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WHY NEW PRODUCT DEVELOPMENT IS ESSENTIAL FOR BUSINESS SUCCESS
Product development is the process by which a company does one of two things: 1) create an entirely new product that either adds to an existing product line or occupies an entirely new niche; 2) modifies or updates an existing product. Successful product development is essential for any business if it hopes to exist for a length of time.
Importance of new product development
New products, whether they take the form of new applications, new innovations, or entirely new goods, are an essential component of business success. According to a business analyst, “Some entire new industries are based on effectiveness in new product development. Everyone in the industry knows that new products are essential for viability. If we do not continue to grow, we die. To grow, a company must continue to learn (research) and make a difference in its industry. Business, whether it sells waste management or intercellular communication, or janitorial services, lives through new growth, not clones of the past.”
What this means is that new products are essential to survival. “Innovate or die” has become a rallying cry at small and large businesses as increasingly savvy consumers demand the newest and the best products. As one entrepreneur in the bicycle manufacturing industry said, “At trade shows, the first thing customers say is, ‘What is new?’ Every year you have to increase the ante. If you were not to do it, you’d be left in the dust.” To prove his point, the entrepreneur admitted that he must revise the company’s 37 products annually (from small changes to complete redesigns), and that fully 50 percent of a line of bike accessories the company also sells is totally replaced by new products each year.
New Product Development for Small Companies
As business experts, analysts, executives, and entrepreneurs all know, there is no one way to organize a company for effective new product development. The ultimate methodology that is chosen depends on the nature of the organization and its goals. It depends on the existing structural order of things. It depends on the corporation’s management style. It depends on the caliber, motivations, and growth potential of the staff in place at the time of installing the new products organization. It depends on past performance by organizations charged with the responsibility. It depends on the orientation of the corporation if this is not to change. (Are the present strengths or weaknesses centered in certain areas?).
Nonetheless, analysts point to several factors that are fairly universal in determining whether a business will enjoy measurable success in new product development efforts. These include fundamentals like comprehensive market and cost analysis, support from top management, enthusiasm among workers, clear lines of authority, and past experience. Other qualities include focus, adequate resources, and leadership:
Focus
First, a small or large business needs to focus on its goals. Limited time and resources mean that hard decisions must be made and a strategic plan needs to be developed. Companies should do the right things right by using the best information available to choose the right technologies and decide on what new products to invest in. Small companies are often growing quickly and can pick and choose among many seemingly strong new product avenues, but the key is to decide what the company does very well and then concentrate on that area or area.
Selecting the right focus can be a balancing act, however. A company needs to keep both short-term and long-term success insight and needs to weigh rapid cash generation versus growth, business life cycles, and technology and market capabilities. All of these factors must come into play, and the risks associated with each must always be considered.
One way a company can stay focused is to develop a product line architecture. Once a company creates its overall strategies and determines how it will reach its goal, it should map out exactly what product lines it will choose to achieve that goal. Product line architecture tells you how your product line will look, what type of products you will have in what markets, how they will be positioned, and in what sequence they will be introduced.
Defining a product line architecture demands that correct decisions be made early in the product development process. Companies should be rigorous and quantitative when coming up with new product specifications or definitions. They should, as much as possible, precisely define the product qualities and price points that a market will bear. Mistakes made early in the process will often not show up until it is far too late either at the prototype or final product stage.
Customer feedback is essential at this stage and can eliminate mistakes in focus. Companies should ask themselves a series of questions when creating a new product line vision. “How would someone use this product? How would you articulate the benefit to the customer? Is this something a customer can really understand as to how it makes their life easier?”
Find the resources
Another key to new product development for businesses is to secure the resources and skills needed to create and market the new product. Small companies may lack the in-house resources needed to create a new product, making it seem out of reach, but analysts note that small business owners have other avenues they can often pursue. If the product idea is good enough, the company may decide to look outside its own walls for partnership and outsourcing opportunities. When the need is not within the capacity of your company, but beneficial arrangements can be made with other companies to the joint venture, contract supply, license/acquire, or, in rare instances to merge, pools of expertise can also be acquired by recruiting within the subject industry and by the use of technology and marketing consultants.
