Developing new products - an introductory guide
This guide is a simple introduction to product design and development, and takes you through the whole process, from protecting your ideas to finding the right manufacturer. If you are new to product development, this is the place to start!
Contents
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Introduction
1. How will you protect your idea?
2. Who will buy your product?
3. Who will you be competing with?
4. What about the technical specification?
5. Which product standards are applicable?
6. How will your product be made and sold?
7. How will it be marketed?
8. How much will all this cost?
9. How will you pay for it?
10. Do you have a plan?
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Introduction
Developing new products is exciting and can be extremely profitable, but the risks are also considerable.
The purpose of this guide is to look at ten fundamental questions that you need to consider to help you make the most of your opportunities and minimise your risks.
If this is your first venture into product development you will require equal quantities of enthusiasm and realism. You need the enthusiasm to carry you through the challenges of the process, and realism to recognise which of those challenges represent a risk worth taking.
Before you get into the details of the process, you also need to know the size of the project you are taking on. Make no mistake, the old adage about “build a better mousetrap and the world will beat a path to your door…” is nonsense. Product development is as much about marketing, research, finance and planning as it is about invention and new ideas.
The great news is that there has never been a better time to create new products. Low cost prototyping, innovative funding methods and the marketing power of the web and social media all reduce risk and increase opportunities for both businesses and ‘solopreneurs’.
We hope you find the following pages an easy, informative and useful read - and that it sets you on your way to profitable, enjoyable and low-risk product development!
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1. How will you protect your idea?
We’re covering this issue now because if you’re going to do it, it should be the first thing on your list.
Most issues of intellectual property protection (IP) come down to disclosure. Once you’ve talked about or published an idea you can’t protect it - because it makes it hard prove that you thought of it first. That said, you should always keep clear records of when you developed or modified an idea or design.
The first thing you should do is prepare a mutual Non-Disclosure Agreement (NDA) which basically keeps shared knowledge confidential between two parties. You can get a solicitor to draw one up, but the UK Intellectual Property Office offers a simple, plain English template at:
https://www.gov.uk/government/publications/non-disclosure-agreements
Secondly, you will need to work out which forms of IP are relevant to you. For example, if you are developing a manufactured product you will be mainly concerned with design rights, registered designs and patents. If you are also creating new music, writing or video, you will be more concerned with copyright. If you are creating a new business, you may need to register your trade mark. For more information on all these issues, take a look at the Intellectual Property Office site at:
https://www.gov.uk/business/intellectual-property
In this document, we are going to focus on design rights, registered designs and patents.
Patents protect new technical concepts in products and processes. Patents need to involve products or processes that are genuinely new, and not an obvious modification of something that already exists. The idea must also be capable of industrial application.
Patents are not, however, only for those ‘eureka’ moments when someone develops a new chemical or material. The novel application of an existing technology can also be patentable, so if you think you’ve come up with a new idea, check out whether you can patent it. This can be done either through the IPO (see contacts, left) or through patent agents who will carry out searches for you - for a fee. The Patent Office will charge you around £300.00 to process a patent application, but remember that professional help, including search fees, particularly if you want get international patent coverage, may run into tens of thousands of pounds. Patents last up to 20 years, provided you keep paying the annual renewal fees.
You also need to bear in mind that patent infringement is not a criminal offence, and that any disputes need to be settled through civil courts, with all the expense that involves.
However, a granted patent does create something you can sell or license in return for a royalty, so it is always worth considering. Just make sure you have the will - and resources - to defend it.
Design rights apply automatically to the internal and external appearance of any new product you develop, but they offer limited protection. Design rights do not, for example, cover any two-dimensional qualities like surface patterns. Design rights are automatic (you don’t need to apply for anything), but they are hard to enforce and you need to keep very clear records to show when you created your design. They also only last for a maximum of fifteen years.
Applying for a registered design is the best way to protect two and three dimensional product ideas. Design registration creates more formal protection which can last up to 25 years and is inexpensive to arrange. Like design right, a registered design only protects appearance, rather than technical issues like function and mechanisms, but it is the best way to protect your ideas and/or obtain commercial return through licensing, etc. The process is quick and simple and costs less than fifty pounds per design. For more information, look at the IPO website listed on the previous page.
Is it worth it?
It makes complete sense to do all you can to protect your ideas, by using NDAs when you talk to possible collaborators, telling them only what they need to know, and protecting your ideas using the appropriate safeguards (patents, etc). These safeguards will be taken seriously by most companies and could result in good, long term income for your business from licensing arrangements or the sale of the idea. If less scrupulous people copy your work without permission, you will then have to decide if you will be better off fighting them through the courts, or moving on and creating another world-beating product!
