I have launched 13 new electronic products from scratch, with a record of 8-2-3, assuming a 2:1 payback as a success.
To be successful, a product must do more than break even. It must also cover investments in any products your company introduces that are not successful. Or your company goes under (duh). More on this below.
I have also twice managed what were, in essence, groups that were new product factories. These groups were chartered to trot out ideas for new electronic products, with the vision of expanding our company organically. Many of these product concepts got through the wickets and were developed, some were very successful, selling for 10 years or more. The two groups of engineers I managed each accepted a goal to launch one new product a year, and they pretty much met their goals every year.
Once I personally tried to launch three new, different electronic products in a year. I do not recommend this. It was very hard on my mental and physical health. My brother pointed out that I should probably hire people, to act as amplifiers of my methods in product development. Based on his advice, I accepted a position leading others to launch new products. Best decision I ever made. Did it twice, as mentioned above. Thanks, bro.
Below are rules I developed to score the viability of a product. If all the bases below were covered, I knew the product would probably be successful through development, and meet the Return on Investment (ROI) goals.
First, a definition of the word, PRODUCT. A product is something that is to be purchased, as is, by more than one customer. This allows the development cost to be spread across a larger number of sales than a bespoke effort. There may some customization for each customer, even if it is just the packaging or a label (the ability to configure a product should be designed in at the start). A product could be a device, a service, or a collection of information such as a drawing package or intellectual property.
A Capability can be a Product. The product may be the ability to produce a type of custom design to meet certain requirements (such as a video surveillance system - certainly, no two are alike). The custom design business has "products", which are marketed as capabilities. Product development may result in a demonstration item that qualifies your company to bid on proposals that use the technology, methods, or certifications. Perhaps no one buys exactly the configuration that is qualified, but it is necessary and useful to enable successful award of contracts. The core technology and knowledge base will be applied to the contracts that are won. The qualification of a prototype shows that you understand and can execute on a similar program for your potential customers.
An idea is not a product. Ideas are free. You can look here for some of mine waiting for execution. Feel free to pursue them. Dragging ideas into reality is what creates a product.
Example: A robot that can scoot under a car and look for bombs is an idea. To be a product, this robot needs a practical implementation, qualification, customers that recognize it's value, a sales channel, reasonable and predictable cost and price, return on investment plan, etc. All the decisions that make something useful have to be integrated into a complete package. If there is some element missing, it will be a stumbling block, that will eventually need to be addressed, or the product will not be successful.
Below are the areas you must address to launch a successful product. Here is a score sheet which contains the factors described below, if you would like to grade your own product idea. On a small product, you may handle many of these yourself. For something larger, you will have to develop partners, subs, or reports to handle most of the areas. This is a big help in figuring out what research to do, and what to delegate. Do the weighting first.
An interesting exercise is to take products currently in development, to see how they do against this scoring method. Then you can evaluate the product as it goes forward, to see whether this method works for you, or needs to be modified or weighted for your particular situation. My experience is with high technology electronic products, sold to demanding customers. Product development for a new type of tiki torch would likely have a different profile.
I found that successful products were well balanced. Those that were initiated, but never achieved escape velocity were were usually strong in a few areas, but very weak or neglected in the others. Great strengths don't compensate for glaring weaknesses. It is better to have good balance. Cover all the bases below, and you will have a good chance of success.
Checklist for Launching a Product
A legitimate technical edge is required, or you will not be able to hold the market. You must also have a base to exploit a success.
A lot of business plans try to make themselves attractive by requiring very little investment. But if you only put $30k into solving a problem, then your competitors can enter the same market very easily. This is why most successful products build on the experience of a previous technology base. Either we leverage technology we have, or expect to spend a chunk of change. The goal is to create a hurdle for your competitors.
If you can find a technology your company has invested in, and repurpose it, you can establish this hurdle for your competitors. That will give you a real edge at introduction.
To have a technical edge, a product will probably be in one of two categories:
1. An extension of a corporate strength – an improvement that takes advantage of the investments and capabilities of the company to date, or
2. A disruptive approach or technology, that addresses a new range of customers or enables something that was not thought practical previously.
Be sure you know which one you are counting on.
You can launch products without a technical advantage, it is done all the time. Look at laptop computers, compact cars. But success will be much more difficult, more random, and depend on other strengths. The technical performance of your product must be at least adequate and well defined.
You need corporate to be interested enough to be listening and taking action, but not involved enough to be talking and directing the action - unless corporate contains truly gifted product development people, which is very, very rare. Most corporate leadership comes from finance, or operations background, not development. And most corporate officers know they are not development types. At least the good ones do.
What is needed is a Sponsor – someone who can represent your product at the at the places you cannot go. A sponsor is someone who will attend higher level meetings, and check to see if your product is being discussed, insert it into solution discussions. They will also bring back to you what the board, or whatever makes the decision about going ahead, thinks is missing, or what timing to use, etc. They can also use connections to snare some more stakeholders.
