Product Development Law and Legal Definition

Product development may be understood generically as all the things that happen from the initial conception or invention of a product to the point when a product is launched into the market. It can also be understood as a method, a discipline, and a formal process followed by a company as it does the same thing. In the modern business literature, the authors typically mean the latter, a "corporate process," and they are typically talking about the undertakings of large corporations in which equally massive teams are involved. As a formalized process with distinct aspects, product development can be disassembled for analysis, discussion, and comment. In actual experience, and especially in the small business environment, product development tends to be many other things; the process is likely to be more creative and hence also chaotic; the activity may be carried by a single individual or a small team. Small businesses rarely have new product managers or departments, and this activity is closer to invention than to engineering and more likely to be led by a charismatic figure—Thomas Edison comes to mind in technical invention or Gabrielle "Coco" Chanel in fashion design.

CONTEXT AND HISTORY

Product development is closely tied to creativity, invention, and insight—and follows the flash of an idea. Thus what we nowadays call a knife was the consequence of some prehistoric human's insight that a flat stone with one sharp edge could cut: the rest was product development.

According to Michael McGrath (in Next Generation Product Development) conscious focus on the development process began late in the 19th century. McGrath divides the time since then into "generations" of product development emphasis. In the first, ending in the 1950s, the focus was on commercialization of inventions; in the second, formalization of product development as a process began, and this emphasis lasted until the 1980s. In the third "generation" of product development, corporate management focused on getting product to market faster. In the 21st century, according to McGrath, emphasis had shifted to R&D-based development.

McGrath, of course, was talking about trends and emphases as taking place in big-corporation culture and as illustrated by waves of products reaching the market—the vast majority of which were modified or adapted products rather than radical inventions. But the most dramatic and revolutionary product introduction of the latter-half of the 20th century did not obey the rules. It was the personal computer, slapped together by an inspired technical man, Steve Wozniak, and sold by a visionary entrepreneur, Steve Jobs. The product was the Apple computer, and the product development process consisted of the two Steves agonizing together in a garage. They didn't even intend to sell computers—just mother boards. They "evolved" the product by trial and error.

The many other inventions that burst on the market as the U.S. and then the world embraced small computers again illustrated (if proof was needed) the unruly nature of the creative process. It cannot be reduced to a recipe, algorithm, or bureaucratic procedure. All types of approaches to product development continue to exist side-by-side. As in gambling, no "system" guarantees success.

BASIC ELEMENTS

Product development is an iterative fusion of different disciplines in order to meet a specific goal. The disciplines are design, engineering, manufacturing, distribution, market positioning, marketing, distribution, and sales. A company developing a product must envision every stage of the process from the final perspective, that of the ultimate buyer, backward, and then from the design forward. Thus the process can readily become repetitive.

For example, initial estimates are made using prototypes; the prototypes are used to envision manufacturing processes and to establish a price range based on estimated production cost. But exposure of the prototypes to customers may elicit suggestions for improvement and negative reactions to features; sometimes suggestions come from dealers or retailers. Market research will often unearth reactions to competing products—or even their unsuspected presence. After this early exposure, flaws must be removed, advantages exploited, competitive challenges met. Redesign, reengineering, and new production estimates may be required. Iteration can also come later as problems are encountered. Some element of the product may be too costly to produce and the problem can only be overcome by changing the product. If the change is substantial enough, talking to customers becomes necessary again.

How much iteration is sensible? The answer depends on the ultimate size of the market and the projected product life. The resources of the company are also an issue. Most small businesses can only afford limited market research. The natural substitute is to consult the intuitive reactions of family and friends—in effect to use a much smaller sample than a global company would.

Product development is typically led by a product manager assisted by a small team representing basic specialties: engineering, manufacturing, marketing, and finance. It is the responsibility of the team to interact effectively with their counterpart in the company in order to obtain services, estimates, and feedback.

PLANNING VERSUS CREATIVITY

In product development, there tends to be a see-saw movement between formality and process and openness and innovation. This is illustrated by comments from two books on the subject. The first comes from a book by Edward K. Bower entitled Specification-Driven Product Development. Bower said: "Small companies typically conduct their development programs in an informal, hit-or-miss fashion, intuitively managing the process on a day-by-day basis. After agreement has been reached on the general nature of the desired new product, its design begins. The detailed features of the product evolve as side effects of implementation decisions. As market considerations are discovered, changes are made to the product's goals, leading to redesign. This unpredictable process leads to schedule and budget overruns, and produces products whose structure wasn't coherently planned, but evolved as requirements changed."

The second comments come from David M. Anderson's book, Design for Manufacturability & Concurrent Engineering. Anderson wrote: "For creative product development, start with a creative, open-minded, receptive team that is stimulated by the challenge. The team should be diverse in knowledge as well as cultural and thinking styles. The team should be fired up…. Creativity is enhanced when people really want to invent something…. Do not start creative product development discussing administrative issues…. This will immediately stifle creativity and shift attention to meeting deadlines and budgets."

The two quotes, although seemingly emphasizing opposite tendencies, actually both quite accurately highlight important aspects of product development. It requires the right mix of disciplined implementation and yet adaptive openness. Existing systems must be used to create a new product. This must happen as rapidly and as inexpensively as possible. Concentrated attention to process and detail and openness to possibilities are both necessary for success.

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. Nonetheless, analysts point to several factors fairly universal in determining whether a business will enjoy measurable success in new product development efforts. These include comprehensive market and cost analysis, top management commitment, enthusiasm among workers, clear lines of authority, and past experience. Concentration, funding, and leadership are key legs that hold up the structure.

Concentration. 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. Growing companies are easily tempted to do too many things at once and finish none. Companies needing diversification are tempted to repeat the customary and therefore never establish that "second front" they need. Concentration on the goal will help keep the focus clearly on a well-thought out plan.

Funding. 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. Sometimes "funding" takes the form of assigning a highly talented person who knows the company well to the "new venture" though he or she will be sorely missed in his or her leadership position.

Leadership. The third and final pillar for building new products 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 product—economic factors, performance requirements, regulatory issues, management issues, and more—and create a winning new product.

The product champion has to guide the project through a predetermined series of viability tests—checkpoints 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 difference—he 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 he or she is getting better treatment, or more service options, or more "free" services as part of his or her purchase, he or she is 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 thing—price—when 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 there 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 pre-established 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.

SEE ALSO Prototypes

BIBLIOGRAPHY

Anderson, David M. Design for Manufacturability & Concurrent Engineering. CIM Press, 2004.

Bower, Edward K. Specification-Driven Product Development. iUniverse, 2003.

Brandt, John R. "Our New-Product Plan: Keep Out: Involving customers and others is a pain. So is worrying about manufacturability and marketing." Industry Week. January 2006.

Kanellos, Michael. "The 64-bit Question: Why is no one buying?" Computer Shopper. May 2006.

McGrath, Michael. Next Generation Product Development. McGraw-Hill, 2004.

Teresko, John. "New Products Faster." Industry Week. January 2004.

"Who's Who: The Eco-Guide." Time. Summer 2006.

"The World's Most Innovative Companies: Their creativity goes beyond products to rewiring themselves." Business Week. 24 April 2006.

                              Hillstrom, Northern Lights

                               updated by Magee, ECDI