From idea to product – make it easy on yourself

Growth emerges from small beginningsIn 1996 McDonald’s introduced its more sophisticated Arch Deluxe burger which was marketed as a “burger with grown-up taste”. The burger came with peppercorn bacon, served on a potato flour sesame seed bun, with lettuce, onion, tomato, cheese and a secret mustard and mayonnaise sauce.

The $100 million ad campaign flopped. Why? Most people go to McDonald’s for a quick bite – a tummy filler. They don’t see McDonalds as a purveyor of gourmet meals.

Examples like this go on and on. Many large companies have suffered new product failures – just think of Apple, Pepsi, Coke and the motor vehicle companies.

New product failure rates are estimated by researchers to be at about 25%. One study showed that one in three products succeed at launch. On average a successful new product required 3000 raw ideas, which would result in 100 projects subsequently honed down to 10 well-developed projects and of these two fully fledged product launches were introduced with only one successful product.

If these are some of the scary statistics from researchers, what are the chances of the smaller business person being successful with far fewer resources? Some small business owners who have introduced successful products on the Internet reckon that 5% of the product ideas that they’ve come up with have been successful.

Failure rates are rising because of ever-increasing expectations from consumers and business, increased competition and the need to make higher financial returns. Entrepreneur’s and small businesses need to increase the chances of creating a winner in the marketplace through a detailed knowledge of new product development and commercialisation.

In this post we can only cover the often overlooked (but sometimes obvious) things that make or break turning an idea or concept into a winning product.

An important question to ask upfront is: “Who is the customer?” Does a marketing exist for the product and, if so, in what form?

It is far riskier to introduce a totally new product where nothing similar exists. Savvy entrepreneurs look for a gap in an existing product market and find out where they can enter the new product idea in terms of purchase price, delivery, use, add-ons to existing products as well as helping customers to maintain, for example, the important transactions such as small business banking, e-mailing lists and databases. Essentially, entrepreneurs need to find out how their product can create value for customers far superior to that which is presently offered on the market.

Very important for deciding to enter a market is the question, “Will anyone pay for what we offer?” It is critical to make money on your new product as obvious as it seems. If a product is too expensive because of the manufacturing costs, the market may just be too small. Unless, of course, you can come up with a different pricing model such as monthly rental, leasing, timeshare, or even equity payments. Lower-priced products provide access to a larger market with much higher volumes.

Although solo entrepreneurs would wish to launch products by themselves it may pay to ask the question “Who can we partner with?” To launch a new product may require capabilities that the entrepreneur presently lacks and may need to overcome through partnering which could provide more cost-effective manufacturing, distribution and advertising.

Another important question is “How big and fast as the market growing?” Knowing the life cycle of a market as well as lifestyle and business trends is important because it gives one an opportunity to assess the risks and rewards involved. Health foods, for example, is an ever expanding market because of 21st-century health-related problems including stress and unhealthy eating. Within the health category it pays to identify overlooked niche markets that are early in their growth cycle and have the potential to expand.

Feasibility testing for new products enables entrepreneurs to quickly decide whether to go ahead with their new product or service, refine it or abandon it and look for something that stands a greater chance of being a success.

Low-cost testing can be done with relative speed by showing your business idea to people whose opinions are valuable such as prospective customers, employees and business partners. But remember that you need to get overwhelmingly positive feedback, so much so that people want to buy it right away, otherwise you might just be barking up the wrong tree. An important point here is that be careful in showing potential customers an early, flawed design that may give them the wrong impression.

A very important question is, “How much money do I have available to invest in my new product idea?” Entrepreneurs and small companies may need to rely on friends, family, company cash flow and even grant schemes to take their ideas to market. Early investments are often too risky for most people until the new business concept has been proven and its commercial value has been established. Investment from outsiders often requires equity and entrepreneurs are quite rightly loath to give away ownership. Early-stage investment should come with an exit strategy for initial funders.

New product ideas need a clear commercialisation roadmap that also defines the owners relevant exit strategy such as patent sale, stock market flotation, licensing or acquisition. In certain instances if the entrepreneur lacks the resources to commercialise the product, these may be more realistic options.

These are some of the more important considerations in making product commercialisation more successful. It’s one of the toughest challenges for solo innovators as well as large companies. Each decision point or gate — generating new product ideas, developing a business model, designing and developing the product and commercial exploitation — requires careful evaluation before proceeding to the next stage.

We’ve given you a quick overview of some of the important questions to ask yourself whatever product or service you intend coming up with. Make sure you refer to it when you wake up in the middle of the night with that “ah-ha” idea that you may think is better than the invention of the lottery.

 

Stay inspired

Chesney Bradshaw

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Do you want to come up with new business ideas? Choose Idea Accelerator for practical, hands-on advice without the myths and half-truths.

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