Research and develop your business ideas, new products and services

Developing your business idea into a viable product or service is a critical part of building a business. Thorough assessment and market research at an early stage will help you to establish whether there is a market for your product or service.

Once you begin trading, new products and services will be very important, and investing in their development is crucial to business growth and profitability. But the development process can be risky and it needs considerable planning and organisation.

This guide will help you assess whether your idea can form the foundation for a successful business and put a process in place to monitor and measure its progress.

It also has tips on how to finance the development of your idea and how to protect it if other people get involved.

You will also find information on the development process for new products or services, which will help you to make practical investment and budgeting decisions. This guide also advises you on how best to create a product development team and manage a project.

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Finding and developing your idea and 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.

Coming up with a new idea

If you want to start a business but don’t yet have an idea to work with, there are many ways to go about identifying one. The following questions may help:

• Do you have any particular skills that could form the basis of a new business?
• Are you aware of a gap in the market in the industry that you currently work in?
• Do you have a hobby that could be turned into a business?
• Has there ever been a time when you needed a particular service or product that nobody else provides? If you needed it, there is a good chance that other people will too.
• Can you help solve any of the problems posted by government departments and public sector organisations on the Small Business Research Initiative (SBRI) website? SBRI is a government scheme supported by the Technology Strategy Board that awards funding to develop innovative ideas.

See the page on the Small Business Research Initiative in our guide on support networks and facilities for innovation and R&D.

Developing your idea

Once you have got a business idea, take time to refine it. This will help you to decide whether it could be the foundation of a successful business.

There are various established methods of developing a business idea. You can:

• conduct market research to discover whether your idea fills a gap in the market – see our guide on market research and market reports
• brainstorm your idea with friends, colleagues or staff – they can give different perspectives on the idea and may know if anyone else is doing the same thing
• think about whether your idea can take advantage of an opportunity created by new technologies, eg by trading online
• consider whether social trends will affect demand for your product, eg the increasing demand for organic food or concerns about global warming and carbon footprints

Developing new products and services

There’s a lot at stake when you are developing a new product or service. To minimise risks and allocate investment and resources wisely, you should consider a number of factors, including customer needs and design, whilst also clearly defining your plans. For more information, see the page on the development stage of a product life cycle in our guide to the product life cycle.

Support for businesses developing new ideas

Designing Demand is a practical mentoring programme developed to help small to medium-sized businesses and technology start-ups use design to improve performance.

It helps businesses embed effective processes for the management of design and innovation and gives managers the skills to exploit design by spotting opportunities, briefing designers and running projects that deliver.

Designing Demand is part of a range of support offered to businesses in England through the government’s Solutions for Business portfolio.

Find out about Designing Demand on the Designing Demand website- Opens in a new window.

Find out about the range of support for business included in the government’s Solutions for Business portfolio.

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Is there a market for my idea?

There are certain criteria you can use to establish whether there is a market or demand for your product or service:

• Does it satisfy or create a market need?
• Can you identify potential customers?
• 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?
• Is the product safe for public use and does it comply with relevant regulations and legislation? Seek legal advice before proceeding.
• Will the market want your product or service at a realistic price?

Market research can play an important role in answering many of these questions and increasing your chances of success. It is much better to invest time researching before you invest your money. See our guide on market research and market reports.

Remember that although the end user of your new product or service might be your most important customer, you may have to take the needs of other parties into account, such as retailers or distributors.

It is very important that you are as thorough in your market research as possible, as mistakes made at this stage of development could prove costly later on. Remember, the more information you have, the better you will be able to understand your potential customers, the marketplace and how your product fits in. For more information, see our guide on common mistakes when starting up – and how to avoid them.

Your competition

Not only must you meet your customers’ needs, you should do so in a way that is better than the alternatives offered by your competitors.

Your new product or service should have a unique selling proposition – a feature or property that makes it stand out in the marketplace. Before entering the market you need to gather ‘competitive intelligence’ by determining:

• how customer needs are currently met
• why customers would choose your product or service rather than 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 our guides on how to know your customers’ needs and understand your competitors.

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Plan the development of your idea

Try to identify the key stages or checkpoints in the development of your idea. Each checkpoint gives you a chance to evaluate the progress of your product or service and decide whether you need to make any changes. It will also allow you to consider at the end of each stage whether to progress with the idea. Any idea that has no realistic chance of success should be dropped before too much time or money is invested.

