Turning an idea into a new product or service is a lot harder than coming up with new ideas. In addition to having the right product idea in the first place, there are three essential ingredients for successful new product development.
- Skills: You need the relevant skills. For example, if you’re developing a new food product, creating it is only the starting point. Other issues include sourcing ingredients, the mass production process, quality control, packaging, costing and pricing, and customer trials.
- Resources: You need to commit sufficient resources. If you can only afford a half-hearted attempt, don’t even begin. If you commit too many resources, the rest of your business may suffer.
- Commitment: The success of the project will depend on your personal commitment. Although teamwork is important, in a smaller business it is often the owner–manager who must drive the project.
Reducing the risks
Try to identify the major risks early on so you can decide if the overall risk is worth the potential reward.
- Establish the likely volume of sales, and the marketing and sales cost of achieving each sale. Will you get a satisfactory return on your investment?
- Is your target market growing or shrinking?
- Are there any foreseeable changes in your market that could affect the success of your product, such as new safety legislation?
- Are there any competing products already in the market? Can you offer something different and unique?
Work out how to reduce each risk to an acceptable level. For example, can your new design be patented or protected in some other way?
Ask potential customers, suppliers and members of the development team for feedback on the idea or a prototype. Good feedback at this stage can save time and money.
Signs of non-starters
While a good product idea is no guarantee of success, a bad product idea is guaranteed to fail.
Here are some fatal flaws:
- You can’t sell at the price or volume necessary to make a profit.
- Your product can easily be copied. Competitors could launch similar services at lower prices, with less start-up costs.
- You lack market power. For example, a new piece of software may be the best in the market but it could be doomed to fail if you lack an effective distribution chain.
Know what you’re doing
Start by defining a basic specification for your new product or service.
- Make sure you have a compelling reason for customers to switch over to your product.
- Next, plan the design of your product. Use in-house or external designers and get them to sign confidentiality agreements if necessary.
- If you need any approvals or certification (such as for electrical products), book the product tests. Ask if the approvals body can also test your prototype to identify any problems early on.
If you intend to manufacture your product, develop your manufacturing plans at the same time as you develop the design of your new product.
- Design new products so that the number of components are minimized.
- Try to reduce the complexity of assembly to save time and reduce labor costs.
- Use standard parts that are inexpensive and easy to source. See if you can use parts you already use in other products.
Finally, ask yourself if it would be cheaper or better to outsource the manufacturing process.
Selling price issues
Decide on the likely selling price for your product and the anticipated sales volume, to find out if the product will be viable. Based on this, work out what your maximum unit cost of production should be. Many new products aim to provide the same quality as an existing product, but at a lower price and with better profit margins. Other products rely on superior design or technology to win market share, and can be priced at a premium.
Create a team with all the skills needed to make the project a success and choose a team leader. Every new product needs a product champion to lead the team.
- Give the team leader the authority to run the project (within an agreed budget and timetable) with the responsibility of reporting progress to you at agreed milestones.
- Make sure all the team members agree on the main objectives, which should be based on the basic project specifications.
- Be prepared for negativity and keep the team motivated. Anyone with a negative attitude will influence the rest of the team.
- Celebrate achieved milestones as an effective way of maintaining morale.
Make it clear there’ll be failures along the way. Remind the team that if making the new product was easy, someone would have done it already.
Managing tasks and objectives
Set SMART objectives (Specific, Measurable, Agreed, Realistic, and Time-bound) to control progress. This enables the team leader to identify problem areas that can be focused on.
Create a flow chart showing the order in which tasks must be completed. A visual chart of the whole process can make things clearer to everyone.
Nothing goes completely smoothly, so as the project proceeds you’ll typically need to adjust the specifications and planning assumptions.
Keep asking yourself if the project will meet its commercial objectives. To do so, it’ll have to meet the pricing levels you’ve assessed as commercially viable. Without planning and monitoring, costs can spiral out of control.
- Calculate costs, do market research and assess the resources you require.
- Select the right team and appoint a leader.
- Involve the team in the new product development to gain their buy-in.
- Allocate work on each development section and set progress milestones.
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