Excerpted Article: Successful entrepreneurs take many different approaches to developing new products. Sometimes their strategy is clearly defined, calling for quick decisions at each step with a least-cost approach to meeting objectives. Other times, just being in the right place with the right idea at the right time can work wonders. In either case the risk factor is reduced, the cost is minimized, and the product becomes a success.
Today, food product developers who take an entrepreneurial approach to development are using a combination of strategies practiced by both large and small makreters to reduce the cost of success and the chance of failure. This product development strategy has four basic steps: concept development, formulation, process and package development, and commercialization.
Building product foundations
Concept development is the first and most important step in product development. Most entrepreneurs cannot afford to miss the mark at this stage because it can quite literally put them out of business. So the entrepreneurial approach sometimes means spending more time in the concept phase than big companies may want to.
What does this mean? It means making sure the concept is as clearly defined as possible before proceeding with the project. And not only should the concept be defined, but the feasibility of the concept should be continuously assessed. The risk factor should be inversely proportional to the cost of moving forward.
The genesis of a concept should have a basis. Maybe it is a line extension or related product expansion. Possibly it is a product that is equal or better than an existing product on the market. The concept may be a response to new consumer trends or an improvement on an already marketed product.
In any event, concept development requires considering the customer, the market and the distribution. In order to properly assess concept development feasibility, all of the disciplines should be involved in the process. It doesn't cost any more to get everybody's input right from the beginning. The development technologist, the marketer, the purchasing agent and the plant manager should all be part of the team to develop the concept.
Test the concept the way a hands-on entrepreneur would -without spending money. Assess the viability with existing resources first. Do you have the technology to develop the product, or would it be advantageous to contract the R&D? Are you capable of manfacturing the product? Do you need to make a cpaital investment in equipment, or should you have the product co-packed? Do you have the right mode of distrubtion for this product, or should you joint venture with someone who does? Who are your competitors and how are they doing? Is there a market for this product, and if so, who is your consumer? Should you get into this business by acquisition? Preliminary answers to these questions give you an indication of the concept feasibility before you make any commitments. Don't spend any money until you are satisfied with the preliminary viability of the concept.
You may not need- or even be ready for- consumer input at this point. Focus groups are only as good as the presentations, and the feedback should be used to generate ideas, not to make decisions. Focus groups are more meaningful if actual concept models or prototypes are presented. Depending on the situation, you may wait for the actual development of a line extension or improvement product. Then you can go to the consumer during the development stage for confirmation.
Deine the concept for the development technologist. Have a target or a point of reference. Set preliminary parameters for ingredient costs, processes and nutritional profiles. The more definition up front, the quicker you can achieve your goals - and at less cost.
From concept to commercialization
For the actual development stage to run smoothly, the formulation, package and process development should take place concurrently. All of the information gathered in the concept stage should be commerciated and utilized effectively. Who actually does the development and how the development process is accomplished is a critical entrepreneuraial decision.
Can an existing target be reverse engineered and modified to meet the concept? Do you just have to add a new flavor component to an eisting base? Do you have to develop new technology, or can you apply existing technology to do the job? Do you have the technical expertise, and if not, where can you get it? Answers to these questions will help make the right decisions.
After you have reached the final laboratory prototype stage, be ready to confirm that the newly developed product meets expectations. Central location testing at this point is advisable for confirmation. Your target or reference product should be included to provide you with a basis or point of reference.
The commercialization process is probably the most nerve-racking step in the development process. It's kind of like living in your home when it is under construction. Time is money, so the faster you get to market with a successful product, the faster you will generate profit dollars. This means it is important to start the commercialization phase of the project as soon as possible.
Because your purchasing, manufacturing and operations people have been involved with the project at the onset, they should be in stride with the timing to get the product out into market. Get out of the laboratory prototype stage as soon as possible. Scale up and production test the product quickly. This allows you to fine tune formulation for production, run shelf-life studies onmanufactured product, and conduct any further testing that may be needed before actual production start-up.
Production testing and start-up are never free of problems, but there are steps that can reduce the bugs and speed up the process. Along with designing labels and sealing up formulas, necessary documentation should take place during commercialization. Ingredient specifications, in-process quality control, finished product specifications, operating procedures and sanitation procedures all should be documented and ready for the start-up. Actually, the preliminary documentation should be prepared for the production test step and modified and finalized before actual production begins.