Your checkpoints may include:

• designing – turning your idea into a product or service that can actually be sold
• prototyping – creating a useable example of your product or service, which can then be tested
• protecting – applying for a patent if you have invented a product or type of technology
• financing – raising the money you will need to get your business started
• operations – setting up the structure of your business, eg finding a suitable location, hiring staff, etc
• marketing – working out how you will sell your product or service

Judge your progress

If the goals of any of your checkpoints are not met, you need to analyse why this is the case. Ask yourself whether your objectives were unreasonable. If so, you may need to revise your objectives.

There are circumstances when you should reconsider your original idea.

These include:

• developing a product or service that isn’t commercially viable and won’t produce a reasonable financial return
• developing a product that is not technically viable, eg it cannot be manufactured or it doesn’t meet performance requirements
• someone else releasing a product or service which is very similar or identical to yours, especially if they are a large or well-established competitor

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Financing your idea and cost control

Securing adequate funding is one of the biggest obstacles many entrepreneurs face. Your funding needs may also change during the course of product development, as it may take longer or cost more than you first expected.

Bank loans and overdrafts are the most common ways to raise money for a new business. But there are plenty of alternative options too, including:

• cashing in shares or other investments you may hold
• borrowing money from family or friends
• remortgaging your property
• non-bank finance – eg credit unions or peer-to-peer loans
• government grants
• investment from business angels or venture capitalists

Remember to build into your financial forecasts a generous margin for contingencies and the unexpected. It’s not worth investing money and then running out before your business has got off the ground.

For advice on working out how much money you will need, and the pros and cons of the different funding options, see our guide on how to choose the right finance when starting up.

It is important to plan any investment and control your costs carefully. You should:

• include future investment in products and services into your strategic business plan
• plan exactly where this investment will be directed
• justify the expenditure on every development project
• manage your cost

Before making investment decisions, consider how much your business stands to gain from the new product or service. Weigh this against any risks you face.

Phasing new product development

One way to minimise your risks is to phase investment in projects. By reviewing a project at the end of each stage of development, you can identify products or services that are unlikely to be successful. If the product or service fails to meet established criteria, you should consider cancelling the project. If it does meet them, you can allocate the resources to allow it to reach the next development stage.

Cost control

It’s essential to keep a close eye on costs when you develop new products and services to avoid them spiralling out of control. You should:

• estimate development costs in advance
• monitor spending throughout the development process
• introduce phased investment

There are two main ways to estimate costs:

• a top-down approach where you consider previous comparable projects and use them as a benchmark
• a bottom-up approach where all team members agree the costs they expect to incur with one project manager, who will then estimate the total cost

Remember that your costs could include staffing, materials, technology, product design, market research, prototyping and overhead costs.

For more information on working with formal project management systems for the first time, see our guide on project management – the basics.

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Creating a project development team

Every potential new product or service needs a dedicated development team.

In creating your team you need to include people with a variety of skills. For example, you may need a creative ideas person, a technical expert, a marketing specialist, someone in charge of market research who understands customer needs, someone who can source components and someone who understands the supply-chain difficulties you could encounter.

All team members should understand your business’ objectives and be committed to them.

There are many forms of effective teamworking and the right one for you will depend on your business’ needs. For example, team members might:

• work exclusively on one project in a single department, reporting to a project manager
• work exclusively on one project but remain in separate departments reporting to department heads who are under the project manager
• work on several projects at once with both a department head and project manager to monitor progress

Teams need someone in a project management role to lead, co-ordinate and motivate the team – see the page in this guide on how to manage a development project.

For more information on working with formal project management systems for the first time, see our guide on project management – the basics.

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Manage a development project

Project managers are essential to ensure the successful development of new products or services. The project manager is responsible for:

• controlling costs and allocating resources
• drawing up the product or service’s specification
• co-ordinating the product development team – see the page in this guide on creating a project development team
• timetabling the development process
• troubleshooting

Timetabling the development process

Your project manager should draw up a critical path for the completion of key tasks and stages in the product development process. SMART (specific, measurable, agreed, realistic and time-bound) objectives should be introduced to help measure and monitor progress.

However, your plans should be flexible as well so that you can deal with any unknown event that occurs.  For example, you may have to deal with a change in the project’s specifications or expected completion date.

For more information on managing your development project, see our guide on how to manage your research, design and development.

For more information on working with formal project management systems for the first time, see our guide on project management – the basics.

