NEW PRODUCT DEVELOPMENT FOR SMALL COMPANIES

As business experts, analysts, executives, and entrepreneurs all know, there is no one way to organize a company for effective new product development. As Gruenwald noted, the ultimate methodology that is chosen "depends on the nature of the corporation and its goals. It depends on the existing structural order of things. It depends on the corporation's management style. It depends on the caliber, motivations, and growth potential of the staff in place at the time of installing the new products organization. It depends on past performance by organizations charged with the responsibility. It depends on the orientation of the corporation, if this is not to change. (Are the present strengths or weaknesses centered in certain areas?)." Nonetheless, analysts point to several factors that are fairly universal in determining whether a business will enjoy measurable success in new product development efforts. These include fundamentals like comprehensive market and cost analysis, support from top management, enthusiasm among workers, clear lines of authority, and past experience. Other qualities cited by marketing expert Kim Clark in Industry Week included focus, adequate resources, and leadership: Focus . First, a small business needs to focus on its goals. Limited time and resources mean that hard decisions must be made and a strategic plan needs to be developed. Companies should "do the right things right" by using the best information available to choose the right technologies and decide on what new products to invest in. Small companies are often growing quickly and can pick and choose among many seemingly strong new product avenues, but the key is to decide what the company does very well and then concentrate on that area or areas. Selecting the right focus can be a balancing act, however. A company needs to keep both short-term and long-term success in sight and needs to weigh rapid cash generation versus growth, business life cycles, and technology and market capabilities. All of these factors must come into play, and the risks associated with each must always be considered.

Clark notes that one way a company can stay focused is to develop a "product-line architecture." Once a company creates its overall strategy and determines how it will reach its goal, it should map out exactly what product lines it will choose to achieve that goal. "Product-line architecture tells you how your product line will look, what types of products you will have in what markets, how they will be positioned, and in what sequence they will be introduced." Defining a product-line architecture demands that correct decisions be made early in the product development process. Companies should be rigorous and quantitative when coming up with new product specifications or definitions. They should, as much as is possible, precisely define the product qualities and price points that a market will bear. Mistakes made early in the process will often not show up until it is far too lateeither at the prototype or final product stage. Customer feedback is essential at this stage and can eliminate mistakes in focus. As one executive told Industry Week , companies should ask themselves a series of questions when creating a new product-line vision: "How would someone use this product? How would you articulate the benefit to the customer? Is this something a customer can really understand [as to] how it makes their life easier?" Find the Resources . Another key to new product development for small businesses is to secure the resources and skills needed to create and market the new product. Small companies may lack the in-house resources needed to create a new product, making it seem out of reach, but analysts note that small business owners have other avenues that they can often pursue. If the product idea is good enough, the company may decide to look outside its own walls for partnership and outsourcing opportunities. "When the need is not within the capability of your company," states Gruenwald, "but beneficial arrangements can be made with other companies to joint-venture, contract-supply, license/acquire, or, in rare instances, to merge. Pools of expertise can also be acquired byrecruiting within the subject industry and by the use of technical and marketing consultants." One key to resource management is to not undertake too many projects at one time. Every company has a finite amount of resources to allocate to new product

development, but small businesses often face especially tight budgets in this regard. And budget in this instance doesn't just mean moneyit also means time. Too many projects means otherwise talented workers can't spend enough time on any one project, and as a result, all projects suffer and fall off schedule, leaving gaping openings for competitors or causing market windows to close. Leadership . The third and final step a small company needs to follow is to find the leadership needed to bring a new product from the idea stage to completed product. This leader will often take the form of a "product champion" who can bring both expertise and enthusiasm to the project. (In small business environments, this product champion will often be the entrepreneur/owner himself.) A strong product champion will be able to balance all the issues associated with a producteconomic factors, performance requirements, regulatory issues, management issues, and moreand create a winning new product. The product champion has to guide the project through a predetermined series of viability testscheckpoints in the development process at which a company evaluates a new product to determine if the product should proceed to the next development stage. If it is determined that the market has shifted, or technology has changed, or the project has become too expensive, then the product must be killed, no matter how much money has already been poured into it. This is where a strong product champion makes the differencehe or she has to have the honesty and authority to make the call to kill the product and convey the reasons for that decision to the product development team. If goals were clearly defined, resources properly allocated, and leadership was strong, then the decision to kill a project should not be a difficult one.

