Euchner is primarily concerned about whether Stamp Expression was the appropriate product to introduce to the market. After examining the analysis conducted, it is evident that the Amita project had numerous shortcomings, resulting in slow initial sales and potential failure of the product’s growth. Utilizing acquisition to expand the small business segment would be a more preferable approach for Pitney Bowes. An examination of the innovation process and personnel identified a significant problem – the complete separation between product engineering and future-scanning roles.
AC&T is responsible for both concept development and commercial feasibility in Amita’s innovation process, without involving the product engineering team. However, if the product engineering team had been involved earlier, it would have provided real-time support and prevented wasted time on feasibility activities. Additionally, involving multiple individuals in the project has led to numerous iterations, resulting in increased project size and added cost. Furthermore, there is a concern regarding the recruitment of personnel to lead the company’s growth.
Neil Metviner, Dan Kohn, and Lisa Somer were all hired for the sales team, coming from a background in credit card and consumer banking. There is doubt regarding their retail experience in defining target markets and devising strategies to attract customers. AC&T’s approach to discovering new growth opportunities is rooted in “customer-centered innovation”, where customer input is valued. However, it is important to note that customers should not be solely relied upon for coming up with solutions. Rather, they should be asked about their desired functions and outcomes for a new product or service (Ulwick, 2002).
AC&T has sought input from various professionals, such as anthropologists, designers, and engineers, to better understand the unexpressed needs and values of customers. However, the decision to include certain functionality, such as the ability to connect the machine directly to a telephone jack or PC, was based on the input of only one client in a focus group. It would be more advisable to consult a larger group of interviewees with diverse backgrounds to avoid personal bias. Additionally, AC&T is heavily influenced by MIT professor Eric Von Hippel, who believes that observing lead users can provide valuable insights for further product improvement and idea generation.
Even though removing important features from the product to cut manufacturing costs may be true, this choice might not satisfy the requirements of regular users and non-customers. An example of a feature being removed is the capability to create colored images, which has had a detrimental effect on the product’s potential. This is because stamp.com, which already holds 85% market share, already provides this functionality. It is always challenging for a company to enter a market that is controlled by a bigger competitor.
To guarantee product success, it is vital to have competitive functionalities and introduce innovative features that can be used as selling points. However, in Amita’s case, their product falls short compared to stamp.com. COO Murray Martin failed to consider the potential future growth of this industry and whether investing in innovation is worthwhile considering the growth rate.
The U. S. Postal Service reports that there is an increasing number of delivery points for residential customers, while the number remains constant for businesses. This suggests that residential postage service is likely generating more revenue compared to business service. However, Pitney Bowes aims to target small businesses with its postage meters and Amita project. Investing capital in a segment with limited growth may not be an ideal strategy. Thus, it is recommended that Pitney Bowes concentrates on their core business of producing and leasing postage meters.
To decide if Pitney Bowes should innovate within its existing business or explore more innovative ideas, several factors need to be considered. Specifically, the following aspects should be reviewed under the assumption that innovation should be closely aligned with the core business: the personnel of the project team. It is crucial to involve staff from diverse backgrounds in the development of innovative products. In particular, the innovation project team should include members from the sales team who possess an understanding of the industry and customer needs.
The company’s target segments and whether this product aligns with the company’s value propositions are known by them.
Similar to the AC&T team, the engineering and technology team is responsible for innovative thinking. They determine the important features that this product can offer, whether it is a completely new offering or designed to meet market demand.
Acting as a bridge between the technology and sales teams, the product management team plays a crucial role. They gather insights from the sales team regarding product features that can fulfill market needs and customers’ price range.
In the role of managing product cost, they communicate with the engineering team to understand the required features of the product. This is a crucial responsibility as they assess innovative products from both a business and management standpoint. Although the technology team may develop exceptional products that capture the market’s attention, it is up to this team to ensure that the product can be delivered to clients at a reasonable cost. In the case of Stamp expressions, product engineering only becomes involved after the feasibility analysis conducted by AC&T.