Sponsors are often external - Senators, Military Officers, Hospital Directors, high ranking or well regarded customer representatives. All of my successful products had a good sponsor. One time it was even a private contractor, who was well thought of by the customer base.
Note for PMBoK People: PMBoK defines a "sponsor" as the person or organization that provides the funding, which is different than the way I am using the word here. PMBoK starts after the product launch process is over, when the new product has been authorized. The PMBoK Sponsor is the ultimate funding source.
The Sponsors I have worked with did not authorize funding. They had connections and critical strategic knowledge and vantage points. Guess I'll have to choose a different word. But you know what I mean. A representative at the highest level.
The customer need must be simply stated. This way multiple customers and designers can both be making the same assumptions about the value of the product, and incorporate this into their solutions. If the customer need cannot be clearly defined, it will only get a short way into the process before it is killed.
Research can proceed without a customer need to drive it. However, a product has to address a specific set of needs, defined in the customers terms.
You may need to bring in an expert in doing this, explain to him your idea, and see what he comes up with. This has been hit and miss for me, but sometimes what popped out was much, much more concise than what I went in with.
Someone must do all the “other” things that must be done to launch a product, and address things no one else can or wants to. Hands on person, totally bought in for the whole ride. Who is it? Is it you? Make sure you have the time for it if it is. But there are many people who will get excited and love this sort of detail stuff, and will stay with the product as it winds into production. See if you can line someone up. Exhausting but fulfilling.
If sales and marketing have been instrumental in defining the customers problems to be solved, this is not a problem. However, in many product developments sales and/or marketing do not fully understand the problem that is being solved. If you are applying a developed capability to a new product space, a new marketing and sales capability will have to be developed, too. Your current staff may simply not have the contacts or knowledge of how to develop the leads necessary. I have seen products stall out because sales did not know how to approach customers with the solution.
If your marketing/sales methods is centered around responding to proposal requests for semi-custom installations, they may not understand or want any part of component sales and product development. Or, if you primarily sell components, then marketing and sales of a capability (such as system integration) will be very foreign to your sales staff. Doesn't mean that you can't do it. But a new product may require marketing/sales channel development also.
Example: Your company makes components for Heating/Ventilation/Air Conditioning (HVAC), and sells them to local installers through distributors. But your new product concept is a whole house HVAC system that a typical homeowner can install in a few hours with common tools. Your marketing/sales people have zero experience selling anything directly to anonymous homeowners. This will need to be addressed as part of product development, or the product will grind to a halt.
Talk to the garage door opener people. They know how to do this.
Overdesign is a serious hazard. Underdesign is a serious hazard. Given the value proposition, what should be aimed at?
This requires an outgoing personality, a hard shell, and outrageous persistence. This is usually a mother hen, who agonizes over leaving features out due to their value/complexity. I said “someone” above, the final decision always comes down to an individual. It is well known that committees cannot make these decisions well. This may be the Champion, but many Champions cannot write a good spec, or handle these decisions, which always involve money, time and resources. They will want to do everything, because it would be great. The Sponsor may point you in the right direction and provide useful guidance, but they may not be detailed enough to allow for the creation of a plan. Who tells the champion, "Feature A is attractive, but we haven't found the resources to make it work in time to get it into the final product. We have to go on without it". Heartbreaking, but if this is not done, the product is never defined, and you never finish.
If you do not have this role filled, you will be in danger of “camelizing” the product, that is, turning a racehorse into a camel. It is better to have the right racehorse, which will delight a limited number of customers, than a camel that does everything every customer asks for - and is so expensive and complex that no customer will actually buy it.
Here is a video on the Bradley Fighting Vehicle design, and how it was camelized over many years: Bradley Fighting Vehicle Evolution. The events and personnel are compressed in this video, but it describes the process very well. This is especially prevalent in a peace time military, when the threat is long range, development budgets are reduced, and it is difficult to disqualify requirements.
Regardless of the calculation method, the question remains: “When do we make money on this product?” During the dotcom boom, this was briefly suspended, but eventually someone runs the numbers.
Ask your finance people to help you develop a Net Present Value spreadsheet to evaluate your opportunity based on its Return on Investment (ROI), if your company does not already have one.
I did not include an example here, because I have not found that generic versions of these sheets are very effective. All companies break up the financing of projects and actualization of revenue differently. I can't include actual ones I have used, they contain too much proprietary information. These differences are very important to your bookkeepers. Involve them in defining success. They will tell you the rules if you ask, and are terrific in developing spreadsheets to evaluate approaches.
