Research and develop ideas, new products and services
Introduction
Research and development (R&D) is a key activity for growing and improving your business.
Successful R&D relies on extensive market research and detailed assessment of your customer needs and behaviours, before developing new and improved products and services to fit those needs.
R&D is crucial to growth, both when starting up and as means of keeping your existing business profitable. But the development process can sometimes be risky and it needs considerable planning and organisation.
This guide will help you assess if your idea can form the foundation for a successful business. It will outline your funding options, ways to protect your products and ideas, and advise you on new product development process, project management and market testing.
Generating ideas for new products and services
A new idea is often the basis for starting up a business. Many entrepreneurs spot a gap in the market and start businesses that provide a product or service that fills it. Others come up with ways to improve an existing product.
Idea generation
The development of a new product or service usually starts with an initial idea. There are many ways to come up with an idea. To begin with, you can ask yourself the following questions:
Is there a gap in the market in the industry that you currently work in?
Are there gaps in your existing product range?
Are you aware of any weaknesses in existing products which you may be able to address?
Can you adapt, modify or improve your existing products?
Can you use customer’s feedback to enhance your existing products or services?
Can you identify a need for a particular service or product that nobody else provides?
Generating a good product or service idea is your starting point in any new product or service development.
New product development
New product development is a process of bringing a new product to the market. You may want to develop new products due to:
changing customer needs or preferences
increased competition
advances in technology
new opportunities
A quality idea lays the foundation for all other stages of product development. Once you’ve come up with a list of product or service ideas, you should carefully screen or assess each one to determine whether you should pursue or discard them. Read more about screening new product or service ideas.
Screening new product or service ideas
Successful new product development starts with identifying good product or service ideas. Each idea will have to be carefully evaluated to determine which are worth pursuing and which should be discarded.
Idea screening
When screening or evaluating your ideas, it might help to assess them against an objective set of criteria. For example, the criteria may include:
the needs of your market and your customers
details of your customer behaviours and expectations
the affordability of your idea, including resources needed for research and development
the technical feasibility of your idea
the market potential of your idea
the profitability of your idea and the return on investment
relevancy and desirability of your new products or product improvements
your competition and their existing products
You may also want to consider doing a SWOT analysis for each of your ideas to identify their strengths and weaknesses.
Once you have filtered viable ideas, take time to refine them further to maximise their chances of success. Read more about researching new product and service ideas.
Researching new product and service ideas
The key to successful research and development (R&D) is conducting extensive market research. This is essential as it helps you to identify and understand the needs of your customers and, ultimately, develop better products or services.
How to identify market need?
To determine if there is a market or demand for your product or service, ask yourself the following questions:
Does it satisfy or create a market need?
Will it outlive passing trends or capitalise on the trend before it dies away?
Is it unique, distinct or superior to those offered by competitors?
What competition will it face – direct or indirect, local, national or global?
Will the market want your product or service at a realistic price?
Can you identify potential customers?
Will your product be safe for public use and comply with relevant laws and regulations?
Market research plays an important role in answering many of these questions and increasing your chances of success.
Be as thorough in your research as possible, as mistakes made at this stage of development could prove costly later on. The more information you have, the better you will be able to understand your potential customers, the marketplace and how your product fits in.
When conducting market research, remember to consider not only the needs of your customers, but also the needs of other parties such as retailers or distributors. See more on market research and market reports.
Assessing market competition
As well as meeting your customers’ needs, your new product or service should have a unique selling proposition (USP) – a feature or property that makes it stand out in the marketplace.
Before entering the market, you should assess your competition and determine:
how they meet their customer needs
what will differentiate your product or service from your competitors this will be your USP
why would the customers choose your product or service over your competitors’, both now and in the future
what risks you are prepared to take to launch your product or service into this market
For more information, see know your customers’ needs and understand your competitors.
Concept development and testing
Concept development and testing is a crucial stage in the new product or service development. It takes place early on in the process and helps to identify key perceptions, user needs and wants associated with the product or service.
What is concept development?
Concept development involves coming up with a detailed description of an idea, explained from the perspective of your customer. A concept typically highlights the best features of the proposed solutions in terms of:
convenience
usability
quality
functionality
performance
price
values
experience
When developing a new product or service, it is common to work with a large number of concepts and only develop the select few that show the most promise.
What is a new product concept?
A new product concept is basically a blueprint for your idea. When developing a new product concept, you should:
describe it from your customers’ point of view
list features and benefits of your product that may appeal to customers
research and determine your target audience
conduct focus groups and thorough market research
consider resources required for designing, manufacturing and delivering the product
Once you develop your product concept, you should test it rigorously with your intended customers to determine its viability.
What is concept testing?
Concept testing is a process that helps you assess the customer reaction to your proposed product or service prior to introducing it to the market. It typically involves conducting surveys with a group of potential users rating one or more of the statements relating to the concept. For example, you may want to use concept testing to find out:
Are they interested in the product?
How much do they like the product?
How desirable do they find the products features?
What features do they like most/least?
How well would the product compare to other brands or similar product?
What price point would they find appealing?
What would they like to change about the product?
You may want to present several different concepts to determine which ones the customers find most desirable.
Benefits of concept development and testing
Developing a product concept may take time, but it is extremely important for the success of your project to define your concept clearly, test it rigorously and avoid making assumptions about the product’s feasibility.