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2. Who will buy your product?
This is where realism has to temper your enthusiasm for the new idea you’ve been developing.
Is there an actual market for the new product? If so, how big is it? Does it address a real need/desire or could it be a ‘solution looking for a problem’? These are critically important questions that cannot be shrugged off - particularly if you are about to spend a lot of money developing, making and promoting your new idea.
What need or desire does your product address?
You need to think about this as analytically as possible. Is the market consumers or companies - or both? Does the new product do something new and unique? If not, how is it better than the competition?
Define your target customer
Determine who your target customer is and develop a profile of who they are. If there are several, give them different ‘personas’ to help you differentiate their specific needs.
Ideally, you will be able to visualise the people who will buy your product - right down to what clothes they wear and what kind of car they drive. The more you know about them, the better, as this will help you promote your product in the right places, using the right keywords and messages.
Quantify the number of target customers
This is clearly not a trivial task, but you can make a good start by looking at UK national statistics at:
Just searching on Google can also generate some useful results One search (Number of kettles sold in the uk) produced stats on declining sales due to coffee machines and the total sales in 2010 and 2012. This is the kind of information you need to quantify your market.
Once you have data on the size of the overall market, you need to estimate how many you will need to sell to you meet your commercial goals. For example, Apple sold an eye-watering 34 million iphones in Q4 of 2013. If you make a protective case, and get one percent of that market, you may sell up to 1.3 million covers each year.
The statistics for your product will depend on the application and the size of the overall market, but be cautious. Underestimating your market won’t cause a problem, but over estimating it could put you out of business.
There are many commercial companies who can supply research data within a defined set of criteria and help you estimate the size of your potential market. The higher your likely investment, the more worthwhile it will be to spend money on professional research.
If there is one piece of advice in this guide that you must follow, it is this - do not allow yourself to fall into the ‘my friends and family like it, so it must sell’ trap. They might be right, but you need facts and figures, not a few personal opinions.
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3. Who will you be competing with?
However unusual your product idea is, it will have competitors. Some of them will be in direct competition, and some will be selling a product that solves the same issue in a different way. You need to look at all of these and assess the relative strengths and weaknesses of their offering and yours. You will need some external - & unbiased - support to do this properly.
Why look at strengths and weaknesses?
The main reason for this exercise is to find unique market niches that your product may occupy and identify areas of competitive advantage. Critical issues are cost, appearance, ease of use, durability, availability and performance. Ideally, you will discover key features of your product that will help you define….
...what will make your product the best choice ?
The key to competitive advantage is differentiation. Your product needs to stand out from the competition because it is quicker, smaller, easier to use, better looking or stronger than other products on the market. Differentiating your product purely on cost is also possible, but it is a risky approach. There is always likely to be someone cheaper than you, and this approach can make your company - as well as your product - look cheap.
Innovation, design and quality are likely to be the best differentiators to deliver long term profits and success.
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4. What about the technical specification?
When you start work on a new innovative product, it is all too easy to forget about the technical details, some of which are - to be honest - quite boring. However, these boring details will make the difference between a interesting concept and a marketable product, so it pays to get them right.
Are you developing a simple, one part product, or are there mechanisms? If there are, will they involve safety issues (finger traps, etc) or will they be dangerous if they fail? Make sure you develop, build and test any mechanisms rigorously for durability and safety.
What will the operating environment be, and does the product need to be sealed against water or dust? These are expressed as IP (ingress protection) ratings. Will the product need to be made of flame retardant materials? (If it is to be sold in the US, the answer is probably yes). Will it need to be made of specific materials to meet safety or food related standards? All of these issues need to be explored or your product may fail to reach the marketplace at all.
What kind of physical abuse will the product be subjected to, and will it need to comply with drop testing? (Dropped from a fixed height onto a solid surface to see if it still works and/or is safe).
Most of these issues will be specific to the function and complexity of your product, and will be closely related to product standards (see next section).
If you would like more information, call us on 01235 833785.
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5. Which product standards are applicable?
CE marking is the most common standard that most products need to meet. The letters ‘CE’ appear on many products that are traded on the single market in the European Economic Area (EEA), consisting of the member states of the EU and European Free Trade Association countries Iceland, Liechtenstein and Norway. CE marking is required for many products and attests the verification by a manufacturer that these products meet EU safety, health or environmental requirements.
For more information on CE marking, look at www.gov.uk/ce-marking.
Depending on your product, there may be other specific standards that are a legal obligation. These range from safety standards for medical equipment to durability tests for tools.
For more guidance on standards for your product sector, look at www.bsigroup.com/en-GB.