The physics of the situation however, is classical, and goes like this:
All successful efforts must also cover the cost of any unsuccessful efforts too, or the company will go under. A product that breaks even is not successful, in that it will not allow the development of new products. Lets say 50% of your companies products are successful (this was a commonly accepted hit rate in my business). If it costs $500k to develop a new product, the return on investment must cover your development cost, plus $500k for the unrelated failed attempts. But then the company only breaks even. In a perfect world, the money would be recouped about the time you need to be developing new products. In fact, if it ended up bringing in $2M, you would be able to start another four products, two of which are expected to be hits. And the company expands, organically.
This is a grossly simplified example. Involve your finance people, discover your hurdles in terms of net present value and ROI. A 3X ROI within 3 years is a typical expectation, and a good place to start.
There is also the question of scale. The larger the development effort, the more certain the payback must be. If the company is risking a large part of its development budget, expect to spend quality time verifying the ROI.
Regardless of your enthusiasm and certainty, the people who front the money have to have a good understanding of when they will get their money back. Or they will not do it. If you need to, get help. And if the numbers are lousy, face reality and find a way to fix it.
You will need contribution by other functional departments - Operations, Marketing, Sales, Program Office, etc . Rarely is a successful product developed without contributions by other disciplines. How does this product help them pursue their strategic objectives? I figure there need to be at least two other functional departments involved that can add value and show additional strategic or tactical gains of the product.
How does this product benefit other departments that must contribute for it to be a success, such as Operations? Electrical Design? Software? Program Management? What new capability can we take advantage of using existing teams, to get them excited? Why would Configuration, Quality, Fulfillment be excited? Why would Columbia, Germantown, Southham, Cheltenham, or whoever be excited we are doing this, and how does this support their goals?
An example: Our operations department knew that surface mount electronics construction was the way of the future. However, our capability was all through-hole at the time. The capital costs of switchover to surface mount components would be expensive. They had been studying it for years, but could not justify the risk of doing a program with surface mount. A new product concept required use of surface mount techniques to meet aggressive cost targets. Operations pounced on the the product due to its construction and commercial nature, and came up with concepts that drastically reduced manufacturing costs and were a large part of its selling point and ultimate success.
Many times I have gone to other operational groups to show them how to use an new product effort to pursue a strategic goal of their own. It has usually changed the product, but typically for the better. And the company got stronger as a result.
Many highly motivated individuals I have worked with have had issues with developing internal supporters, because they want the success to be uniquely “theirs”. Eventually, though, they usually grudgingly accepted the fact that other departments could whack off a piece of the problem, solve it, and everybody is better off.
Profile the user, and make up a presentation that will make a typical customer not consider buying anything else for their specific case. Define a terrific solution to their problem that isn't possible without your product.
Example: For one of our new product ideas, a customer had to provide ground support for a variety of equipment, but the customer didn't know the exact mix of the equipment to provide, or the delivery schedule. What to buy? When to buy? Big numbers of units. Huge risk. Warehousing, units they may not have been able to use, etc. So we went back to engineering and inside sales, and solved the problem.
Our sales people then presented that our product could be configured to support all types they were considering. Same price, same mounting and envelope. Mix and match, customer picks the quantity and type one week prior to each shipment. Just in time delivery.
The sales guys said the customer practically picked them up and marched them around the room on their shoulders. A lot of little issues got mowed down after that. It also caused a competitor to withdraw from the market and completely redesign their offering to remain competitive.
On another product, a customer asked if there was a way to avoid requalifying the entire software package after product updates, which were sure to be many and extensive during trials. Although it seemed impossible, we came up with a way to do this. We presented it, and suddenly, we were one of only two qualified bidders (they had to have at least two). Five other competitors were eliminated outright.
I would never try to launch a product without belief that I had something in this category. The IT factor.
You need at least three paying customers. These need to be precise customers, or a specific demographic, with known needs and the ability to obtain the funds to buy the product. Known, in our world, meant independently verified. Having known customers means that at least you will not not sustain a loss. The customers need to each have some weight. One large customer, who calls all the shots, may end up driving you to a product that no one else wants. I have seen many products that "met the spec" fail when launched as a standard product with one large customer. Most large customers (orders of 10,000 units or more) want what they want. There is a crossover quantity where it makes more sense to do a custom contract, rather than do a general product development.
Four active customers was too many. Two seemed to encourage division. Things always got going when there were three real set of needs to pull against each other. I think it has to do with voting. If two users don't need a feature, then it is easier to work this with the third user, or something to that effect.
People who want prototypes to demonstrate a concept to obtain funding are not a paying customer. They are getting ready to approach a paying customer. When you supply prototypes to demo, you are in effect teaming with someone who is launching a product at the next level. You can used these rules set out on this page to check to see whether you think he has a chance. Maybe help knock out a few of the qualifiers.
Verify potential customers that have the same, similar, or compatible priority sets. Even if customers want the same feature set, if one wants a low price and the other wants high reliability, a single product may not be attractive to either of them.