Cool Product Idea! Now What? (Part I) Lessons learned on product development
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 growing legion of inventors and entrepreneurs who 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 sketch on a paper napkin. 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. You have a lot of research to do 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 we will impart some lessons learned and discuss areas of concentration that will work for first-time entrepreneurs and established businesses. Let’s break the product-development process down 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. Putting more effort and thought into this phase will save time during design and implementation.
Conceptual development
1. Product positioning
No matter how novel your idea is, it will be compared to something already on the market. For example, the Segway Personal Transporter is one of the most innovative and well-publicized products of the decade. Yet its price tag (approximately $5,200) can be compared to that of a four-wheeled ATV, and its functionally can be compared to that of motorized scooters.
• Identify the competition. Who are you up against?
• How does your product fit into 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 (department stores, specialty outlets, 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 only one 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 for the buyer 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, singleproduct brands.
• Having several products in your lineup 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 homeimprovement 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 will 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 with the potential to keep selling in 15 years)? 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 are 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, but it needs to be completed before beginning the design and implementation phase. A well-defined product specification:
• 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.
• 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
– features and benefits
“Cool Idea! Now What? (Part II)” will discuss design, implementation and post-product launch. Read it on the Web.