Introduction We have seen many people come up with an idea and then try to make a business out of it. Some people have failed and some of gone incredibly well. What’s the difference between those who succeed and those who fail? Well we can’t tell you that it is the basic idea. We have seen some strange product go well. We have also seen some products that we thought were pretty good do very poorly. Some of the projects that went poorly left people in debt up to $100 000.
Does that mean that it all about the ability to sell a product? Do you have to be able to sell ice to the Eskimos? We don’t think that’s the case either. Every product that went well had a strong, although sometimes surprising, demand. But we often thought that the failed products did too. So what was the difference?
The integrated development strategy The difference we noticed between those who went well and those who didn’t was in the way they developed their products. They didn’t come up with a completed design, start manufacture and then hope that someone would buy their product. Instead, they took a series of steps that were integrated with the rest of their business model development process.
They combined the product development process with their market research, business plan development, and sometimes their financing. This article will document this process so that if you follow it, then you should be able to do the same.
Step 1 Concepts The first step after coming up with the idea is to get a few pictures (or 2D renderings) of different concepts showing how the product might look. You could get this done for less than $1000 if you are prepared to scan the internet for small foreign design houses. They might be foreign, but they still understand the style and fashion of other parts of the world because they can use the internet to quickly research it. The key is to ensure that you communicate as much about the product’s requirements as possible: all the way from style to function. So for the kind of money that you would put on your credit card you will have some product concepts.
Step 2 More market research The next step is to now do some more market research. You should have already done a bit when you bounced your idea off a few people at the start. Now that you have some professional looking product concepts you will be able to get higher quality market data. With these documents you can do three things:
You can speak confidently with people who you plan to work with – distributors and such
You can get a more accurate indication of what people will pay
You can produce a more stimulating and understandable business plan, which can get you funding for the next stage(s)
Speaking with potential partners When you have professional concept drawings you are no longer relying solely on your ability to communicate your idea. You also now have a talking point so that the focus needn’t be on you all the time. This provides two advantages that you should fully exploit:
You don’t feel as stressed about speaking with strangers.
You can ask others for their opinion, and get some very informed feedback.
So take your concepts to possible partners, such as distributors and retailers, and feel confident that you have something serious to talk with them about. When you do talk with them, ask them to look at the concepts and tell you what issues they see and any ideas that they have. Note: People love to give their opinion so you will get plenty of good feedback. Even better, if they have given you some advice on how to improve your product, then people will have a sense of ownership. They will be very interested in seeing you succeed, because it is now partly their idea. Go back to these people as your business gets closer to starting; they will likely help you or want to work with you.
Accurate information on value It is much easier for people to gauge the value of something that they can see. Simply show the concepts to people from the target market and ask them what they would be prepared to pay for it (don’t give them some numbers to choose from; ask them to pick the number). This gives you some excellent data for your market research and your business plan.
The business plan A business plan for a product based business really comes to life when you have professionally drawn concepts included. It makes it clear to the potential investor what you plan on selling. It also makes it easier for the potential investor to understand the value of the product. This will increase your chances of getting further funding for the next stage. Especially if you have included your recent findings on what potential customers would pay. Remember at this time all you need is funding for the next step. This could mean money from friends or angels. It could also mean funding from a venture capitalist, but as an option to have the first right to invest in later stages. There are various ways you could do this. The key is to realise that by this stage the money need not be your own.
Step 3 3D rendering With advances in modern CAD systems it is possible to create near life like 3D images. These, like the concepts in step 1, allow you to better gauge the value of your market and speak more confidently with other people. They also allow you to produce an even better looking business plan.
Note 1. Before you get the 3D renderings done, you will need to choose a particular concept (if you were presented with a number of them). You will also need to communicate all of the recommendations that were given to you by the people you spoke with. Of course, that is only the recommendations that you think are worth acting upon.
Note 2. A good design house will do some preliminary engineering when they produce a 3D model for rendering. So ask before selecting the one that you will use.
Note 3. If it will help, then have the renderings include the environment in which the product will be used. Including a representation of a person also helps show size. This will better communicate the reality of the product to others.
Note 4. Some companies can also do animated 3D presentations. This might be your step 3. Or maybe step 3b if you find that the renderings do not communicate the function of your product well enough.
Step 4 Improved market research A rendering is so much better than the initial concepts for communicating the proposed nature of a product. Therefore, step 4 is the same as step 2, but more serious. This time when you speak to potential distributors, ask them how many units they think they could sell. Ask potential end users again about what they would pay; this time it should be more accurate and consistent. All this data can be used to update and improve the business plan, which can be used to get funding for the next step.
Step 5 Engineering design and prototyping Hopefully, some engineering design was done when the 3D renderings were done. Therefore, at this stage you only need to pay for finalisation of the engineering drawings and a prototype. At the end of this step you should have a fully functional prototype and quotation based on the engineering drawings for full manufacturing. Note. Some products will go through a middle stage where a sample (looks functional, but is not) is first produced. This is used to confirm the design before incurring the cost of a functional prototype, if such a prototype is very expensive.
Step 6 Acquire orders, complete your business plan and get your funding With a prototype you can show people a real life product. You can confirm orders and price. You might do this at trade shows and such or you might have made enough contacts in the earlier steps to find people to make the orders. In either case, if you followed the previous steps and altered the design based upon the feedback, then you will have no trouble getting orders. Once you have the orders and the quotations for production, you can complete your business plan. With such a well founded business plan funding is practically assured, and you will be able to start your product based business.
Closing The above strategy allows you to move steadily forward and to use the development process to optimise your design and business plan. It is these iterations, based on market feedback, that ensure you have a strong business plan and a saleable product. Therefore, you must ensure that you get as much feedback as possible, take all feedback seriously, and act upon it as required. Also, you must be prepared to drop an idea if the business plan doesn’t stack up. This is where external investors are ideal; they will be more pragmatic about your plan than you. Try to get such investors in as early as possible so that you don’t take a poor idea too far.