LAUNCHING A NEW PRODUCT

Once the product-line architecture has been established and a new product is being developed, it is time for a company to think about how to successfully launch the product in its target market. This is the stage where an advertising or public relations agency can come into play, especially for small businesses without the internal resources to handle such a job themselves. When using an outside agency to launch a product, a company should:

Have a well-defined product concept (which is where product-line architecture comes into play). Provide the agency with background information on its products and goals. Conduct necessary patent research, applying for new patents as needed. Have the manufacturing process in place and ready to go, either internally or via outsourcing. Have a formal business plan in place that defines funding of the project. Determine who will approve the marketing or advertising plan that the agency creates (the fewer people communicating with the agency, the better). Determine the proper timing for the launch.

SPEED-TO-MARKET AND PRODUCT DEVELOPMENT

In today's technology-fueled business environment, the always-important speed to market factor has become perhaps the most critical factor in new product development. Today, however, speed to market is perhaps the most crucial part of product development. Improved communication (especially the Internet), increased globalization, and rapid changes in technology have put tremendous pressure on companies to get their product to market first. To improve speed to market, a company should first make sure that it is making the best possible use of available technology. If it is, then there are other steps that can be taken to speed product development through efficient, market-oriented product planning that takes the customer into account:

SERVICE COMPANIES AND NEW PRODUCTS

Service companies should take a disciplined, analytical approach to developing new services, relying on targeted customer input just as companies outside the service sector do. Companies in the service industry know that they are competing for customers based on perceived value as much as actual price. If a customer feels they are getting better treatment, or more service options, or more "free" services as part of their purchase, they are more likely to remain a client of that company. If, however, a company stops innovating and adding new services to its core business, then the service becomes a commodity and clients look at only one thingpricewhen deciding on what company to choose.

Service companies should routinely ask themselves a series of questions:

Could current services be presented in a different way? Could they be offered to new customer groups? Are their little things that can be tweaked to freshen or update a service? Could services be improved or changed?

Because by their very nature services are easy to copy (no materials or product knowledge is needed), service companies actually face more pressure to innovate and develop new products than manufacturers. By continually asking the above questions and by following the same models manufacturing companies follow when pursuing product development, service companies can stay ahead of their competitors and make their services clearly identifiable to consumers.

PITFALLS TO PRODUCT DEVELOPMENT

Finally, when embarking on the product development process, try to remember in advance what the obstacles to success are. These pitfalls are many and varied, and can include:

Inadequate market analysis. Inadequate cost analysis. Strong competitor reaction. Undue infatuation with your company's own technology and expertise. Overreaching to make products beyond your company's financial and knowledge grasp. Technical staff too attached to a project and too proud to admit defeat, even when a project can not be justified according to preestablished criteria. Problems with patent, license, or copyright issues. No real criteria for deciding if a project is good or bad. Changes in strategy at the corporate level are not conveyed to the product development team. Low product awareness. Money and staff allocated to a project are hidden in the budget of another project.

Company decision-makers blinded by the charisma or charm of the person presenting the new product idea. Project accepted on the basis of who gets it first.

FURTHER READING:
Berenson, Conrad, and Iris Mohr-Jackson. "Product Rejuvenation:A Less Risky Alternative to Product Innovation." Business Horizons. November/December 1994. De Young, Garrett. "Listen, Then Design." Industry Week. Feb. 17, 1997. Engineering Stages of New Product Development. National Society of Professional Engineers, 1990. Gruenwald, George. New Product Development:Responding to Market Demand. NTC Publishing, 1995. Henry, Walter, Michael Mesasco, and Hirokazu Takada. New Product Development and Testing. Lexington Books, 1989. Kinni, Theodore B. "Focus, Leverage, and Leadership." Industry Week. March 28, 1995. Maynard, Roberta. "Launching Your Product." Nation's Business. August 1995. Stevens, Tim. "Balancing Act:Product Development." Industry Week. March 17, 1997.

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