Bringing new products to market: Phase zero to launch
When is the right time to launch a new product? Is your company ready? How do you plan and budget the process, gauge the market and learn from the mistakes of others? We talk to people who have found ways to bring ideas to market
Phase zero is Paul Stephenson’s name for the most important part in developing any new product or service – the moment when a new concept is given a plan and a budget. Paul has worked at Naim Audio, the company that has led high-end high fidelity technology and creates the only noise you should be able to hear in a Bentley, for 30 years. He estimates that in the decade he has led the company as managing director the company has developed and launched 80 new products. He definitely knows how to get new product development (NPD) right. Naim achieved a record turnover in its last financial year while manufacturing all its products on its own premises at Salisbury. “We now have the manufacturing tools and know-how which have enabled us to make world class hi-fis in thousands of units, not tens, while still maintaining the hand built premium quality,” he says. “Naim’s business model is based on R&D.”
Every product a mini start-up
So what is the right time for a company to commit itself to developing new products or services? All companies start with some unique product or offering. “Getting that initial product to the manufacturing stage and setting up your sales channels take all your time,” says Paul. “Ideally it will generate enough sales to fund the next product – and in a technology-based business the next products absolutely need to be built into the business plan. Make sure you really understand the value of the market place, the sales and distribution channels, then go to the bank with your marketing case and tell them why yours is different!” NPD begins to sound a lot like starting a new business, and should be approached in much the same way, agrees Peter Thier, VP of global product development at the Cambridge technology management consultancy Sagentia. “The business case has to be sound: at the front end NPD is about identifying the need in the marketplace and the business rationale behind that.” Even if you are able to finance the entire process yourself, it is vital to make the business case as if you were going to pitch the new product to a bank or VC for support. But don’t let them skew the pace of development. There is always pressure from the VC board or your corporate board to bring new things to market. If the idea is too sexy they expect it to be on the market in a few months whereas there may be a whole lot of boring risk and cost reduction work left to do. Be careful what you reveal and when, Thier counsels.
Gathering the tools
Early stage companies tend to be technology-focused. “I think one of the mistakes these companies make is to assume that the same skill set works as well for technology development as for the launch of the process.” Conversely a more established business may have already shifted to growth mode and not necessarily have the breadth of skills to bring a new technology – particularly moving out of its core competency – into a smart development process. Identify the gaps and be creative about filling them. This may mean hiring. Companies in the pharmaceutical or cosmetics space are frequently established on their chemistry: that is where their IP lies. When they start to look at delivery they often need to develop devices. Engineering and manufacturing those devices could be terra incognita to them. If you need access to key technology that may exist within a university somewhere in the world or a piece of IP held within another commercial organisation it may mean hiring the research team or acquiring an organisation that has device experience to develop the system. If the process is taking you out of your comfort zone the really smart thing to do may be to team up with a product development specialist like Sagentia. Product development principles are the same whatever the size of your company. This is the company that developed the mobile payment system M-Pesa for Vodafone and some breakthrough medical devices for growing companies including LED surgical lighting for Brandon Medical and robotic cameras for keyhole surgery in collaboration with Prosurgics. “We help clients discover where those gaps in the business exist and how they can fill them,” says Thier. Whatever the right solution for you, DIY is a high risk strategy, he warns. “Budgets typically are overrun exceedingly and the timeline to launch can extend considerably. Sometimes it is simply a matter of finding the technology or the device and private labelling it, but you have to conduct that search to find out where it lies and how to acquire it.” There are other ways. Morbid fear of one’s competitors can be very restrictive and if you can overcome it, a LinkedIn group could be the route to the best minds in the target field. “I used to be very sceptical,” says Paul Stephenson. “I assumed that the people out there would poach my staff but that never happened.” The reason LinkedIn can be an effective market research or product development tool is that it’s anarchic and its users are the ones who decide how it works.
