It’s hard to believe that after writing this column monthly for Small Business Times since 1999, I’ve never talked about the important subject of new product development.
Maybe that’s because many readers perceive this as a “big company” issue.
Thanks to the expert input I have received this month from TEC (The Executive Committee) resource specialists Mitch Gooze and Nick Webb, nothing could be further from the truth. A small company grows because it commits resources to developing new products and services.
Let’s talk about how this can be done in an orderly fashion.
Here is the cold reality, according to Gooze: three out of four new product ventures fail, and a sizeable fraction of new product innovations never make it to market. So what’s the key up front to get the ball rolling in the right direction? Five things:
• Resources – The ability to finance and dedicate them.
• Marketing expertise – Knowing what the market needs.
• Distribution channels – Knowing how to get it to the user.
• Sales – Knowledgeable champions who can take it there.
• Technology & operations – The two must marry successfully.
Without those five conditions in place, our experts advise, don’t even think about a new product. But that’s really not bad news. It suggests that you need to identify the areas of weaknesses, then rectify them. Gooze believes that the marketing analysis is perhaps the most important step.
There are three issues: Who is this new product or service for? How will it be used? And how does it fit into your current product/service line? You also need to consider how it will affect future products.
The best way to get the answers is through independent market research. You have to determine that your new offering is not only within the range of your delivery capabilities, but that it’s what your customers need and want.
The worst-case situation is to develop a new mousetrap that you just know is going to have high market acceptance, only to find out later that you missed the target by a country mile. Using market research and prolific market testing will prevent that from happening.
Define your goals
It seems axiomatic, but any new product development effort must be consistent with your long-term goals. Without goals, you have no way of measuring progress about performance achievements, no way to benchmark if you are on the right track. Clearly defined product goals:
• Guide the selection of development projects.
• Define target markets, competitive strengths and weaknesses, and the best way to attack the marketplace.
• Differentiate your new offering from what is already available in the marketplace.
• Motivate managers and employees to see that accomplishing your new product goals are in their best interests.
Goals also help focus on milestones on the way to project completion. Without them, a company can have a tendency to “leap frog” intermediate steps, and go for the final project kill. The net result can be project failure.
Success factors
Gooze maintains that the key success factor in a new product’s successful launch is differentiation. Just look around at all the “me too” products in the marketplace, where distinguishing one from the other takes a very perceptive eye.
Imitation, he says, is not necessarily a bad thing, especially if it represents a true advance in the product life cycle. More importantly, if it brings to market something that the pioneer missed, it has a much better chance of succeeding.
But if the imitation route is chosen, the key is to bring added value at the same or lower cost. He refers to this as “imitation-plus.” A new product still high on the learning curve tends to have a higher embedded cost associated with it. But as it tweaks itself down the learning curve, a skillful competitor can learn from this and create a lower-cost, higher-value alternative.
Here are some other critical success factors to consider:
• A steady stream of catalogued ideas throughout the whole process.
• Owners who accept risk-taking as a natural part of the new product development process.
• The willingness to bring together employees from different disciplines within the company to participate.
• A willingness to test the budget in terms of resource demands, because it’s very seldom that a new product commitment comes in under budget.
• A determination to prioritize all projects associated with the new product development effort, and to review these priorities at least weekly, and change as necessary.
The new product/service hopper
You might be overwhelmed with the idea of developing a new product or service. But market research experts will tell you that it’s all in the mind of the beholder. A new product or service doesn’t necessarily have to be new, but it does have to be different in terms of value or cost, or a combination thereof. And, this, of course, is up to the customer.
Let’s list five other possibilities:
• A product line extension with new features to make it work more efficiently.
• Merging two services together so that the customer has a “one-stop” shopping opportunity.
• Altering the distribution network to increase product delivery and availability.
• The use of innovative technical product support with customized, customer-driven software diagnostics.
• The addition of downstream products, modified to be compatible with present product offerings.
In other words, for the small and medium-sized business, a new product does not have to be a state-of-the-art iPod. It must, however, fill a customer need that isn’t being met. More importantly, the customer must perceive that the new offering is, in fact, meeting a need that they can articulate and accept.