One key to resource management is to not undertake too many projects at one time. Every company has a finite amount of resources to allocate to new product development, but small businesses often face especially tight budgets in this regard. And budget in this instance doesn’t just mean money; it also means time. Too many projects mean otherwise talented workers can’t spend enough time on any one project and as a result, all projects suffer and fail off schedule, leaving gaping openings for competitors or causing market windows to close.
Leadership
The third and final step a company needs to follow is to find the leadership needed to bring a new product from the idea stage to the completed product. The leader will often take the form of a “product champion” who can bring both expertise and enthusiasm to the project. In small business environments, this product champion will often be the entrepreneur/owner himself.) A strong product champion will be able to balance all the issues associated with a product such as economic factors, performance requirements, regulatory issues, management issues, and more, and create a winning new product.
The project champion has to guide the project through a predetermined series of viability tests, checkpoints in the development process at which a company evaluates a new product to determine if the product should proceed to the next development stage. If it is determined that the market has shifted, or technology has changed, or the project has become too expensive, then the product must be killed, no matter how much money has already been poured into it.
This is where a strong product champion makes the difference; he or she has to have the honesty and authority to make the call to kill the product and convey the reasons for that decision to the product development team. If goals were clearly defined, resources properly allocated, and leadership was strong, then the decision to kill a project should not be a difficult one.
Launching a new product
Once the product line has been established and a new product is being developed, it is time for a company to think about how to successfully launch the product in its target market. This is the stage where an advertising or public relations agency can come into play, especially for small businesses without internal resources to handle such a job themselves. When using an outside agency to launch a product, a company should:
- Have a well-defined product concept (which is where product line architecture comes into play).
- Provide the agency with background information on its products and goals.
- Conduct necessary patent research, applying for a new patent is needed.
- Have the manufacturing process in place and ready to go, either internally or via outsourcing.
- Have a formal business plan in place that defines the funding of the project.
- Determine who will approve the marketing or advertising plan that the company creates (the fewer people communicating with the agency, the better).
- Determine the proper timing for the launch.
Service Companies and New Products
Service companies should take a disciplined, analytical approach to develop new services, relying on targeted customer input just as companies outside the service sector do. Companies in the service industry know that they are competing for customers based on perceived value as much as the actual price.
If a customer feels they are getting better treatment, or more service options, or more “free” services as part of their purchase, they are more likely to remain a client to that company. If, however, a company stops innovating and adding new services to its core business, then the service becomes a commodity and clients look at only one thing, i.e. price when deciding on what company to choose.
Service companies should routinely ask themselves a series of questions:
- Could current services be presented in a different way?
- Could they be offered to new customer groups?
- Are there little things that can be tweaked to freshen or update a service?
- Could services be improved or changed?
Because by their very nature services are easy to copy (no materials or product knowledge is needed), service companies actually face more pressure to innovate and develop new products than manufacturers. By continually asking the above questions and by following the same models manufacturing companies follow when pursuing product development, service companies can stay ahead of their competitors and make their services clearly identifiable to consumers.
Pitfalls of Product Development
Finally, when embarking on the product development process, try to remember in advance what the obstacles to success are. These pitfalls are many and varied, and can include:
- Inadequate market analysis.
- Inadequate cost analysis.
- Strong competitor reaction.
- Undue infatuation with your company’s own technology and expertise.
- Overreaching to make products beyond your company’s financial and knowledge grasp’
- Technical staff too attached to a project and too proud to admit defeat, even when a project cannot be justified according to pre-established criteria. Problems with patent, license, or copyright issues.
- No real criteria for deciding if a project is good or bad.
- Changes in strategy at the corporate level are not conveyed to the project development team.
- Low product awareness.
- Money and staff allocated to a project are hidden in the budget of another project.
- Company decision-makers are blinded by the charisma or charm of the person presenting the new product idea.
- Project accepted on the basis of who gets it first.
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