The involvement of the product engineering team at an earlier stage can help identify major obstacles, as discussed earlier. It is also important for the company to restrict any additional requirements on the project, excluding the three main team players mentioned. This helps control the project scope and prevent unnecessary cost escalation. In addition to team composition, recruiting personnel with the appropriate skill-set should also be considered. A candidate with retail experience, preferably with a background in postal services, would be highly suitable for driving the product to market as a member of the sales team.
Pitney Bowes should have conducted cost-benefit analysis on the various features of Stamp Expression. The company should have addressed the following questions:
1. Which functionalities are essential? The company should have gathered input from clients through discussions. Neglecting any of these functionalities may result in customer attrition.
2. Which functionalities are desired or innovative? This step would assist Pitney Bowes in making informed decisions when considering the trade-offs between different functionalities.
A cost-benefit analysis can be conducted to evaluate customer demand and the potential benefits of a feature, as well as the additional costs it may incur. This analysis helps AC&T determine which features to include in their product based on the maximum cost set by the sales team. If there is a value proposition that AC&T deems essential, they should examine its commercial viability and conduct market research. This information should then be communicated internally within the company to obtain support from senior management.
Only senior support is needed to protect the critical value proposition of the product. The target market for Pitney Bowes to enter the market should be Stamp.com users because Stamp.com holds 85% of the market share. Stamp.com charges a premium of 130% over the postage value for full-colored self-adhesive stamps. One possible strategy for Stamp Expression is to target customers who require fewer featured stamps and prefer to pay less. Pitney Bowes can only gain business from existing Stamp.com customers if they enter as a lower-cost supplier. As mentioned in the analysis, the residential service segment is growing. Pitney Bowes should investigate whether Stamp Expression is suitable for this segment and its requirements. Additionally, low-cost meters that are currently in inventory due to short-term rental agreements can be offered to residential families at a minimal price. For example, during Christmas when families send cards to others, offering these meters can potentially lead to a seasonal profit for Pitney Bowes. The sales channel should also be considered.
Based on the slow initial sales observed, it may not be effective to use telemarketing as a sales channel for Stamp Expression. Pitney Bowes should consider trying retailing as an alternative channel. While retailing did not work for older postage meters due to the process customers had to go through, the company can still showcase the product in retail spaces as a demonstration and to attract customers’ attention. The crucial aspect is to develop a commission scheme for retail sales in order to drive the product’s success. Should we innovate or explore new ideas?
In summary, the suitability of Stamp Expression as a solution for core business growth should be evaluated. Pitney Bowes needs to assess the expenses associated with the Stamp Expression project and the anticipated revenue, taking into consideration that it can only be marketed as a disruptive innovation. One option worth considering is the cost of acquiring Stamp.com. If the cost of the Amita project is high, acquiring Stamp.com may be a more appealing solution, allowing Pitney Bowes to capture the entire market share of stamp.com.
In contrast, Pitney Bowes capitalized on the growth in the direct mailing business by employing open innovation. This involved acquiring various companies and utilizing their products or technology to create a vertical integration known as Mailstream. This strategy proved successful, resulting in over $250 billion of marketplace opportunities. If Pitney Bowes takes a different approach for products, such as acquiring stamp.com, and continues to utilize open innovation for Mailstream, it has the potential to generate a significant amount of revenue. However, this is not meant to discourage AC&T.
Innovation plays a crucial role in both societal advancement and commercial success. This is particularly true in industries such as postage, where profit margins are slim and new technologies like the internet pose a threat. To ensure that any innovation has a significant impact on the market, extensive investigation and feasibility analysis must be conducted. (Reference: 1. Christensen, C and Yu, H. 2006, Piney Bowes Inc, Harvard Business School. 2. Ulwick, A. W. 2002. Turn Customer Input into Innovation. Harvard Business Review, January 2002. Pp 81-87)
