Most companies, large and small, recognize that they need to constantly develop new products or revisions to existing products to stay ahead of the herd.
Ideas for new products come from multiple departments: Sales, Engineering, Marketing and occasionally the people who manufacture the product might speak up too.
Sales and Engineering generally butt heads during new product development, especially in the concept phase. Sales goes and talks to customers and brings back highly optimist views of what will sell. This might be based on a compilation of many customers, or it might be based on one customer, or it might be based on something that someone dreams up and thinks it is a good idea. Because it’s Sales, this department always has a say and will get their New Product Idea heard.
It is Engineering’s job to tell Sales how long it will take and how much it will cost to build. Engineering departments are often overworked and the last thing they need on their plate is another bright and shiny learning curve.
A typical New Product Conversation between Sales and Engineering:
Sales: I just talked to 500 customers and they all need this Doohickey to go with their Boohaha that they purchase from us already! It’s a definite win! I can sell this right away!
Engineering: That Doohickey requires a wireless interface, medical certification and will cost 150k to develop.
Sales: Well everything has wireless, how hard can that be? And our competitor has medical certification already! We are going to lose market share if I don’t get this product!
Engineering: You’ve piled X, Y and Z projects on me just this month alone, when am I supposed to work on this?
Sales: Can’t you just work more hours? I’m doing MY job, pulling in orders.
With this kind of combination of blind optimism, time constraints and development costs, it’s necessary to analyze whether or not the New Product Idea actually has some merit. It is important to do this before you have engineers starting to design it. I use a Market Analysis procedure for doing this and it works like this:
- Do the obvious first, looking to see if it exists already.
- Ask if it existed already and failed.
- If it did exist and fail, was it because it was:
- Too expensive?
- Too hard to build?
- Too hard to certify?
- Something else entirely?
The next step is to look at the total available market, whatever that might be. For example, you want to invent a new kind of motor with a wireless interface and have it medically certified. So you look at the amount of people who buy motors to be built into products that will meet medical specifications. Units can be in potential customers (# of people), potential dollars (total money in the market) or percentages of market to be won. The idea here is to see if this project is even worth analyzing further. Especially the idea here is to define the project BEFORE you waste an engineer’s valuable time.
Once it is determined that there really are people who purchase motors for medical devices and you have some kind of number, you then look at all the people who already buy motors from competitors. This is called the served available market. This number is what you can get if you got 100% of competitor business. Actually winning the entire market is unlikely and unrealistic, but this can be thought about in terms of five year plan. How much of this business can we take within the next five years? Say you already know from talking to customers that 10% aren’t happy with their current supplier; that means you have a group ready to be convinced that that they should buy motors from you.
Now that it’s been determined that there is a total market and that some of it is ripe for your company to take, there needs to be a plan to convince customers to buy the motors from you. It needs to be figured out how you are going to do that. It doesn’t make sense just to say the normal things like “We will sell it at a trade show” or “We’ll just advertise it in a magazine”. Specifics are needed. WHO exactly is going to sell it? What are the distribution channels? (yeah, that’s some sales lingo right there) Most importantly, who specifically is going to buy it?
This kind of procedure can loosely be performed in a day or two, saving an engineering department time and money. It also saves the whole company from moving forward on a product that there is no market for, or a product that costs too much to develop. With sales people like this, what’s not to like?
I doodled that picture myself.
I used to tell the sales guys: “You can have it cheap, fast and good – pick any two”.
Cheap+Fast = no good
Cheap+Good = not fast
Fast + Good = not cheap!
And they’ll still make you build it.
In small struggling companies, you’ll frequently have the sales people at your door, telling you they just know that they can sell more of the existing product if you just make a few simple changes. To paraphrase someone or other: if you can’t sell your pig, putting lipstick on it isn’t going to help.
In large companies that work very closely with their customers, the customer will tell you that they want everything you ship to them to have a particular colour of button or a different way of doing something.
It seemed so easy in engineering school.
I suppose I’ve been fortunate, but in my experience the marketing and development guys I’ve dealt with have been by and large understanding that I have a number of projects on my plate at any given time. I found that establishing and referring to a project priority list allows me to better deal with those certain individuals who think I should drop everything I’m doing and wave a magic wand and create whatever it is they’ve dreamed up. Most people realize it does not work this way, and those who don’t have been, for me, pretty easy to deal with.
But what Alan said made be laugh, because it’s so very true.
A funny comic about pigs and lipstick!
http://www.eeweb.com/rtz/polished-pig
Is this what’s happening at your current employer and your industry colleagues at other companies?
Exactly the reason why I’m staying away from that industry in terms of business, as I’m just focused on tackling marketing problems rather than marketing + engineering design + commissioning + manufacturing + licensing problems.
Enjoyed your logical analysis of determining what products / features to build, and when / how to allocate company resources. But unfortunately it’s a mistake to apply logic (engineering) to an illogical field (sales). Unless chief company executives have engineering backgrounds – that they still exercise – they will not go along with your analysis. Too many executives are businessmen who downplay the role of engineering (some consider engineering an unhappy expense). Too many businessmen are easily excited by Sales’ promises of profits, and they want them NOW. That’s why they hear what Sales says, over the objections of Engineering. Even if Engineering has time to do the market analysis that Sales skips, they’re not likely to be heard over Sales’ prognostications.
I’ve had better luck gently steering Sales toward project goals that make better engineering sense. By keeping abreast of new developments in my field, I find promising and interesting features that I in turn mention to Sales. If I can get them excited about those possibilities they’re more likely to champion projects that I’d rather be working on. They’ll mention these ideas to their customers, and if they get any positive feedback voila we can get a funded project that we like. Yes it’s manipulation, but that’s how a lot of companies work. To fight fire with fire I’d rather do some manipulation than to be constantly regulated.