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Workshop 4: Turning your idea into a Product

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  • 1. Commercial Development Programme Commercial Essentials Workshop 4 – Developing Your Idea Into a Product
  • 2. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Ross Golightly
  • 3. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Agenda
    • Recap on Commercialisation Project Management Cycle
    • Product Creation
    • Product Development and Prototyping in the Commercialisation Process
    • The Role of a Prototype in Raising Funding and Commercialisation
    • The Advantages of Strong Design and Product Development
    • The Components of a Product
    • Working with a Developer / Prototyping Provider
    • Case Study: Breeze Blockers
    • Product Testing
    • Concept Research
    • Financial Considerations
    • Prototyping and Licensing/Technology Transfer
    • Creating a Product: Considerations for Licensing
    • Sources of Funding
  • 4. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Commercialisation Project Management Cycle Risk Management Strategy IP Exploitation Concept Research Business Plan IP Protection Funding Package Product Dvpt Commercial- isation Working Capital Strategy Dvpt Market Research Company Set Up Idea Dvpt Revenue Generation
  • 5. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Product Creation
    • There are generally 4 stages that an early-stage company would go through in creating a product:
    • Development of the idea (product/service/technology)
    • Creation of a crude prototype (usually called a “mock-up” and created using DIY methods)
    • Creation of a pre-production prototype (using a third party rapid prototype provider)
    • Finished product/technology stage (the end-result that has been commercialised)
  • 6. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Product Development and Prototyping in the Commercialisation Process
    • After company formation, prototyping/product development is one of the first
    • activities you should undertake.
    • This should be done in tandem with any protection of IP so the filing reflects the
    • product concept being created.
    • Create a technical project plan (either separate to or as part of your business plan)
    • scoping out the interventions, providers and finance required to create your
    • product.
    • Don’t ever engage the market until the product is complete unless you have a very
    • stakeholder-dependent idea (such as a technology platform that harmonises with
    • another platform) and need market partners to be part of the process.
  • 7. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Where are you in the Process? Risk Management Strategy IP Exploitation Concept Research Business Plan IP Protection Funding Package Product Dvpt Commercial- isation Working Capital Strategy Dvpt Market Research Company Set Up Idea Dvpt Revenue Generation
  • 8. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • The Role of a Prototype in Raising Funding and Commercialisation
    • Provides something tangible to show an investor, lender or funder
    • Provides something tangible to show a licensee or market partner
    • Makes the idea more investible (i.e. the product is more proven to a greater
    • degree)
    • Improves your credibility and professionalism in the eyes of a third party
    • A business with a mere idea (no matter how strong) is still largely unproven and
    • less investible (if at all)
  • 9. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS What are the Advantages of Strong Design and Product Development? .....
  • 10. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Apple
  • 11. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS “ Great Design Makes People Love Your Company” Business Week
  • 12. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS “ Innovation and design allow Sony to maintain market premium pricing, providing more cash flow from its product portfolio. This cash flow can then be re-invested into more innovation” Financial Times
  • 13. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • The Value of Strong Product Design
    • Design is not a cost – bad design is a cost
    • Strong design holds premium prices – even against like for like products/brands
    • Strong design makes your product more distinct and less likely to be easily
    • imitated/copied
    • Design can differentiate products that have the same functionality as another
    • Design is now a strategic driver in major corporations
  • 14. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • The Components of a Product
    • Set your brief around:
    • Positioning Brief (Uniqueness, Innovation, Differentiation)
    • Technical Innovation Brief (Function, Features, Technical USP, Specification)
    • Product Design Brief (Aesthetics, Feel, Touch, Colour, Materials)
    • Brand Execution Brief (Visualisation and Verbalisation of your product offer)
  • 15. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Working with a Developer / Prototyping Provider
    • Always operate with Non Disclosure Agreements (NDA’s)
    • Thoroughly investigate issues around ownership of intellectual property arising
    • from the work together
    • They will also be able to project-manage your first-stage production run – often a
    • very time-intensive process
    • Seek advice from your patent attorney – ensure the outputs of the work reflect the
    • original filing for protection of the idea
    • Always work to a clear brief – a supplier is only ever as good as the instruction you
    • give
  • 16. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 1: Development of Idea: “ Develop, manufacture and supply a range of bicycle accessories designed to keep a cyclist warm during the cold autumn, winter, and early spring seasons”
  • 17. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 2: Mock Up Prototype Development
  • 18. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 3: Pre-Production Prototype (developer engaged)
  • 19. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 4: Product Range Roll Out and Full Brand Concepts
  • 20. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS The Importance of Product Testing: Success Rate of New Product Ideas Development 5 10 15 20 25 30 35 40 45 50 55 60 Number of Surviving Ideas Cumulative time (percent) Screening Business analysis Development Testing Commercialisation One successful new product
  • 21. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS The Problem with not doing Research Development
  • 22. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Product Testing: The Subjective Massacre Development I don’t like change: We should make the same products…forever! I don’t like Fred: So I don’t like his ideas! I’m the boss – therefore I’m right…
  • 23. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Product Testing: Scoring Attractiveness Development High Medium Low size of market large modest small regulatory compliance High requirement High Value Some requirement No requirement importance of innovation aesthetics = sales cost compromise functional only Component count Low Medium High Buyer decision process identifiable and simple or experienced complex & slow or some experience difficult to Define or no experience targeting customers Visible targets Attractiveness Worse Option Better Option Strategic Factors Operational Factors Some targets no visible targets
  • 24. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Product Testing: Opportunity Attractiveness Development High Medium Low size of market Attractiveness regulatory compliance Importance of innovation Opportunity 1 Opportunity 2 Opportunity 3 Opportunity 4
  • 25. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Concept Research
    • Used when you haven’t yet enough faith ‘to make it real’:
    • Concept research - though vital in development - not used to make decisions
    • Provides valuable insights – almost as useful as going out into the field
    • Defining customer requirement - pre prototype
    • Prioritising requirements/ preferences - planning/ design brief
    • Preliminary price points - market will bear/expected price range
    • Challenge user issues - functionality/ usability/ practicality
    • Positioning competitors products - Ranking on customer Criteria
    • Concept research is conducted with the prospective customers / market
    • influencers themselves
    • Face to face / Focus Groups are more forthcoming.
