Rick Meekins is the Managing Partner at Aepiphanni, a Business Consultancy, an Atlanta, GA based small business consultancy that provides Management Consulting, Implementation and Managed Services to business leaders and entrepreneurs seeking to improve or expand operations.
Product Development – Follow the Plate
How a good product development process can save you time, productivity and money
Over the past 10 years, nearly all of our clients have been entrepreneurs – people who spotted needs in the marketplace and built companies to meet those needs. So, by nature, we all – myself included – constantly think of new ways to sell more stuff – products or services. Based on experience, my guess would be those in the restaurant industry that run their own stores or have the flexibility to be creative must be masterful at this due to the need to come up with some new menu items that will sell nearly every day.
If you think about it, restaurateurs have to be good at this or they subject themselves to losing a lot of money, quickly. When they commit to a special, they are immediately investing ingredients and time into the development of the menu item without necessarily being able to get the investment back. So while the cost of a plate might be 1/4 – 1/3rd of the price of the product (raw goods) the time associated with developing the item adds additional costs.
So what makes for good product development?
Starting with the end in mind, a good product development process will help you identify opportunities and pitfalls in your new product. In short, you will know the following about your new (proposed) product:
- It sells for a profit – including time and contribution to operating expenses. Sometimes, when we price items, we only look at the cost of the raw goods, or we use a simple formula and go from there. While in some places, this will work consistently, but the question begs to be asked – are you leaving money on the table? Alternatively, are you charging enough to cover all of the expenses? There is a time investment in product development and testing, more so than you would have associated with your production offerings.
- It will give you advantage – products that can easily be duplicated have a limited shelf life. Period. Your advantage will be slim and short-lived. Following what everyone else is doing will not give you advantage; you might be able to keep up, which may feel good, but again, there is no advantage. It would be like starting a yellow cab business in New York. Products that will give you advantage are those that the market sees as being desirable, will easily be identified as associated with your brand, are not easily duplicated and practical enough so that your target market can easily adopt or consume it.
- It is marketable – the coolest invention in the world that has no market is essentially the realization of a hallucination. Kind of like aluminum foil hats to keep aliens from reading your mind. (Do take into consideration that Per Rocks and Stars have sold like hotcakes!) The extension of this is that you can sell it at a price people are willing to pay, it meets people’s expectations for what they think the product should do, it can be promoted in a way to get people to take action and people would be able to access whatever necessary means required to purchase it.
- It meets some need – even if people don’t realize they have a need – like a portable computer that doubles as a universal communication device – or it’s companion watch that seems to do everything in world except teleportation, although I understand that is under development.
- It is worth developing. Sometimes, the litmus test of “even though I can doesn’t mean I should” is simple enough litmus test. Can you make deep fried butter? Should you? No comment.
Rules of Thumb
The process for product development can be very long and take a great deal of commitment and resources to make sure that you have gotten it right. Of course, without saying, the reward should fit the work. Rules of thumb:
- The cost of product development shouldn’t be greater than the potential for revenue from it.
- Take into consideration the shelf-life of the product – including the amount of time it would take for another firm to compete directly or indirectly with your very cool product. If it is a great idea, inevitably, someone will copy it, with or without your permission.
- Don’t necessarily shoot for the bleachers the first time at bat. While we often assume the market is going to buy what we create and we, of course, know that the market needs it more than they do, for whatever reason, they don’t know what is good for them and we have to augment our offering to suit their needs.
- Have a product map. With the above point (don’t shoot for the bleachers) have an idea of how you will sell, test and improve the product over time, ideally in a short time. Moving slowly or without a plan may cause you to miss out on opportunity
- Make sure you have the money or a plan to get the money for continued development. Running out of money is…well, you know.
- Know that every product – most products (services) – aren’t home runs – some because they fail going through the product development process, e.g., the anticipated market doesn’t exist for the product. Other times, they fail in the marketplace because of some external forces such as developments in technology, changes in the economy, etc. This is the risk associated with your product that you should be aware of.
- The pricing strategy for your product should take supply and demand for the product into consideration. A hugely popular product can demand a higher cost than a commodity product and everything in between.
- In product development, think about every step of the product; how will you market it…how you will handle product improvement, complaints, add-on offerings, upsells, follow-ups, managing growth, etc..
Your company is known by the products it sells. Your company’s reputation is built on what it sells and how it does what it does. If you are in the restaurant business, you are familiar with the idea that you are only as good as the last plate served. If you are in other service industries, you know you are only as good as the results you get for your customers. Many times, there is no second change without significant push to make things right. In either case, getting your products right the first time will save you time, money and grief in the end.
Rick Meekins is the Managing Consultant at Aepiphanni, a Business Consultancy that provides Management Consulting, Implementation and Managed Services to business leaders and entrepreneurs seeking to improve or expand operations. We are the trusted advisor to those seeking forward-thinking operational and strategic solutions to help them plan for and navigate through the challenges of business growth.
If you are ready to discuss how Aepiphanni can help you with business strategy, overcoming challenges to growth or any number of business solutions for your business, whether a small, growing or established company, contact us directly or submit a request for a complimentary Coffee & a Consult to learn how we can help you CREATE | DESIGN | BUILD an Extraordinary company.