Product Planning: A Key to Entrepreneurial Success
Feb 22, 2012
by Tom Ricci ASME.org
Entrepreneurs strike out on their own for many reasons. Some are realizing their dream of independence at a time in their life where social and/or financial circumstances allow. Others may join the start-up ranks because they are frustrated with their current work situation. In either case, entrepreneurs typically bring to the table what they believe to be a killer product or application and one that will enable them to reap the emotional and financial rewards of commercial success.
So Why Do So Many Fail?
Entrepreneurs are typically resource-limited and cash-strapped, causing them to cut important corners in product planning and development. While they may be truly gifted product designers, most don't understand or possess the business savvy that will translate their idea into commercial success. Most importantly, many times entrepreneurs, driven by pride or ego, don't know when to pull the plug on a product idea. Even armed with undeniable facts, they feel like they can overcome the obvious negative factors and succeed against all odds.
How can they avoid this trap? Long before the engineers open up their favorite design tool, they need to develop a product-planning strategy. Comprehensive product planning is essential–it encompasses market analysis and justification, competitive product analysis, pricing analysis, manufacturability, and ROI. With a thorough and objective analysis in these critical areas, the entrepreneur can develop a value proposition for the new product and decide early on whether the product has a commercial future. If the stars are aligned, then that information will be the crux of the business plan that will gain the attention of investors. If the data just doesn't add up, then they have the information needed to step back and make a no-go decision before a lot of money is poured into a loser.
Let's take a closer look at some of the product-planning essentials.
Market Analysis and Justification
What problem does the product solve and how big is the problem? Here, entrepreneurs need to gather information about the potential users of the product and size of the potential market. Does the product replace an existing solution or is it a new way to solve an existing problem? What are the trends in the market? All of these factors need to be carefully analyzed before proceeding to product development.
Competitive Product Analysis
If there truly is a perceived need for the product in identified markets, the next step is to develop a competitive product analysis that will provide the data necessary to pinpoint competitive marketing positioning and create a value proposition for the product. Here, it's necessary to drill down into competitive product specifications and compare them to the new product, identify key points of differentiation, and analyze the value of the competitive points to the user.
The next step is to understand the value to the end users of the new or differentiated competitive product features. How much will they be willing to pay for these perceived benefits? What price will the market bear? Can a definitive ROI be quantitated for the end user?
At this stage, the entrepreneur has established the market need, perceived value, and market price for the product. Now it is critical to determine how much it will cost to design, manufacture, and distribute the product; can the product be manufactured and sold at the anticipated market price for the expected profit? And at what quantities?
Making the Go/No-Go Decision
By now, the entrepreneur has the information necessary to determine whether the product can be a viable commercial success. And if the answer is yes, a firm value proposition is in hand, which will be the foundation for a strong business strategy and execution plan. If value proposition is weak, than the entrepreneur can stop the effort and save a lot of money and agony moving forward before any further investment in resources, materials, and time are made.
While there are many more factors to address in launching a commercially successful product, initial and comprehensive product planning is critical to success.
Tom Ricci is the owner of Ricci Communications.
Comprehensive product planning is essential–it encompasses market analysis and justification, competitive product analysis, pricing analysis, manufacturability, and ROI.