Product Development

It is Good Business

Products, much like people, have life cycles and evolve through four primary stages including introduction, growth, maturity and decline.

A closely managed product offering often employs a detailed product lifecycle (PLC) management strategy. The goals of PLC management are to reduce time to market, improve product quality, reduce prototyping costs, identify potential sales opportunities and revenue contributions, and reduce environmental impacts at end-of-life. Also, to create successful new products companies must understand its customers, markets and competitors.

Product Lifestyle and Price

As touched on prior, price of a product upon launch can often be a premium, bringing much profit and ROI, especially if it is an innovative product that is highly desirable.  As the product moves into growth stage and becomes more commonplace, the price will begin to settle and may or may not level.   If one or more competitors emerge in the maturity and growth stages, it will most likely drive price down during this phase, as secondary competitors enter the market with lower pricing.  In the decline phase, often either over saturated market or declining consumer demand dynamics will significantly drive pricing down to the lowest point in the product lifecycle.

This example uncovers several points:

• New products typically bring high price points.
• Innovation can drive price points and increase profit and ROI.
• As products mature and the market becomes saturated, prices erode.

At the end of a product lifecycle a company can either let a product die a slow miserable death or it can decide to build into their lifecycle a rebirthing of sorts: breathing new life into their products.  Rebirthing can be done through small but impactful modifications and improvements or by re-launching new versions of their product.  Companies need to plan innovation and new product development into their life cycles and to maintain an overall healthy margin average within their portfolio.  Best of all, is when new and innovative products are launched regularly, bringing the strongest and long lasting benefits to an organization.

Balancing the product portfolio

Companies that are sensitive to the impact that the PLC has on revenue, will perpetually invest in multiple products so there are multiple products at various stages in the revenue cycle.  This strategy incorporates a balanced product portfolio approach, which includes some products within each stage, inherently brings healthy margins, stable production and market differentiation. Much like a balanced financial portfolio, a balanced product portfolio brings a healthy combination such as:

• High margin, climbing volume, high cost products.
• Moderate margin, high volume, moderate cost products.
• Declining margin, declining volume, low cost products.

Companies committed to PLC management

There is a right and a wrong way to manage products, and, if done properly, can bring significant benefits including revenue opportunity, market share increases and growth to an organization. But, what is the “right” way to manage a product?

Ultimately the ideal targets for Novation Industries are companies committed to effective PLC, to developing a balanced product portfolio and to investing in product re-births or new product births. And, when a priority of innovation is brought into the mix, a company will inherently build market share, generate profit and healthy margins and build strong, sustainable companies. 

Definition:  Product life-cycle management (or PLCM) is the succession of strategies used by business management as a product goes through its life-cycle.

PRODUCT DEVELOPMENT PROCESS

Manufacturers, master distributors and product marketers are constantly faced with pressures to develop new products, get them to market faster and promote and sell them effectively. This is all being done with tighter margins, global competitive pressures and a more demanding consumer and customer base. 

Effective product development is the key to combating these pressures and being successful in new product development and launch. The product development process is a series of development steps that is required before a product enters into the introductory phase of its lifecycle. 

• Idea generation  – ideas for new products obtained from basic research, market and consumer trends, company’s R&D department, competitors, focus groups, employees, and salespeople.
• Idea screening – identify sound ideas and eliminate the unsound – demand, price, profit, sales opportunities are considered.
• Concept development and testing – develop the features list, marketing approach.
• Business analysis – pricing, positioning, volume, production capabilities
• Beta testing and market testing – design, engineering, prototype, testing and validation.
• Product development – manufacturing engineering, production.
• Commercialization – launch, promote, distribute, sell.

Once a product has passed the first four bullet points above, it enters the technical stages, bullet point 5 and 6 and these steps can be accomplished in a number of different ways to achieve an outcome.  Some approaches are more effective than others. 

As we mentioned earlier, fragmented development can lead to cost and quality issues, whereby integration and defragmentation, brings significant benefits.  The more that the development process is blended and integrated, the more benefits of efficiency, innovation, product reliability, product efficiency – become apparent.