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The product development process

The process of developing new products or services can be divided into a number of key stages:

• Idea generation – to come up with innovative new ideas.
• Idea distillation – to screen out any ideas not worth taking forward.
• Concept definition – to consider specifications such as technical feasibility and market potential. If you’re planning a new product, you should also consider the design process at this point – see our guide on how can I use design in my business? You can also find information on the design process on the Design Council website- Opens in a new window.
• Strategic analysis – to ensure your ideas fit into your business’ strategic plans.
• Concept development – to create a prototype product or pilot service.
• Test marketing and finalising the concept – to modify the product or service according to customer, manufacturer and support organisations’ feedback. This means deciding the best timing and process for piloting your new product or service.
• Product launch – before setting a date for your launch, you should determine how you will sell, promote and support your product or service. It is important to get it right the first time, but remember that any decisions to delay your launch should be balanced against the danger that your competitors will beat you to market.

You can see our diagram of the product development process- Opens in a new window.

Some of these stages could overlap, but the presence of a staged product development process will help keep timing and costs under control. For more information on managing projects, see our guide on how to manage your research, design and development.

The lifecycle of products and services

All products and services have a lifecycle – this is the period that runs from the initial idea and development of a product to its withdrawal from the market and beyond. There are five key stages in the lifecycle of any product or service:

• Development
• Introduction
• Growth 
• Maturity
• Decline

Identifying where products or services are in their lifecycle is central to your profitability. For more information, see our guide on the product life cycle.

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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.

You will need to take the following factors into account:

• The benefits – or value – to the customer of your product or service compared with what the competition has to offer – will customers be prepared to pay the price you want to charge?
• Whether or not you’re first to market – is your product or service innovative or are you following a market trend?
• The selling channels you want to use as this will affect your promotional spend and distribution costs.
• How quickly you want to establish your product or service.
• The expected lifecycle of your product or service.
• How much you will need to charge to cover your costs.

Strategic pricing can be used to drive sales and regulate demand. See our guide on how to price your product or service.

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Sharing your ideas with others

At some stage you will probably wish to discuss your idea with a third party. But 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 your intellectual property.

Before talking to 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 our guide on non-disclosure agreements.

Intellectual property (IP)

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.

As your IP is likely to be a valuable asset, it’s wise to help secure the future of your business by protecting it legally. For information on the different ways you can prevent others from stealing your IP, and advice on carrying out an IP audit, see our guide on protecting intellectual property.

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Test the market

Product testing is important throughout the design process. While you are developing your product or service it’s a good idea to keep testing the market to make sure you are still on the right track. You can do this by using:

• Focus groups – ask small groups of your target customers what they want from your product or service.
• Questionnaires – try to get as wide a sample as possible.
• Prototypes – show an early version of your product to customers. You may find that your prototype will go through several stages of development as you refine your idea.

You may need to respond to suggestions from users by modifying the design. Don’t be discouraged, as most successful entrepreneurs do not view this as a failure, but as a learning curve.

It’s a good idea to send your product to a large or very reputable potential customer or user. A positive testimonial will prove invaluable as you approach other customers.

You may want to consider testing even after your product goes on sale. Ongoing contact with customers can uncover both the shortcomings of your product and possible opportunities that you may have missed.

Once you have a final product, you can then set about building a brand. A brand includes everything that is visible to the customer, such as the product name, its packaging and its delivery.

You also need to consider your pricing policy. You need 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. Then check on the price at which your competitors are selling to customers. You can determine the price of your product or service so that it is attractive to customers as well as making you a profit.

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Checklist: developing a product or service

The following checklist will help you understand everything you should take into account when developing a new product or service:

• Have you consulted members of your team about your development plans? They may contribute insights and have useful experience.
• Have you spoken to suppliers, customers and other business associates? Their specialist expertise could be invaluable.
• Have you thought about your potential market and competition? For more information, see the page in this guide on is there a market for my idea?
• Have you thought about how you’re going to price your product or service and how to cover your costs? See the page in this guide on pricing your proposed service or product.
• Have you considered 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 further information, see the page in this guide on financing your idea and cost control.
• Have you considered who needs to be on your product development team and how they will work together? For more information, see the page in this guide on creating a project development team.
• Have you considered who’s going to manage the team? See the page in this guide on how to manage a development project.
• Have you considered any regulations (including environmental regulations) that will affect your new product or service?
• Have you looked beyond the new product or service’s immediate potential and considered the longer term?

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CASE STUDY

Here’s how I exploited a gap in the market

Based in Cornwall, Gecko Headgear Ltd is a designer and manufacturer of marine safety helmets. Founded in 1993 by Jeff Sacree, the company employs seven people and started out as a surfboard business. Jeff explains how he spotted a gap in the niche watersports market, for which he developed an innovative heat-retaining helmet.