Concept testing will help you evaluate objectively which product ideas are likely to yield the best results. It may also help you to:
estimate the concept market potential
prove the viability of the concept
eliminate poor concepts
identify features that customers find most desireable
develop and further test your prototypes
segment your potential customer base
identify the appropriate price point and position for your product
estimate sales and potential return on investment
Remember that concept development and testing is only one of the steps involved in the new product or service development. For an overview of all the stages, see the product development process.
Pricing your proposed service or product
Establishing a pricing strategy for a new product or service is an important part of the development process. You should consider pricing the moment you decide to take an idea forward as it will determine how much you can afford to invest in the project.
How to price your new product or service
To set the right price for your product or service, you will need to take the following into account:
the impact of your new product or service on your entire portfolio
the analysis of its value – eg the benefits to the customer and the likelihood of them paying the price you want to charge
the competition and their pricing – is your product or service innovative or are you following a market trend
the selling channels you want to use – this will affect your promotional spend and distribution costs
how quickly you want to establish your product or service
the expected life cycle of your product or service
how much you will need to charge to cover your costs
Make sure to cost all the materials, other inputs, machinery, processes and administrative time realistically. You will need to research different suppliers and the cost of marketing and distribution.
Strategic pricing can be used to drive sales and regulate demand. See our guide on how to price your product or service.
How to protect new product ideas
If you create something unique or come up with a great idea for a viable, commercially successful product or service, you will likely have intellectual property (IP) that you can protect and exploit.
IP in new ideas
All businesses have IP. Your business’ IP is what sets it apart from its competitors. For example, it could be your business name, logos, inventions, product designs or other creative work.
Depending on the type of IP you have in your product or service, you may want to register a design, apply for a trade mark or file a patent. For information on the different ways you can prevent others from stealing your IP, see more on protecting intellectual property.
Confidentiality and non-disclosure
At some stage, you will probably wish to discuss your new product or service idea with a third party or test it with customers and clients. It’s important to understand that, once you put an idea into the public domain, it can no longer be considered confidential or a trade secret, so you need to take steps to protect it.
Before talking to any third parties, it is a good idea to ask them to sign a non-disclosure or confidentiality agreement – to prevent them from sharing details of your idea with others. See more on non-disclosure agreements.
The product development process
New product development is a process of taking a product or service from conception to market.
The process sets out a series of stages that new products typically go through, beginning with ideation and concept generation, and ending with the product’s introduction to the market.
Occasionally, some of the stages overlap or vary depending on the nature of the business.
Key stages in the process of product or service development
The process involves eight key stages:
1. Idea generation brainstorming and coming up with innovative new ideas. See generating ideas for new products and services.
2. Idea evaluation – filtering out any ideas not worth taking forward. See screening new product or service idea.
3. Concept definition – considering specifications such as technical feasibility, product design and market potential. See researching new product and service ideas.
4. Strategic analysis – ensuring your ideas fit into your business’ strategic plans and determining the demand, the costs and the profit margin.
5. Product development and testing – creating a prototype product or pilot service. See concept development and testing.
6. Market testing – modifying the product or service according to customer, manufacturer and support organisations’ feedback. This involves deciding the best timing and process for piloting your new product or service. See how to test the market.
7. Commercialisation determining the pricing for your product or service and finalising marketing plans. See pricing your proposed service or product.
8. Product launch a detailed launch plan can help ensure smooth introduction to market.
In most cases, a phased approach to product development process will help you keep schedule, resources and costs under control.
Use our checklist to help you develop a product or service or, for more information on managing projects, see how to manage your research, design and development.
Checklist: developing a product or service
There are many things to take into account when developing a new product or service. The checklist below should keep you on track and help ensure that your development process runs smoothly.
Developing new products or services checklist
1. Start by generating good quality ideas. Think about potential new products or services, or enhancements to existing ones. Get insights and suggestions from staff, suppliers, customers and business associates. Find out more about generating ideas for new products and services.
2. Assess your ideas for viability and feasibility. While they may be good ideas, they might not necessarily make a sustainable or commercially successful product. Use customer needs and expectations to drive your product development. Learn more about screening new product or service ideas.
3. Research the market and how your proposed product or service might fit in. Start testing at the ideas stage and adapt your idea to meet the needs of the market. Think about your customers, their desires and requirements, and dont forget to take a look at your competition and their offering. Read more about researching new product and service ideas.
4. Define your product concept clearly and outline specifications and features which you believe will appeal to your customers. Then test the concept with your target audience and refine based on their feedback. See more on concept development and testing.
5. Think about how you’re going to price your product or service and cover your costs. Read more about pricing your proposed service or product.
6. Consider how to phase in your new product development and control how much you are spending. Make sure you stop work on ideas that don’t meet your criteria before committing a lot of time and resources. For more information, see financing new product or service development.
7. Build a good project team to lead your development and involve them from the outset. Think about who needs to be on it and how they will work together, and who’s going to manage the team. See more on creating a new product development team.
8. Develop an early prototype and market test it to address any technical or user acceptance issues. Design, test and refine packaging, brand and the look and feel of the product. Continue making modifications until your product meets customers’ expectations and needs. Find out how to test the market.
9. Consider if any regulations (including environmental regulations) are likely to affect your new product or service. Take steps to protect your intellectual property from the outset find out how to protect new product ideas.
10. Plan for launch and develop a marketing strategy to maximise the impact and the commercialisation of your product or service. Look beyond its immediate potential and consider the longer term.
Continue to monitor the product success after launch and remember to look for further improvement opportunities or opportunities to extend the product’s lifespan.
You may also want to make new product or service development an essential part of your business strategy and plan for new products on a scheduled basis to make sure your business remains competitive in the market.