How to Develop a New Product: A Guide for Small Businesses
Product development is key to staying competitive – here’s how to put a process in place to bring your new product to market
Constant innovation is the key to staying ahead of your competitors as a business.
When you think you have hit upon the next big idea for a product, it is tempting to rush through the development process in order to see it hit the market as soon as possible; but this stage needs to be carefully planned, in order to minimise the inevitable risks to your business.
It is important to note that a ‘product’ a company offers does not have to be a physical good; whether it is a new insurance package or windscreen wiper, the development principles are the same.
In this article, we assume you have already hit upon inspiration for a new product; it is not a briefing on coming up with an idea, but rather a guide to the equally challenging process of bringing it to market.
Can I bring my idea to market?
Although you may have an idea that is set to take the market by storm, you still need to ask yourself three key questions when assessing whether you can complete the product development stage.
1. Do I have the right skills? Most new products will require expertise in every stage of the development process.
For example, if you decide to develop a new soft drink, you will need specialist knowledge in creating the look and taste, packaging, sourcing ingredients, branding, quality control, and much more.
2. Do I have enough resources? You need to ensure you have enough money, time, and manpower to bring the idea to fruition, without neglecting the core activities of your business.
Ask yourself whether you will need external finance to complete the project.
3. Am I committed enough? Especially in small businesses, it is often the founder or owner who drives through the product development process.
Ask yourself whether you truly have the patience and determination to see a project through.
How do I reduce the risks associated with product development?
When considering whether to develop any new product, you should undertake a balancing exercise of risk vs. reward; are the potential benefits to your business worth the comparative risk of the whole project failing?
What areas should I look at when assessing risk?
Think about what state is the market in. Make an estimate of sales – taking into account the relative production and marketing cost of completing each sale.
Look at your target audience – is it an emerging or shrinking market? Are there any issues that could affect the launch, such as impending EU regulation or legislation?
Investigate whether anyone else currently offers a similar product, and whether you can differentiate yourself sufficiently to make an entry into the market.
Try to avoid leaping into the unknown wherever possible. Has someone else had success with a similar product launch in the past? Visit trade shows to get an idea of how others have brought similar products to fruition.
When you have assessed the risks, work out if there is any way you can reduce them before beginning the development process.
As an example, putting in a patent application for a new invention will protect you against imitators.
Find out whether you will need to invest in new staff, technology or equipment to bring the product to market – and how much this will cost.
Producing a low-cost prototype
Prototypes are an essential way of testing the market before diving into production. Especially for technical or mechanical products, you might need a ‘works-like model’ and a ‘looks-like model’ so you can get feedback from customers or suppliers on both the aesthetic and functional aspects of your new product.
What steps should I take before starting a product development project?
Before you dive into the actual development process, you need to know exactly what you will be developing; what it will look like, how much it will cost, and when it will be ready for launch.
Develop a detailed product specification and describe the product in detail, outlining its key features and the steps you will take to implement these features.
Acquire a unique selling point (USP) and think about how you will differentiate your product to make customers choose it in preference to competing products that exist currently.
The design and aesthetics of the product are a vital element in its success; if you do not have in-house designers, hire consultants from elsewhere.
Decide on a realistic estimate of when the product will be ready for launch, and consider what the scenario would be if it was delayed. Pilot launches and trial runs are essential for ironing out the inevitable issues that arise before launch.
If you are developing a product that needs certification, such as a food product, book in with the appropriate approval body early on.
Come up with a realistic price point for your product after working out what your maximum per-unit production cost will be.
Finally, work out how many you will sell. Look at the size of your target market and the share of it you are likely to have, and work out what typical order sizes would be. When you have done this you can work out how many you will make.
How do I put together a product development team?
Unless you are developing a product on your own, you will need to assemble a team of staff to drive through the development process.
Appoint a ‘product champion’ or team leader to champion the development team. They should be sufficiently evangelical about it to drive the project through to completion. When you have set a timetable and allocated a budget, allow your product champion to lead the process without your interference.
A good team will have the skills needed to deal with every aspect of the product development process. Assembling a team with a complete mix of skills from the start allows everyone to be on the same page from day one, accelerating the overall process.
Agree on the objectives and ensure all the team members know exactly what the specification for the product is, and what they will do to achieve it.
Finally remember to keep your team motivated. When developing a new product, it is normal to go through a honeymoon phase when everything seems fresh and exciting; but you will find that actually bringing these ideas to fruition can be an arduous and demoralising process.
Remind your team that setbacks and failures will occur along the way but that they should be mindful of the bigger picture.
How do I ensure an effective product management process?
After assembling your team, it is finally time to begin in earnest and put your ideas into action. To ensure a smooth process, you’ll need to do a number of things.
Firstly, allow the team leader to assign parameters for each part of the product specification. You may want to consider breaking up the project in this way as it’ll make it easier to deal with.
Give your team members personal responsibility for individual specifications as this should ensure they’re suitably motivated.
Create a ‘critical path’ plan that shows the order of the tasks that need to be completed, and that allows different parts of the team to split up and divide their time and expertise effectively.
Finally, as the project progresses, you will probably need to adjust the specifications and planning process; this particularly happens at the prototype or testing stage. Each time this happens, ask yourself whether the process as a whole is still commercially viable.
How do I keep on top of my product development costs?
Without careful oversight, product development costs have a nasty way of spiralling out of control. There are two main methods of estimating the likely cost of a project
Top-down. If you have done a similar project before, use it as a comparator. If this new project will take half the time than the last one with the same team, then you might halve the expected cost
Bottom-up. If you have never done a similar project in the past, get each team member to calculate the individual costs of their part of the project, in conference with your team leader. Add these figures together, with a contingency amount on top of that, and you will have a rough budget for your project – but be aware that these estimates often produce very optimistic cost estimations.
What should I do to stay ahead of the competition?
Product development should be a regular or ongoing cycle if you are to stay one step ahead of your competitors – you should therefore regard it as an essential element of your business.
Make sure you plan for product development on a regular or scheduled basis; do not wait for your competitors to make a move and then play catch-up, and put aside a yearly budget for product development and new projects if you can.