Why is this important?

The product development process is a structured way of bring your ideas for new products and services for your business to market. It covers the process involved from the initial concept to operational implementation.

The products and services that your business sells are part of what differentiates your business from any other. Investing in the development of new products and services is crucial to the growth and profitability of your business, but embarking on the development process can be risky.

You can minimise the risks involved with developing and launching a new product to the market by following a simple process outlined in this document. 

What to do

Process overview

The new product development process can be broken down into a number of distinct stages. The end of each stage includes a 'go/no go' decision point where you can make decisions on the validity of the project before you spend any more time and money on it.

In practice some of these stages may overlap, but the presence of a staged process will help keep timing and costs under control.

1. Concept

The concept phase is a quick and inexpensive assessment of the merits of a particular idea for a new product or service and its market prospects.

The principal objective of this phase is to document your product concept idea.  The document does not need to be very long but it should address the following elements:

• Definition of the proposed product - if you can't easily define it, you may find it difficult to sell, so take your time in describing your vision in as much detail as possible
• What is the perceived market need?
• Who are your competitors, and what is their competitive offering?
• Identification of who you need to assist you to bring this product to market - this includes staff, other businesses, legislative bodies etc
• What is the price range for your new product?
• Estimate of resources required to bring the product to market - in essence, this is an estimate of the costs and time for the project
• Possible risks and mitigation strategies
• Any major issues to overcome before the product becomes viable
• High level plan

One of the challenges during the concept phase is how to develop ideas into a solid project plan to support a business decision to continue. Once you have written the concept you need to ask yourself the following questions:

• Is this idea likely to make money? (Look at your estimate of costs, then tie it in with what you believe is the likely revenue - based on demand and price estimates)
• Does the idea fit in with your current business activities and strategy? Deviations from existing business involve more risk than those that have synergies with what you are currently doing
• Will existing business be unaffected while I develop this concept?
• Are there any obvious 'show-stopping' risks?

If the answer is 'no' to any of these questions then you will need to consider whether it is worth moving on to the validation stage.

2. Validation

The purpose of the validation phase is to test the market potential for the product, refine the product definition to meet any specific requests from the market, and investigate the impact the new product will have on your current operations. 

Validation activities are most valuable and cost-effective once all secondary sources of information have been gathered and analysed. This includes articles in publications, past market research, internal information systems (such as your Customer Relationship Management system) and other sources. This will ensure that validation efforts can be better tailored and focus on what you don’t already know.

Validation can be conducted using either qualitative or quantitative market research methods. Qualitative methods include things like interviews, workshops and focus groups. Quantitative methods include things like surveys or interviews.

For best results it is advisable that validation is conducted both internally and externally.

Internal validation

Internal validation involves testing the concept on your staff. The purpose of internal validation is to get feedback from key internal stakeholders on the viability of the product before going to market, determine the likely impact on your existing operations and to build readiness within your business to accept the new product should it be progressed through the development cycle. 

External validation

External validation activities effectively test the idea with potential customers. A range of customers should be chosen to assist with validation so that all potential segments can be identified and the product offering refined to meet the specific requirements of different segments. 

Once you have completed the internal and external validation activities, the following things should be understood:

• an accurate definition of the product
• an estimate of the target market size
• indicative pricing
• internal impacts on your business

Once you have completed all your validation activities you need to ask yourself the following questions:

• Does the product cannibalise the market of your business' other existing products? If not, does the product represent a commercially attractive option for your business?
• How many people would the product development project need and does your business currently have the capacity?
• Does the product fit with your strategic objectives?

You will then need to consider whether it is worth moving on to the business case stage.

3. Business case

The business case takes the information you have outlined in the concept and validation stages and formalises the decision process of whether or not to bring the product to market.

The business case should cover the following elements:

• detail of the product to be developed, the target market, pricing and recommended approach to pilot and roll-out, based on the results from the validation exercise
• identification of any strategic implications for the new product
• a recommendation of how capability and resource restraints will be managed or addressed
• a detailed cost-benefit analysis for both a pilot and full roll-out
• a set of measurement criteria for monitoring the success of the pilot and/or full scale rollout

On completion of the business case phase a 'go/no-go' decision needs to be made as to whether to proceed to the Development phase. The criteria for making this decision include:

• Do the financial forecasts for the product align with your business' short and long-term financial targets?
• Does the product align with your strategic objectives?
• What is the opportunity cost of developing this product?

4. Development

The development phase involves creating a marketable version of the product that can be taken to a pilot segment of the market. The product should be developed as closely as possible to the definition signed off in the business case.

Development represents a project in itself, with four distinct stages as outlined below. Please note that some products may not require each element to be completed in full depending on the nature of the product.

Design

The design phase includes the following elements:

• agree on project management protocols
• define key deliverables
• allocate team responsibilities
• develop project timeline
• develop product specification
• develop functional specification
• agree on marketing activities
• agree on post-implementation support requirements
• identify process and procedure requirements
• identify requirements for sales support material

Develop

The development phase includes the following elements:

• develop product
• document marketing plan
• document product service and support procedures
• document operational procedures and processes
• develop sales support material
• initiate legal document development
• develop training materials and schedule
• develop test plan and script

Test

The test phase includes the following elements:

• execute testing plan
• prioritise fixes
• update product document's Frequently Asked Questions
• conduct training
• finalise legal documentation
• sign-off for launch to market

Implement

The implement phase includes the following elements:

• execute marketing plan
• implement operational procedures and processes
• draft product strategy
• move to 'pilot' phase

5. Pilot

The purpose of this stage is to provide final and total validation of the entire project: the product itself, the production process, customer acceptance, and the economics of the project.

Clear criteria should have been defined in the business case to measure the success of the pilot. These should be monitored throughout the pilot, and used as a basis for adjustment of product definition, pricing and targeting of marketing and sales activities.

Achievement against these criteria will form the basis of the decision to progress to full product launch.

On completion of the pilot phase a 'go/no-go' decision needs to be made as to whether to proceed to rollout.  The criteria for making this decision include:

• Did the pilot yield positive customer feedback?
• Are there any critical items on the customer feedback register?
• Does the product still align with your business' strategic objectives?
• Have any other opportunities come to light that should be exploited?    

6. Rollout

If the pilot is deemed to be successful, a full roll-out of the product across the entire market will follow. The roll-out phase involves full commercialisation of the product - the beginning of full production and commercial launch. 

Any opportunities or modifications identified in the pilot phase will need to be addressed before the formal launch. Scaling up to full production of the product and execution of the sales and marketing plan represents a project which will need to be formally managed. The methodology used in the development phase can be replicated here and the deliverables updated to reflect the changes.

Products presented for rollout should have clearly identifiable:

• cost base
• revenue stream
• profit contribution
• marketing plan
• product strategy
• supporting processes

If a product presented for rollout does not include these elements it reduces its chances of success.

Once a product has reached the rollout phase, this is the end of the product development process.

Where to go for help

Do it yourself

Professional advice on accessing R&D grants, export grants  and the R&D tax Concession/Credit system.   

Ph: 02 9797 1777  Email: aiserv@bigpond.net.au Website: www.australianindustryservices.com.au

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