Congratulations, you've come up with the next great invention that will take the market by storm and revolutionize our daily lives! You're ready to join a rapidly increasing legion of inventors and entrepreneurs that are turning their ideas into millions of dollars. All the cool kids are doing it. Just check out the reality TV shows "Everyday Edisons" and "American Inventor" or Oprah Winfrey's "Search for the Next Big Idea."
You have a paper napkin sketch. You just need to get it to the engineers and find someone to make it. The cash will start rolling in.
Whoa, Einstein. You'd better take a deep breath and come up with a game plan. There's a lot of research and details to think about before getting the designers involved. According to one of America's most prolific inventors, Thomas Edison, "Genius is 1 percent inspiration, 99 percent perspiration." You have the inspiration, now it's time to get to work.
We're not going to get into a step-by-step product development process here, but rather impart some lessons learned and areas of concentration that will work for first-time entrepreneurs and established businesses. For purposes of this article the product development process will be broken into three phases:
I. Conceptual development
II. Design and implementation
III. Post-product launch
The first phase, conceptual development, lays the groundwork for what is to come. The more effort and thought put into this phase will save time during design and implementation.
I. Conceptual development
1. Product positioning
No matter how novel your idea, it will be compared to something already on the market. For example, the Segway® Personal Transporter is one of the most unique, innovative and well-publicized products of the decade. Yet, because of its price tag (approximately $5200) it can be compared to four-wheeled ATVs and functionally compared to motorized scooters.
- Identify the competition. Who are you up against?
- How does your product fit in the market? Is it a Cadillac or Honda Civic? Both are great products, but differ on features and benefits.
- How will it compete (price, features, or quality)?
- Identify the target retail price.
- Identify sales outlets (i.e. The "Mart" stores, specialty outlets or Web sites).
2. Brand development and acceptance
Unless you truly have a revolutionary, out-of-this-world idea it will be difficult to gain significant distribution with a single product to your company name. Why? It takes just as much time for a buyer from a nationwide distributor to manage a single-product company as it does to manage a company with a few dozen SKUs (stock keeping units). Buyers are basically graded on their sales generation efficiency. They are not going to risk their jobs by taking on a lot of new, single product brands.
- Having several products in your line-up creates a more legitimate impression to buyers and the end consumer.
- How many SKUs can you get out of one product idea? The next time you're at a home improvement outlet check out how many cordless drills are displayed under each brand name.
- Develop a supporting cast. Consider other products that can be sold with your main product (i.e. cordless drill manufacturers also sell drill and driver bits under their brand names).
- Commodity-type items and consumables will have a lower capital investment than flagship products and more easily allow you to bulk up the product line on a tight budget.
3. Project scope
How difficult is the product development project going to be? If the new product idea is electronic and you don't understand the basic workings of a light switch you obviously will need quite a few contracted resources.
- Identify areas in which you will need help (i.e. engineering design, packaging, manufacturing).
- Is the product a home run (high sales volume, high margin) or a base hit (ok sales, but it will still be selling 15 years later)? Home runs are great, but base hits more often win the game. If you have several product ideas, mix the base hits in with the home runs for better resource allocation. Home-run projects often require a higher capital and time investment than smaller, base-hit projects.
- Estimate the capital expense. If you enlist contract manufacturing, the vendor should be able to give you a ballpark tooling figure without a finalized design.
4. Patents
One thing that can leave a project dead in the water is a possible patent infringement. It's much better to realize this before a lot of time and money is invested in the project.
- Perform due diligence on patent research. Research any infringing patents. Work around infringing claims if possible.
- Enlist the services of a reputable intellectual property law firm.
- Patent research can generate ideas on product features and other products. See where someone else left off.
- All United States utility and design patents are online. Check out www.uspto.gov.
5. Product specification
This is the compilation of the research done during conceptual development. The product specification is a living document (i.e. it's not set in stone), but it needs to be completed before beginning the design and implementation phase.
- Acts as a leash for the design engineers. It will keep them from charging in the wrong direction. Marketing, sales, operations and engineering stay on the same page.
- A well-defined product specification reduces the number of iterations during the design and implementation phase.
- Keeps everyone in the loop of progress. Regular project review and reference to the product specification keeps the project on track.
- At a minimum the product specification should identify:
- market channels
- target distribution channels
- competition
- suggested retail price
- estimated annual sales (number of units)
- target cost
- estimated capital investment
- product requirements (i.e. UL, CE approval)
- features and benefits
Authored by: Tim Morrow. Tim Morrow and Doug Simon operate Simon & Morrow Design, LLC (contract product development) and Boone Outdoor Hardware. Morrow is a client of Jim Gann, counselor for the Small Business Development and Technology Development Center at the University of Missouri in Columbia.
Date reviewed: 1/3/08
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