From a product development perspective, the most important issue is that you appreciate that these standards usually require tests to be carried out. These tests can be both costly and time-consuming, so you need to make sure that you have allowed enough time and money in your plan. Realistically, your planning should also allow for changes to the design and retesting if the first version does not meet the appropriate standards.
Complying with standards can be trivial or very involved. Find out what is needed as soon as possible to ensure that you meet your targets and budget.
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6. How will your product be made and sold?
Will you make the product yourself or will you sub-contract production to someone in the UK or Asia? How much are you prepared to invest in tooling and production set-up? Will you sell the product direct to the public or through the internet and/or retail outlets? These issues need to be considered at the outset, as they will have a significant impact on commercial success.
Choosing the right process
There was a time, not so long ago, when most high volume products were injection moulded, and most low volume products fabricated from sheet metal. Times have changed. Manufacturing processes are undergoing something of a revolution (and not just because of the much-hyped 3D printing boom). Conventional processes are being reinvented and many costs are coming down, so talk to a manufacturing broker like Iota Sigma to find out more about the most appropriate process for your product and manufacturing volumes.
Toe in the water, or in at the deep end?
The new production processes allow small batches to be made that are both reasonable in cost and realistic in appearance and function. This means that it is no longer necessary to invest in full production tooling to find out if a new product idea is viable - you can make a small number, test the market, get feedback and create the Mk2 model before you commit to tooling for volume production.
Who will put it together?
Will you get the parts made and then assemble and distribute the product yourself, or pay someone else to organise everything and simply watch the money roll in? (Warning - it is not really this simple!). It is, however, a realistic option, particularly if you don’t want to invest in production resources and the product is reasonably high volume.
What happens if there are problems?
It is hard to think of any company that has not had its share of product recalls and problems. Whether it is one faulty part or the kind of total product recalls suffered by Toyota in recent years, you need a system to receive and respond to customer issues. Web based review sites and social media are now making this even more important, so make sure you have systems in place. Managed correctly, customer problems can be turned into good news stories that enhance, rather than damage your reputation.
Ethical issues
Like customer service, ethical manufacturing issues are - rightly - becoming more prominent as a result of freedom of information and social media.
Whether it is the working conditions in factories you may outsource to, the materials and processes you use or the way you package your products, a strong ethnical position can only benefit your reputation and business.
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7. How will it be marketed?
Whilst new production technologies are changing the way products are made, social media and the internet are transforming the way they are promoted, reviewed and popularised.
Getting the world to beat a path to your door
If you have researched your market carefully, you should have an accurate picture of the people you are trying to sell to. By developing a good understanding of the issues and related products that they are interested in, and even an image of where they shop and what they wear, you will be in good position to place messages in places they are likely to be looking.
By using appropriate keywords in blog posts, tweets, Google adwords and your company website you should attract interest from your target group. Posting articles on your website that address the issues and concerns that your prospective customers have is one of the most powerful ways of promoting your product.
The power of moving pictures
Uploading a video of your product is also very worthwhile, as YouTube is now the second most popular search engine after Google. Good videos also get widely promoted through other social media, so the impact can be considerable.
What about conventional advertising?
Conventional advertising and promotion still works of course, particularly if you are trying to reach a specific market, but bear in mind that it can be very expensive.
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8. How much will all this cost?
Quite a lot. New prototyping and production methods have lowered many costs, but product development is still an expensive process, particularly when testing and marketing are taken into consideration.
Design and development costs
Like all product development costs, design expenditure will depend on complexity and the amount of time required. A simple, small product - like a coat hanger or clothes peg - may cost a few thousand pounds to develop, including the CAD data for production. A complex product like an item of consumer electronics may cost several tens of thousands of pounds.
Prototyping and testing
Prototyping costs have come down with the wide range of digital and CNC options available, but expense will also depend on size and complexity. Small, simple products will cost a few hundred pounds, complex ones many thousands.
Testing costs will depend more on the product function than its size or complexity. Many products will need little or no testing, but safety-critical devices may cost many thousands of pounds to test and re-test as needed.
Tooling and production
A small, simple injection mould tool will cost a few thousand pounds, whilst a large complex one will be many tens of thousands of pounds. Tooling for other plastic processes, like vacuum forming, that do not involve high pressures, will cost considerably less.
The tooling set up costs for machined or fabricated parts often runs to only a few hundred pounds, but the individual parts are more expensive than a moulded equivalent. This is why it is vital to consider production volume early in the design process - there is an important link between the quantity you make, the part cost and the tooling investment.
Marketing and promotion
The use of social media to promote products has cut marketing costs dramatically - particularly if it is well targeted and focussed on real customer need. The cost of a well-produced video will still cost several thousand pounds, however, and a good website will require a similar investment.
