of the firm). (See Figure 3.)

The value chain for an ADI division will consist of internal activities that are
linked horizontally. Its vertical linkages may represent strategic alliances, joint
ventures, mergers, and license agreements with external organizations, or it may
represent linkages with other ADI divisions. Competitive advantage is often
derived by isolating linkages and focusing on their coordination and optimization.

The process of value chain definition starts with a macro-level look and proceeds
into successively finer linkages, component, and activity break downs as needed
to isolate the activities that lead to competitive advantage.

Competitive advantage stems from these many discrete activities that contribute to
a firm's relative cost position and create a basis for differentiation. A cost
advantage may result from such disparate sources as a low-cost physical
distribution system, a highly efficient assembly process, or superior sales force

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 VIII - Key Concepts

utilization. Differentiation can be a product of other diverse factors, including the

procurement of high quality raw materials, a responsive order entry system, or a
superior product design. A firm gains competitive advantage by performing these
strategically important activities more inexpensively or better than its competitors.

As a result, a value chain analysis is helpful in addressing the following three key
strategic questions:

q What is an appropriate contribution for the firm in the industry's value chain?

q What strengths need to be developed, and deficiencies shared to

competitively deliver the value proposition?

q In which activities should the firm focus on relative cost reduction?

Value chain is a contributing tool for strategic planning and is particularly useful
in Steps 3, 4, and 6 of Business Planning.

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 VIII - Key Concepts

Figure 2
The Value System

Business
Unit Value
Chain

Supplier Business Channel Customer

Value Unit Value Value Value
Chains Chain Chains Chains

Multiple ADI Division

Value Chain
Linkages

Partner
Value
Chain

Figure 3
Generic Value Chain
Model
Firm Infrastructure
Support { Human Resources Management

Ma
Activities Technology Department

r gi
Procurement

M n
ar g
Primary in
Activities

Inbound Operations Outbound Marke ting Service

Logistics Logistics & Sales
Order Processing Components

In put Orde r Cre dit Inven to ry Tran sport- Post C ustomer

Log istics L ogi sti cs App roval Lo gistics ation
Shippi ng Shippi ng Accoun ti ng Se rvice
Log istics

Subdividing the Value Chain

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 VIII - Key Concepts

Industry Analysis

Michael Porter has also developed a model to help companies analyze the forces
they must battle to succeed in their industry. Companies have found Porter's ideas
very useful in understanding competitive forces for the industry segments they
have chosen.

Porter describes five forces that govern the competitiveness of any industry.

q Potential entrants.

q Threat of substitution.

q Bargaining power of suppliers.

q Bargaining power of buyers.

q Rivalry among current competitors.

Porter recommends that companies analyze their strengths and weaknesses in

relation to these forces. He describes the next step as follows:

"Then the strategist can devise a plan of action that may include (1) positioning
the company so that its capabilities provide the best defense against the
competitive force; and/or (2) influencing the balance of forces through strategic
moves, thereby improving the company's position; and/or (3) anticipating shifts in
the factors underlying the forces and responding to them with the hope of
exploiting change by choosing a strategy appropriate for the new competitive
balance before opponents recognize it. (Michael Porter, "How Competitive
Forces Shape Strategy," Harvard Business Review, March April 1979, p. 143).

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 VIII - Key Concepts

Porter describes his points in the article noted above, and in two books cited in the
listing of resources.

All these concepts are highly compatible with Business Planning. They provide
an excellent perspective on the types of competitors you can analyze in Step 4.
They also suggest how the team can use the results to help develop a winning plan
of action against these competitive forces.

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 IX - Resources

a Business Planning Process

Section IX - Resources

q Books

q Article

q Consultants

Analog Devices, Inc. Company Confidential IX-1

 IX - Resources

Books:

o Competitive Advantage, Michael Porter, Free Press, 1985.

q Competitive Strategy, Michael E. Porter, Free Press, New York, 1980.
q Concept Engineering, The Key to Operationally Defining Your Customer's
Requirements, Document 7I, CQM, Cambridge, Sept. 1992.
o Conceptual Blockbusting and The Care and Feeding of Ideas by James L. Adams,
Addison-Wesley.
q How to Gain (and Maintain) the Competitive Advantage in Business, By William E.
Rothschild, McGraw-Hill, New York, 1984.
o Market Research and Analysis, Donald R. Lehmann, Irwin, Boston, 1989.
q Quality Function Deployment – Integrating Customer Requirements into Product
Design, Yigi Okeo, ed., Productivity Press, Cambridge, 1988.
q Thriving on Chaos, Tom Peters, Borzoi Books, New York, 1988, Chapter L-2,
"Develop an Inspiring Vision."
q The VOC Reference Guide, Fred Pouliot, ADI, May 5, 1993.

Articles:

o "Commercial Use of Conjoint Analysis: A Survey," Cattin and Wittink, Journal of

Marketing, Summer, 1982.
q "How Competitive Forces Shape Strategy," Harvard Business Review, March-April
1979.
q Making Impossible Dreams Come Trues," James C. Collins, Jerry I. Porras, Stanford
Business School Magazine, July 1989.
o "Must Finance and Strategy Clash?", Patrick Barnise, Paul Marsh and Robin Wensley,
Harvard Business Review, September - October 1989.
o "Redesigning Product Lines with Conjoint Analysis: How Sunbeam Does It," Albert L.
Page and Harold F. Rosenbaum, Journal of Product Innovation Management, 1987,
Nov. 4, pp. 120-137.

Analog Devices, Inc. Company Confidential IX-2

 IX - Resources

Articles (con't):

q "Six Basics for General Managers," Andrall E. Pearson, Harvard Business Review,
July-August 1989.
q "Segmenting Industrial and High Technology Markets," Hiavacek and Ames, Journal of
Business Strategy, Fall, 1986.
q "Strategic Intent," Gary Hamel, C.K. Prahalad, Harvard Business Review, May-June
1989.
q "The House of Quality," John Hauser and Don Clausing, Harvard Business Review,
May-June, 1988.

Consultants:

o Consultants: Decision Research, Lexington, MA., Mars & Co., Greenwich, CT.
o Consultants: Dr. Paul Green, The Wharton School, University of Pennsylvania,
Philadelphia, PA

Analog Devices, Inc. Company Confidential IX-3