By utilizing your resources effectively and making the right decisions, you can reduce your risk considerably and maximize the probability of a successful product. Let's take a look at how this works in the real world.
Learning from the little guys
Sometimes the best new product concepts are simply the result of someone looking at a particular market segment and saying, "What's missing?" One entrepreneur did just that and literally created one of the most famous products of the decade. This particular entrepreneur looked at the snack food market and found that the best-selling products were cheese-flavored snacks, but none used real cheese. He then surveyed the market to find the most preferred flavor - Cheddar cheese- and researched which product had the most profit potential-popcorn-and put the two together to come up with what was then a unique product.
Like most entrepreneurial companies, this one grew slowly-creating high consumer demand for its product through strategic marketing and smart decisions. One of the most important decisions the company made was how to expand its market. At one point, the company had the idea of developing other flavors as a way to expand. Market research showed line extensions to be a mistake and suggested the company should focus instead on geographic expansion of its signature product.
The small company listened to its customers and focused its efforts on market expansion-pushing distribution from its base in Massachusetts into New England and the entire Northeast before being acquired by a Fortune 500 company that wanted to roll out the product nationally. Today, this product is the market leader in its category, and several other major national snack food manufacturers have introduced their own real cheese popcorn. All because one entrepreneur defined a really good concept and listened to his customers.
Knowing when to go outside.
It has been said that the best entrepreneurs know what they don't know. That was the case with an entrepreneur who wanted to develop a beverage with the same stimulating effect of coffee or caffeine, but without any cafeeine in it. He wanted a beverage that would provide a healthy, natural, pick-me-up alternative for consumers, but he had no idea what the product could or should be.
By using outside experts, he was able to turn this innovative idea into a real concept. From the concept, seven viable products were developed, which were narrowed down to four product flavors. Next, the products were tested with consumers. Ultimately, the entrepreneur found a joint venture partner to manufacture the product, and negotiations with a Fortune 100 beverage company are under way.
Both large and small companies should also evaluate whether an outside development firm can make a particular product's development more cost- and time-efficient. Many times the answer is yes.
Trying not to have it all.
An entrepreneur had a recipe for an instant cocoa product and a strong determination that her product would be a success in the marketplace. She already had persuaded a local establishment to serve her product and it was doing well. This entrepreneur needed help in commercializing her recipe, which was prepared using ingredients purchased from a retail supermarket, including some ingredients that were actually formulated products themselves.
The first step in the development process was to reverse engineer the formulated products in her recipe, so that a product with commercially feasible ingredients could be developed. A target was already in place, and the developed formula had to match that recipe. Simple triangle testing confimred this. The entrepreneur was conveinced that the recipe was a winner by virtue of the acceptaiblity demonstrated in the local establishment that used the product. She also did preliminary market research.
But success was not based on product alone. The entrepreneur realized that a market for the product needed to be defined. Who was the customer and how would the product be distributed? She quickly determined that conventional retail distribution was beyond the company's entrepreneurial capabilities, so she pursued alternative avenues. Specialty and gourmet shops, ski lodges, and mountain inns, mail-order catalogs and gif sets all became alternative markets for distrubtion of the product. By identifying this appropriate and achievable niche, the entrepreneur quickly expanded her business.
Nutrition labeling, product specifications, alternative packaging and shelf-life studies soon became expensive necessities to service her market. But these costs were leveraged agains the sales that already had been generated. Not bad for a novice.
As the business grew, producing and packaging the product by hand also became impossible. The company contracted to have the product manufactured in bulk and lined up a copacker. Volume was increased by expanding the line with flavor variations using the same base mix. The flavor expansion came from feedback obtained by understanding who the company's customer is and what he or she wants.
Today, the company's products can be found in airport gifts shops, specialty stores, major mail-order catalogs-and in the local establishment where it all started. The company is now in the process of creating enough consumer demand for its product so that conventional retail distribution could be a reality if it decides to pursue that route.
By gorwing the business through planned small steps, this entrepreneur was able to achieve big success for her product. Other entrepreneurial companies can learn from this slow and steady approach, instead of attempting to do it all or have it all.
The facts are clear: Some of the most successful products in the market today are the results of companies-both small and large-0taking an entrepreneurial approach to the strategic development of new products.
