[MUSIC] Hi, welcome back. In the last lecture, we calculated the demand for your product. The focus of this lecture is for you to learn the fundamentals of developing and launching new products. Instead of providing you with a guided process, which may not apply to you because of the nature of your industry, I will give you my key success factors to launching and developing new products. I assume that after lecture 1.3 you have defined your product strategy. So before sharing these factors let me ask you some questions that you should think about. Who is the target of your new product? What specific need of these target customers will your product satisfy? Which specific benefits should the new product have? How will you market and sell the new product? How will you manage costs, to develop a profitable new product without cannibalizing others in your product mix? When is the best time to expand a product line and with what strategy? How should your organization respond to similar competitive products? How should my company organize their pipeline of new products? As you can see, this list is very comprehensive. And you should make sure that you have answered the above before you over-commit to your new product. Some of these I will answer in this lecture and some in the next lecture, which is about your product pipeline. Let's begin with the first success factor. In my experience, it is crucial to listen to the consumer along the way, keep in touch with the market place. Although this sounds obvious, companies don't always keep open ended conversations with customers or potential customers. For example, identify who are the early adopters and risk takers allows you to know the evolution of their needs. And where are the gaps? Share with them information, asking them questions. Such as, what will help you achieve your objectives? Or what are your cost constraints? What are the desired features? What are the redundant features, will actually help you fine tune your product. Successful companies also talk to the distribution channels to understand their perspective and their needs. Market research is crucial to measure the interaction between potential customers, and concepts or prototypes. But it is important that the market research be relevant and open, versus confirming. What does this mean? It means that it arrives on time to actually make decisions and not after. It means that it's rich in facts to make relevant decisions. For example, that it helps to estimate the cannibalization of existing products. It means that it doesn't document what is obvious. For example, that consumers want the best quality at the least price. It also means that it's not to confirm a point of view that we already have. That it is specific and non-standardized. And that it takes into consideration the functional needs of all of your team whether it's R&D or marketing or production. Listening to a consumer can also be done by developing prototypes that you can test. Your prototypes might not be perfect but they will allow you to learn what customers appreciate most and least, what attributes they missed. The feedback helps your developers reconcile the desired features with constraints of time and costs. Building a prototype also has the added benefit of getting all of the internal stakeholders excited and energized about your product. That leads to my second success factor, getting everyone on board, including those areas of functions not directly involved with the development process, and do it early on. If possible, from the project's launch. I will illustrate why this is important with a simple example. While working for a real estate company, the team had developed a whole set of customization options for the new homes that would be soon launched. After having the models ready, and the personal training to sell these features. The development team approach IT and accounting to communicate these new options. As it turned out, their internal system did not have enough fields to capture the customization options or even to invoice them. The necessary changes in programming and testing would cause a three month delay in the launch of the new product. Which meant Hundreds of thousands of dollars, as you can see something that seems like unrelated to their product could set back your lunch and add to your cost. My third success factor is to set go-no go milestones, with specific decision-making criteria and stick to them. I will illustrate this point with an example of my own experience as an entrepreneur. Some years back I purchased the right to an American franchise to open up stores in Spain. Having a well thought out business plan we had to find the key premises for each store to be profitable. One of those premises was the highest amount that we could pay as a rent for the space where the stores would be. And also the traffic foot fall, the amount of persons that would need to pass in front of her store everyday. In this line of business, the most difficult task was to get the retail space. After visiting all shopping mall owners, realtors, etc, we were eagerly awaiting to find something to open up. After some months, we finally got a call from a major mall owner offering a space in his new mall next to Carefor and Ikea. We were amazed. How lucky could we be? However, the price was 30% more than our business plan and the conditions required a significant upfront cash payment. Despite having a milestone and a criteria for deciding on locations we let the best of our hype and gut make the decision. Launching the first store this fall. It proved to be a disaster. At the beginning we could not sell enough product to pay the rent. As we began to sell more and get acceptance of our product, the footfall of the mall decreased, and thus our sales went down. At the end we had to close down within 18 months of our opening. My fourth success criteria when launching new products are to consider the competitive advantages of your organization. For example, is your company small and with a flat structure? Then one of the advantages that you might have is that you communicate very well and can make joint decisions very quickly. How can you incorporate this into your product launch? Maybe defining a plan for monitoring the launch, and the system to make quick changes in pricing, promotions, and features, etcetera, that will allow you to test and learn. Let me show you another example. I work with a company that makes products for body shops, but they don't sell directly, but rather through distributors. However, this company had a technical team which visits body shops regularly to help the owners get the most out of their product. These visits allow them to capture lots of customer insight that could provide a competitive advantage to the company. But, how can the user any? Well, beyond the obvious, which is feeling back needs that could be the seed of new products. They can also help in developing great value propositions for both the [INAUDIBLE] and the body shop. The can be the door openers for the new products. They can also do their job of training. They can facilitate the quick adoptions of the new products, et cetera. On the other hand you should also include in your product action plans How to develop the capacities needed for the launch. We turn those critical competences to reach our objective. Which ones are the [INAUDIBLE] to have. I think the best case is to illustrate this are software companies. How many times they have launched a software to the mainstream consumer, and they don't have the support hotline to help you navigate through them, or answer questions. This is also very common in the telephone industry where they might launch a new plan but nobody has been trained to activate it in their systems. The fifth success factor is to generate a business case that summarizes the concept's viability. We often look at the new product in the context of the company financials and not as a stand alone business. Well, if it is to be sustainable, we should definitely evaluate, what are the resources that it requires, and develop a model with scenarios from pessimist to optimist, we should even do a stress test and evaluate the organizational capacities and competencies required for success, to ensure that we are able to deliver them, within our model cost structure. Think of it, if we're a start up the new product might eat up all of our resources, and at least we should be aware of the perimeters of the risk that we are taking. There are many other factors to consider when developing and launching new products, and there is much written about it, I have shared with you those that I consider in my experience, are critical for success. Before I go, I want to share with you another crucial element to consider, which is how you organize your product launches so you can maximize a return of each of your product. This is the topic of our next lecture. See you then. [MUSIC]
