Launching a product has never been easier…or is it?
Karl R. LaPan, President & CEO, The NIIC
So, you have an excellent idea for a new product? Exciting times are ahead, no doubt. However, you also have your work cut out for you to take yours from concept to reality. Today, there is a strong emphasis on speed to market, reducing development times and commercializing in ways that are faster, cheaper, better, and smarter. Despite what contemporary models show and say, commercialization is not always a linear and straightforward process.
Learn from the most seasoned entrepreneurs and be prepared to launch, taking into account these three key challenges:
Developing a product requires the expertise of all types and the scope and scale of the work will vary according to the technical complexity. For example, creating a new hardware product will likely require a small team of product developers. Unless you are are the one in five early-stage companies likely to obtain any outside investment, many startups outsource their initial R&D or contract moonlighting workers to complete their first product concepts.
The good news? The gig economy means that freelancers are a valuable resource that innovators of the past did not have at their disposal. The growing base of contract workers will no doubt be a boon to startups. Bureau of Labor statistics on the gig economy shows continued growth from 55 million contingent workers in 2017 to 57 million gig workers in the US economy, amounting to a staggering 36% of all US workers.
Implementing market feedback
The buzz today is customer discovery and validation. The idea is to get out of the product development lab and into real-time customer feedback and to integrate the learnings quickly and seamlessly in the product development process. Many business builders are not receptive to customer feedback and fight the input every step of the product development cycle. Remember, the idea is to solve someone else’s problem or pain, not your own.
Target market feedback can be golden when incorporated into the product. However, it can be a time and resource-intensive process. The software can allow you to release a simple version quickly (minimum viable product), gather feedback, and integrate it into the next version.
Still, the fact remains that it’s nearly impossible to know what consumers want to buy until you have a viable product. However, physical products require a considerable investment of time and effort in navigating the complexities of developing, prototyping, pre-producing, and manufacturing the product before you can gather substantive market and use-case feedback.
One workaround is to sell the product before you make it. That might mean pre-selling the product on your website or running a crowdfunding campaign. Both of these strategies will require brand recognition and an interested audience (many of whom are first to try new and innovative things), so start building a following now and follow the best practices rubric for how to make your crowdfunding efforts worthwhile.
Many people that talk about producing a product want to build their manufacturing plants. Given the capital intensity, the sizable investment, the unlikely ability to reach scale, most business builders should look at contract manufacturing to meet their needs and redirect their limited cash to other aspects of their product’s value chain.
Once manufacturing is live, cash flow can be a real challenge. Many factors are at play – redesigning the product for manufacturability, paying the production in advance, having to order a minimum quantity of the product and have inventory on hand, and navigating the working capital challenges of getting paid 30-90 days after shipment. All of these factors put pressure and strain on the business builder. Some business builders have been successful at getting attractive payment terms (especially if they have pre-existing relationships in the industry) and others have relied upon factoring or angel investors to provide the funding to navigate the difficulties of the working capital cycle. Please don’t underestimate how much time it might take to build a credible distribution and supply chain for your product.
There are high failure rates for new products. We see the successes but not always the failures. Remember, the Microsoft Zune? I bet not! Microsoft lost nearly $290 Million on it and sold just over 2 million of them. Apple sold over 300 million iPods.
If you have successfully launched a physical product, what lessons have left a mark on you? What would you do differently if you could start over?