What I did

Identify the market

“As a surfer, I could see the potential for a helmet that was both lightweight and heat-retaining. I was also looking for ways to diversify my product offering, since selling surfboards is highly seasonal. I designed and made the first helmet for myself but the idea soon caught on with other surfers.

“However, surfing is a relatively small market and I began wondering if I could base the whole business on my helmet design. I researched other potential users and a conversation with a lifeboatman led me to approach the Royal National Lifeboat Institution (RNLI), who were immediately interested in using a version of the helmet.”

Plan ahead and get funding

“Although I was already making helmets, working with the RNLI was a different ballgame. The helmet they wanted had to be adapted, tested and certified before I could start selling it. I also needed to take on staff, which meant the company needed investment. I got a bank loan on the back of the RNLI’s involvement, which was then topped up at various stages.

“A good relationship with the bank is crucial when you’re trying to bring an innovative product to market. In our case the product development process took three years – far longer than we initially expected.”

Keep innovating

“When the RNLI contract finally brought us success, we were careful not to rest on our laurels.

“To date, we’ve gone through ten different versions of the safety helmet, refining it in line with customer feedback each time. The helmet can now accept a range of add-ons, such as cameras, torches and communications equipment, according to customer requirements. We’ve also developed a new full-face helmet for watercraft racing and a range designed to capitalise on the current boom in extreme sports.

“Partnerships with suppliers have been another key to success. For example, we’ve worked with a manufacturer to develop a new adhesive that can withstand saltwater use. We’ve also partnered with The Welding Institute to find better ways of welding sections of the helmet together. This has helped us innovate and keep ahead of competitors.”

What I’d do differently

Get advice sooner

“Approaching the RNLI was quite a bold move for a one-man band. I had no experience of dealing with large organisations and, with hindsight, I could easily have come unstuck in the early stages. Getting advice at an earlier stage would have helped me approach such sales conversations better prepared.”

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CASE STUDY

Here’s how I got my great new product in front of customers

Sam Tate co-founded Sprue Aegis plc in 1998 when he and his business partner came up with an innovative smoke detector. The FireAngel fits between a light fitting and the bulb, taking its energy from the mains. FireAngel charges up its rechargeable battery when the light is on – and runs off the battery when the light is off.

The company hasn’t looked back since convincing one high street retailer to sell the detector. It’s now stocked in around 6,000 outlets.

What I did

Research the target consumer

“We spent months digging out market research reports, talking to the Fire Brigade and the Office of the Deputy Prime Minister – the government department responsible for fire safety (now the responsibility of Communities and Local Government).

“Once we confirmed the FireAngel was a valuable idea, I went out on to the street to see if there was a market for it. We basically just stopped people, showed them the prototype and asked a set list of questions. We also looked closely at our competitors’ products and who their market was.

“We initially worked out a sales strategy involving the Internet, direct marketing and advertising. However, we soon knew on a cost-per-sale basis this wouldn’t be feasible – we would have sold less and had to charge twice as much. We then realised an ideal way to reach consumers who wanted a quick solution was through supermarkets.”

Get the right price and sales channel

“Most smoke detectors retail at between £5 and £10. We knew we could charge a premium because fitting the alarm is as simple as changing a bulb. It doesn’t need a battery and it lasts for up to ten years.

“We set the price at around £20 but the retailer obviously takes a margin. Remember – it’s a lot harder to put the price up than drop it down, so don’t go in too cheaply.”

Nail the sales pitch early

“It’s really important to be able to get your message across in 30 seconds flat. If you get the chance to speak to a buyer, you need to be able to sock it to them – they’re extremely busy people. It’s definitely down to trial and error so I would recommend rehearsing your sales pitch in front of anyone who will listen, and not delivering it for the first time to the top buyer at a potentially major client.

“It took three years to get our product to market. A lot of this time was spent on design and safety testing, but it took 18 months of talking to one well-known high street retailer before they agreed to stock the alarm. Once you’re in there with one retail chain, it gets much easier to approach others. But you definitely have to be persistent to succeed.”

What I’d do differently

Don’t take ‘no’ for an answer – right from the start

“It’s easy to say, but be prepared for knockbacks. We got them – and would have started to get demoralised by them without a total belief in our product.

“After a short time we realised that persistence was the key to making it all happen. Buyers are busy people and you’ve got to make yourself stand out from the crowd. For example, we waited in the reception of one high street retailer’s head office until the buyer agreed to see us. Sometimes you have to go to that level.”