Advertising in conventional media remains expensive, but is worth considering, particularly for specific markets catered for by specialist magazines. A half page ad in a well-known technology magazine, for example, will cost you £1,000.00 per advert.
The bottom line
Product development is an expensive process. If you are planning on designing, developing, prototyping, testing, tooling and promoting a mass produced new product - even a fairly simple one - you need to plan for a six-figure budget. If you are planning to make something on a smaller - more craft based - scale, the sums required will be dramatically lower - maybe in the high thousands.
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9. How will you pay for it?
Like manufacturing methods, funding sources for product development have undergone something of a revolution in recent years. Crowd funding and other sources of capital have made it easier for individuals to raise the money they need for innovative new products.
Managing your risks
Before you start looking for sources of funding it is worth considering how to minimise the amount of money you will need. Your first cost will probably be protecting your intellectual property. You can get an NDA in place without spending any money, and design protection is very inexpensive. It is only when you get into taking out and defending patents that things start to get expensive.
The design phase can - and should - be divided into several sections to manage costs and risks. Design concepts and a ‘proof of concept’ model or prototype should be all you need to pay for before you can go looking for external funding to take the project through the detailed design and production phases.
Conventional funding
Overdrafts, bank loans and other conventional sources of funding are one route that can be taken, as are support from venture capitalists. The venture capital route is similar to the concept behind Dragon’s Den, in which wealthy entrepreneurs, or more often capital funds, will invest in a new technology or product in return for a significant degree of control in the company and proportion of the eventual returns.
Many VC companies have a reputation for high trading targets and tight controls, and it is essential to take good commercial advice before signing up for such an arrangement. If you would like to see examples of VCs, look at:
https://startups.co.uk/venture-capital-funds-a-z-directory/
Crowd funding
Crowdfunding is an alternative method of raising finance for a business, project or idea. Unlike VC investment, which typically takes a larger stake in a small business, with crowdfunding you can attract a ‘crowd’ of people, usually via the internet, each of whom takes a small stake in the business idea, by contributing towards an online funding target. In many cases, this model is more successful than attempting to source the full investment from a single individual or organisation. Furthermore, while some investors may be hesitant to invest in an unproven idea, crowdfunding provides an alternative way to source seed capital from a number of backers.
2012 was quite a year for the crowdfunding industry. According to Forbes, crowdfunding platforms grew from $1.5 billion in 2011 to $2.8 billion in 2012.
Today Crowdfunding platforms are not just giving you an opportunity to fund projects, but to participate in and change them. Now, you can follow a product all the way through to its production, allowing a consumer experience long before the product ships.
Crowdfunding for new products
If you’re seeking funding for a product based project, not all crowdfunding platforms will be appropriate, so you’ll need to do a little research. Here are some of the sites that might be of interest to you:
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10. Do you have a plan?
Ah, business planning. Two words that strike dread into even the most stoic hearts. But before we get too bogged down in spreadsheets and percentages, let us look at what you need.
What do you need a plan for?
Do you need a plan to get funding; agree actions with colleagues; or simply schedule the project itself?
If you need a commercial business plan for funding purposes, please take a look at the UK govt website at:
www.gov.uk/write-business-plan.
If you need a product develop plan for your business, you should look at BS7000/2 : The management of product design, development and manufacture. Crucible has produced an executive summary of this surprisingly useful document. Please follow this link if you would like to receive a copy.
If you need a simple plan to help you manage your project, we think the following topics are the most important ones to consider:
1. Summarise the idea behind your new product in a couple of paragraphs. Focus on what problem it will solve or how it will improve someone’s life or bank balance.
2. Make sure you have protected your idea in the most appropriate way (see section 1).
3. Estimate the size of your market (see section 2).
4. Check on the strengths and weaknesses of your six main competitors (see section 3).
5. Identify the basis on which you will compete (what will make your product stand out against the competition?) Please don’t choose lowest cost - it is a one-way street!
6. Realistically, identify the main risks and threats you will face, in terms of technical issues, resources, the market and timescales.
7. Draw up a detailed technical specification (see section 4).
8. Work out which standards your product will need to meet, and what tests will be required. (see section 5).
9. Identify, if possible at this early stage, which production methods you will need to use, and what the likely tooling timescales of these will be.
10. Try to estimate your costs. You may need to do some preparatory design work on a representative shape to get a rough idea of tooling costs, but don’t forget estimates for all the other issues (see section 8).
11. Then, work out a time plan. Work back from any critical dates (important exhibitions, etc) and allow plenty of time for production tooling, modifications, testing, approvals and things not going according to plan!
12. Finally, meet with your team frequently to check on all these issues, and address any variations or problems as they occur.
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