The race to market
So understanding what resources are really needed in the development process is paramount. Of course money is the key resource, so do set a realistic budget. Development typically accounts for about a quarter of the whole cost of bringing a device or product to market so make sure you have allocated enough funds to achieving a successful launch. After that comes the question of timing. If the technology is fairly mature the timeline is shorter and more realistic. The more immature the technology, the greater the risk of the timeline slipping. It’s important to understand those risks upfront: hopefully they have been addressed at the design stage. At the same time decide on manufacturing. Where you are going to manufacture has a bearing on design. Both Veetee and Naim do their own but if you are using a contract manufacturer consider their capabilities and what aspects of the design they need tailored to their specific processes. That in turn could significantly increase your time to market. Contract manufacturers like to be in on the design process. Because they understand manufacturing processes, that can save both cost and time, but ring fence your performance and usability specs: their priorities may be different from yours and the voice of the end user needs to be heard at every stage. Veetee is the largest supplier of dry rice to the UK retail trade, a position built up by its founder Moni Varma over 30 years. He had a USP; he refused to use the flavourless parboiled rice offered by the American and Indian market leaders. But rice is a commodity, he says, with wafer thin margins and in 2007 he realised it was time to develop the ground breaking aseptic packaging process, adapted to use natural white, not processed parboiled, rice for microwave cooking. Varma invested £20m in an additional factory at Veetee’s UK Kent headquarters and Dine In was launched in 2009. “We used focus groups in different parts of the country to establish its acceptability. There has to be a point of difference in the underlying concept. In any product development we do we try to find an element that makes us both different and better.” Though getting the launch right is your priority, speed to market is also important. “In NPD time to market is critical. If you arrive second you have to ask yourself, is that good enough?” says technology driven Paul Stephenson. “I’d say that if you don’t take a very focused, realistic view of the development schedule you run the risk that you will miss the market opportunity. Or overrun the budget, which is almost equally bad.” That said, Naim products never really go head to head with any competitor. There could be a case for letting a competitor get his head blown off before putting your own above the parapet. “You have to weigh whether having first mover advantage is really there for you or whether being second on the market has its own advantages,” says Peter Thier. The iPod was not the first to market but it captured the bulk of the share: there was shared music before iTunes but Apple found the right model to accelerate. Being second or third to market, understanding where the challenges lay with the earlier products and resolving those before your competitors could give you a significant breakthrough in the market place – by following.
What can go wrong?
Always factor risk into the development process – as a successful business you know that already. At some point you will need to set the paperwork aside, sit back and get in touch with your gut feeling, says Moni Varma. “In the worst case you could lose a few million but had I not been prepared to take that risk the Dine In product, rice in trays, would never have seen the light of day.” Three years on he has captured 20% of the market share and is limited only by capacity and preparing to extend the Dine In lines at his Kent factory secure in the knowledge that this share will grow. Now he is preparing to launch his next new product, ready-to-eat pasta, in a year’s time. Be ready to pull the plug on a new product, however late in the process, if it becomes apparent that it won’t fly. With so many products coming forward it would be astonishing if this didn’t happen at a technology based company like Naim Audio which had invested £150,000 on a new concept. Prototypes had been made, the sound was excellent and the customers were salivating says Paul Stephenson. “But when we started to look at manufacturing we found it could not be made in anything like production numbers and the business case evaporated.” Naim cut its losses on the product. A genius idea can be so easily flawed if it really cannot be made to a reliable quality standard in numbers, he says. “We learnt a long time ago that the process must include design for manufacturing – and from day one it should involve potential suppliers if you suspect you are close to the bleeding edge!”
What goes wrong and why?*
A checklist for development to launch
|The risk||Ask yourself|
|Products over budget||Original budget realistic? Cost model developed at an early stage and monitored effectively? Did the specification change during the development? Did development resource have relevant product experience?|
|Product late||Was the original time line realistic? Was the programme suitably phased, with clear and regular milestones? Did external influences delay the programme? Were these interdependencies understood? Did the specification change during the development?|
|Failure to meet specification||Did technology fail to deliver? Was sufficient testing built into the programme at appropriate times? Was the specification relaxed due to other constraints, like cost? Was life testing only possible at a late stage?|
|Development budget exceeded||Original plan was under resourced? Late product leading to cost over run? Was production tooling committed too early?|
|Problematic early production||Initial production yield low – sufficient pre-production activity? Initial demand stronger than expected? Product recall – late breaking changes from extensive field trials?|
|Poor market acceptance||Was the voice of the customer heard? Is the product timely? Is it too expensive? Does it perform? Have late changes compromised the product?|