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Management Side

Product Development Concept Alternatives

In reaping the benefits from product development, it would seem that larger companies have a clear advantage due to depth of capital resources and staffing of a wide range of individuals with different talents. In fact, these companies are often able to devote teams of personnel to assess market opportunities and to determine the optimum strategies needed to develop either new products or to modify existing ones. Taking into consideration that product development is very difficult, time consuming, and laden with significant costs, companies with limited resources may be tempted to avoid this effort altogether. And those involved strictly in the manufacture of products with customer-defined specifications often make it clear in ISO procedures that product design and development are not included in their scope.

In the past, product development was thought of as that phase that made product design functional. Consequently, many individual steps had to be taken before a project could wend its way to completion. These included identifying customer needs, determining specifications, analyzing competitive products, completing economic evaluations, making prototypes, scheduling pilot runs, test marketing, etc. Today, the lines between these terms have become blurred, and they are increasingly being linked and broadened to include even sales and marketing input. In other words, the process is no longer perceived as design being strictly the front end conceptual phase and development being essentially the engineering and manufacturing phases. This shift in viewpoint opened the door for smaller companies to take advantage of their quicker reaction time when presented with new market opportunities.

But how can smaller companies and others with limited resources develop and supply competitive products? Listed below are a few possibilities to consider in this regard:

• Eliminate both R&D and product development costs. While this may sound radical, in some cases it is possible to purchase or license already developed technology, with agreement to manufacture the products to previously established procedures and specifications. When the High Top® polyurethane roll cover was introduced to the paper industry in North America by Kern Rubber (later renamed KRC), the manufacturing and marketing rights had been purchased from Yamauchi Rubber® in Japan. The covers were manufactured to Yamauchi specifications, and no product modifications at KRC® were permitted under the terms of the agreement. There was a royalty paid on the covers supplied during the initial years, but this cost was felt to be much less than what would have been required to develop the technology in-house. Another example is the endless woven forming fabric manufactured by Cheney Bigelow® in the past, done under license agreement from Huyck® Corporation, which held the patents on the technology.

• Control product development costs through "brand extension." If a company supplies products that have been well received in the market, it may not be necessary to consider replacing these for many years. Instead of new product development, the focus can be on the internal manufacturing process and quality control. Marketing advantages are still possible if improved versions of the original products are introduced, and the risk associated with complete product changes is minimized.

• "Clone" the competition. One word of caution is offered before proceeding with this alternative. If the competitive product or process is patent protected, a fine line exists before possible infringement may occur. But it is well known that many companies wait for the industry leaders to introduce new products and then attempt to follow with something "just as good as a Xerox®." Paper companies analyze competitive grades exhaustively to identify changes in properties or furnish components. Felt and fabric suppliers are always on the alert for competitive shifts in weave construction, filaments, or surface coatings. Roll cover suppliers routinely perform chemical analyses to identify and test the strength of materials of competitive covers. So, if a company is willing to wait for the leader to complete the product development work and introduce a new product, it is sometimes possible to recover quickly without losing a significant amount of market share. This approach may help minimize product development costs but, in essence, is an abandonment of being considered a market leader.

• Use Outside R&D Company Sources. If a company has limited in-house personnel or equipment capabilities, consideration may be given to using off-premise companies for specific projects under confidentiality agreements. R&D centers often have specialized pilot equipment, test stands, and full laboratories which can be contracted to determine the feasibility of new product ideas or to make late stage evaluations before a product is finalized. If used selectively, the cost associated with this approach may be less than supporting an on-going product development group in house.

• Consider Using Supplier Capabilities. Suppliers may be willing to enter into confidential joint development programs if it is clear that their efforts will be rewarded when the outcome becomes successful. For example, a supplier may require that their material be used exclusively for a specific length of time in a new product. These programs develop trust between the companies involved, but have the disadvantage of neglecting the full range of materials or ideas that may originate from other supplier sources.

• Use a Scaled Down R&D Effort. The basic premise of this article is that many companies may not have the resources to support doing research and/or product development internally. But the need for doing this work varies widely, both between companies and across industries. For example, some smaller companies with comfortable profit levels may be able to justify a basic product development program, provided the expense as a percent of sales is controlled in the range of 1.5-2.0%. The goal would be to gain a position of market leadership for the respective products. Company management must also establish a means of measuring whether the results are producing an acceptable return on investment.

Regardless of the decision concerning whether to conduct product development/improvement on or off- premise, the importance of this function cannot be ignored. Changes in the market have to be continuously monitored, and the reaction time to competitive product changes must be minimized. To do otherwise leads to a steady erosion in market presence and profitability.

Robert Moore is a retired chemical engineer, and is an experienced technical and fictional writer. His past work experience spanned the chemical, paper and equipment manufacturing industries, including holding management positions at Voith Paper, Scapa plc, and The Mead Paper Corporation.



 


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