In general, a technology company's focus is on developing products that have a projected volume of sales sufficient to cover the costs of development, manufacturing, productizing, and going to market with the goal of returning a specified margin of profit.
Product development usually has nothing to do with whether the product is the right product, or the best product to address the issue, or one that is best for the industry – it only has to do with the potential return on investment for developing the product.
Product development is an expensive time consuming process and so most companies will take a rigorous, organized, approach. Sometimes it may make use of a flow chart like this one:or this oneto help all the stakeholders see "the big picture" and how the various functions fit together in the complex process of product development.
The process will also include documented "gates" or significant milestones through which the product must go through which is often represented using a Gantt's Chart like this: to track progress, delays, and missed target dates.
Step 1 - Needs Assessment.
This identifies the needs and business opportunity for a new product. Ideas for new products can come from market and consumer trends, the company's R&D department, competitors, existing customer suggestions, front line employee suggestions, salespeople, corporate spies, and trade shows. One has to be careful during the needs assessment phase because, as Henry Ford noted, “If I had asked people what they wanted, they would have said faster horses.”
Step 2 - Economic Validation.
This attempts to identify the return on investment of developing the product or the risk of not developing the product. Perhaps historical data from similar solutions might be used or a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats) may be done.Sometimes it's just a WAG (Wild Ass Guess). It's also important to know how much a customer will pay for the product since it must be produced for much less because of mark-up and margins required by all the people that handle it. The discussion is specifically to make sure that the product cost (and appropriate markups) don't exceed the customers desire and ability to purchase.
Step 3 - Gathering Outside Information.
Typically, a patent search and some market research are done to ensure there are no existing barriers to the product's development. Marketing would do research on things like competitive analysis, market availability, costs of getting the product to the consumer, etc. as well as some justification (in hard numbers) as to why the product will be able to penetrate the market.
Step 4 - The Design Phase.
Here the goal is to find not just any solution - but the "Elegant Solution" - the one that's the best blend of compromise of all the conflicting requirements. This process involves conceptual design where fundamental and "big" ideas are scoped out and evaluated. Often this starts with a brainstorming session where open-minded, creative thinkers from inside and outside the company gather and share ideas for exploration and evaluation The conceptual design phase is also a time for comparing competing products against a reasonable list of requirements to see how the competition stacks up.
Step 5: Screening of ideas.
The ideas generated in Step 4 are critically evaluated by the management team to isolate the most attractive options. As the ideas are whittled down to a few attractive options, rough estimates are made of an idea’s potential in terms of sales, production costs, profit potential, and competitors’ response if the product is introduced. Acceptable ideas move on to the next step.
Step 6 - Concept Development.
This begins the principal design phase (the micro level) where the details are developed and where the fundamental engineering is done. Market research continues to analyze the viability of the product ideas. The key objective is to obtain useful forecasts of market size, overall product demand, operational costs (e.g., production costs) and financial projections (e.g., sales and profits). Additionally, the organization must determine if the product will fit within the company’s overall mission and strategy.
Step 7 - Prototyping
Prototyping is the design verification phase of product development and is used to demonstrate or prove aspects of a design. Prototyping simply takes the design from the virtual and imaginary realm to the physical world. The kind of prototype used must fit the needs of the project and to demonstrate the viability of the product - especially since there is often a significant cost involved.Fabricated prototypes are typically functional versions that may or may not look like the final product but give the opportunity to test function and prove something works. Prototyping also allows manufacturing assessment to determine the best way for the product to make the transition from design to production easier, faster and smoother. This is the "Alpha" and "Beta" phase of product development.
Step 8 - Production
The Production phase is usually, by far, the most expensive part of product development. The design needs to be fully documented with detailed drawings for the applicable parts and assembly. Service support and training are initiated.
Step 9 - Product Marketing
Marketers begin to construct a marketing plan for the product. Once the prototype is ready the marketer seeks customer input - perhaps at beta test sites. However, unlike the concept testing stage where customers are only exposed to the idea, in this step the customer gets to experience the real product as well as other aspects of the marketing mix, such as advertising, pricing, and distribution options (e.g., retail store, direct from company, etc.). Favorable customer reaction helps solidify the marketer’s decision to introduce the product and also provides other valuable information such as estimated purchase rates and understanding how the product will be used by the customer. Reaction that is less favorable may suggest the need for adjustments to elements of the products or the way the product will be marketed to prospective customers. In addition to gaining customer feedback, this step is used to develop customer testimonials and white papers. Sales and dealer channels start to be trained on the upcoming product.
Step 10 - Commercialization
If market testing and beta site experience display promising results the product is ready to be introduced to a wider market. Some companies launch products well in advance of actual availability in order to stifle the sales of similar products from competing businesses. Sometimes the product is introduced or rolled-out the product in waves with parts of the market receiving the product on different schedules, or with only parts of the total product solution being available. This allows the company to ramp up production in a more controlled way and to fine tune the marketing mix as the product is distributed to new areas.