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CASE STUDY

Here’s how developing a new product benefited my business

WOW Toys was formed in 1997 by toy maker Nadim Ednan-Laperouse and is based in Fulham, London. The company designs and supplies multi functional toys that don’t need batteries for children aged 0-5 years. They currently sell to over 400 retail outlets in the UK and export their products to 36 countries around the world.

Here Nadim talks about the value of new product development, and how it has benefited his business.

Transcript

Nadim Ednan-Laperouse: “My name is Nadim Ednan-Laperouse, I’m the CEO of WOW Toys. We’re an English toy company that specialises in pre-school toys – that’s toys for younger children. (Footage of brightly coloured toy vehicles and figures) We distribute in the UK and in 36 other countries in the world. (Picture of a world map with pins in various countries in all over the world) When we show new products to our customers, their reaction usually is ‘WOW! That’s fabulous, we can’t get that from anywhere else, we want to buy it.’ It’s as simple as that.”

“New product development at WOW is a kind of controlled process and we’ve developed a planning system for that, that is quite straightforward to follow for all of the people in the company. There are a lot of processes involved in the cycle, and planning is key. For us at WOW it takes us about a 1-year cycle time to have an idea and to launch it on the market. (Picture of a plain white prototype toy next to a bright green finished article) And if we adhere to that cycle, or that schedule, then we win.”

“We’re always working on a range of new potential products. And recently Harvey Harvester (Nadim holds a bright green combine-harvester toy), this product here that is one of our star products, this is a recent launch, and it’s literally been on the market for a couple of months around the world, and I’m glad to say it’s selling very well. He’s a harvester – the perfect harvester for a two-year-old – comes with his own driver that can fit inside the cab, like so (he demonstrates this).”

“And it has a rotating front thresher to harvest all the wheat in time for everybody, and also bales of hay that can be put in the top, like that (he demonstrates these capabilities) and as the vehicle drives along, the hay comes out the back.”

“He’s been successful, as far as we can ascertain, because the theme and the style of it has appealed to a very broad brush of our entire customer base, so that every single country is buying this product and the mothers and children love it.”

“When we start considering new product development, there are three things that we need to look at. One is the trends in the marketplace. Two – we need to look at what’s missing from our own product range, against our competitors. And three, also what the public, ie the end consumer are asking from us.”

“Through our process, we get a pretty clear idea early on if a new product is going to be successful, because we show the prototypes of the designs to our key customers, both in the UK and abroad. And we do this at specific times in the year, and that allows us to actually gauge very early on if a toy is going to be successful or not, and whether we should actually pursue finishing the design and spending more money on a project.”

“Our most successful product has been this one I’m holding in my hand called Harry Copter. He’s been successful, as far as we can ascertain, because we don’t use batteries, and this is a perfect example of that (he demonstrates the toy – pressing a button to make the rotor spin). You have a mechanical toy, that doesn’t need batteries, but it can do a lot of things. And the theming of the toy is very endearing, and appeals to a wide range of children and parents across the entire world.”

“When we have successful new products at WOW, the impact is quite tremendous; it really pushes the company along financially, and also in terms of relationships with our customer base. A successful product basically puts us right at the top of the league, in terms of our situation and our potential growth as a company. Largely, most of our toys are very successful, and we spend a lot of time making sure of that. But when it’s really successful, it’s a great feeling for the company and everyone else who’s involved with the product.”

“As a research and development based company; return on investment is really important for us, because that’s where the profits come from. Now our built-in timeline is that any brand new product should pay its entire cost of development within the first 14 months of being launched on the market. That is our measure of success, and if we can beat that, then fantastic! If a toy takes longer than 14 months to pay back, then something’s not quite right. But after 14 months, we’re making profit, year on year.”

“There are a lot of risks attached to new product development, but anything that can get you ahead by a long way does have its risks. Product development is just a process, that if it’s well managed, and you are kind of in control of most of the issues, it will pay dividends. However, if you’re not managing that process well, you can end up losing quite a lot of money.”

“New product development is absolutely vital. WOW Toys would not exist for more than one year as a business if we didn’t have new product development. I think new product development is the life-blood and the soul of any business. It’s absolutely important to be excited, motivated and want to be involved in new product development.”

Disclaimer: The material in this audio/video may include the views or recommendations of third parties, which do not necessarily reflect the views of Kraken, or indicate its commitment to a particular course of action. We assume no responsibility or liability arising in respect of any such third party material.

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