Most large corporations have departments responsible for research and development, engineering, and testing. In many cases, the budgets for these departments are astronomical, because new products development and the continual improvement of existing products and processes are among the most important challenging tasks of high performing, world-class businesses.
In the case of start-up ventures, the task is equally challenging; however, most new ventures, unlike large corporations, have very limited or nonexistent budgets for product development.
Investors frequently consider research and development, engineering, and testing to be the highest-risk stages for new companies, so funding for these activities is difficult, if not impossible, to secure.
Entrepreneurs are left with a dilemma: how to perform the research and development (R&D) that will result in high quality, engineered prototype as quickly and as inexpensively as possible. A lack of sufficient new product development (NPD) resources has many unintended consequences.
The Impact of Insufficient Resources
Whether in large, established companies or in small entrepreneurial ventures, new product development typically suffers from severe resource deficiencies that result in too much time to market, poor project performance, and meagre value creation.
One of the biggest sources of insufficient resources is, surprisingly, too many projects – in other words, a lack of focus.
Typically, this happens when the entrepreneur throws a lot of projects into the market, hoping that one will stick. Then the entrepreneur doesn’t want to let go of the project because money has already been spent (even though these monies represent sunk costs). There is no mechanism for stopping or killing projects in place, so old, useless projects carry on.
A lack of resources focused on NPD results in six common problems.
1. Poor Execution
The critical due diligence and market analysis required to ensure a successful product launch is often shortened or bypassed in favour of speed. Approximately 75% of NPD projects don’t include viral market research.
2. Time-to-market increases
When a new venture lacks sufficient resources, bottlenecks and backups tend to occur because people aren’t getting around to doing the work, and when the work is done, it must often be redone because it was done in haste. Overall execution is generally poor.
3. First-to-market opportunities are missed
Poor execution results in missed opportunities to enter the market at a quiet time without immediate competition. Also, these “game-changer” opportunities often require more resources than less risky initiatives, they are often bypassed in favour of incremental opportunities that are easier and can be done quickly at a much lower cost. Unfortunately, these kinds of opportunities provide little value or return to the company, and in fact, the returns continue to diminish until the company finally decides to change the game with a truly innovative project.
4. Projects are made simpler so that more can be done with less
This dumbing-down of projects is another consequence of resource scarcity. Where resources are limited, product features and benefits are often sacrificed in order to get more products out.
5. Team morale declines
The combination of a lack of resources and increasing time pressure causes morale problems on product development teams and a sense that the team must accomplish the impossible. Although members of the team are often willing to get the job done, more frequently the stressful environment saps up the morale.
Entrepreneurs can avoid a shortage of resources by carefully planning the product development strategy so as to focus on projects that are closest to the company’s core competency and will bring the company closer to its primary goal.
Entrepreneurs also have to learn how to say no to opportunity when it threatens to stretch the company’s resources too thin and endanger other activities. Some resources should be dedicated to new product development to keep the company competitive, but the mantra should be “fewer but better new product projects.”