  • 26. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Product Research
    • No-one would sensibly go into production without product research – but people
    • still do. Or they research an idea in limited, artificial environments.
    • Thousands of ill-researched new products have failed to survive the test of the real
    • world.
    • Research should be professionally carried out by objective third parties with real
    • potential customers. It is essential but expensive.
    • A bold product claim must stand up to scrutiny from customers, the trade, suppliers
    • and the media.
    • Think – Commercial testing: with potential customers.
    • Think – Technical testing: stress testing, scenario testing, quality testing, live
    • environments etc.
  • 27. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Creating a Product / Prototype: Financial Considerations
    • U nit costs decrease as production runs increase
    • Initial tooling is a one-off cost and will represent a high investment
    • Consider all of your on-costs associated with the product – packaging, secondary
    • packaging, distribution etc.
    •  
  • 28. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Development Costs in the Product Development Cycle 80% of all future product costs determined by this stage Idea Concept design Detailed design & prototypes Production ramp up Actual spend Costs committed On-going production Total cost % 100 %
  • 29. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Prototyping and Licensing/Technology Transfer
    • Having a prototype that has been created by a clear R&D exercise increases your
    • negotiating position with a licensee or technology partner.
    • A well developed prototype provides a clear revenue opportunity “handed on a
    • plate” for a manufacturer to exploit – this de-risks the opportunity to the licensee
    • and increases your bargaining power.
    • Alternatively, an under-developed product at the idea stage, no matter how strong
    • the idea, represents risk to the licensee because they will have to invest in R&D to
    • get the idea/technology to production stage. This decreases your bargaining power
    • in royalty negotiating.
    • Always seek to develop your idea as far as humanly possible. Ultimately, aim to do
    • the work that the licensee’s R&D department would have done themselves.
  • 30. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Creating a Product: Considerations for Licensing
    • Consider things from the licensee’s perspective so that your product is
    • commercially viable to them:
    • Can it be manufactured cost effectively?
    • Will it hold a price that the market will bear and that will provide a suitable margin
    • for the licensee?
    • Can the parts/components be easily sourced (whilst still creating novel value)?
    • Is the right production technology available to produce the product competitively?
    • Can this production technology be easily sourced?
    • Always remember though: prototypes never represent a finished product – they
    • can be manufactured cheaper and are often de-engineered in the interests of
    • stretching margins further
  • 31. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design - Codeworks DEV Fund
    • Launching April 2010 but currently being trialled with small intake of businesses
    • Funding towards development of software prototype
    • Businesses must be classified as high-growth and have an ability to scale to revenues of £3m
    • within 3 years
    • Business must not have in-house technical capability to produce a software prototype (i.e. idea but
    • not know-how) and a well thought-through Business Plan to enter the fund
    • Entry to DEV fund is selective – intake is based on 15 businesses over the next 12 months
    • Initial market research to support prototype development is funded
    • Software development provided by supplier on Codeworks panel who the business selects via
    • quote process
    • Codeworks fund provides 2:1 match – i.e. 66% towards supplier costs with client providing 33%
  • 32. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design - Innovation Vouchers
    • Business Link grant towards any aspect of Innovation (e.g. product development, product
    • testing etc.)
    • Can only be accessed by trading businesses (although pre-orders can be classified as
    • trading)
    • Funding at 100% towards first £3,000 and 70% for a further £7,000 – fixed/guaranteed
    • A business can only access the Innovation Voucher once and with only one provider
    • Was formally only redeemable against public organisations but now redeemable against
    • private sector providers
    • Only redeemable against suppliers accredited to deliver Innovation Vouchers (i.e. always
    • check with provider)
    • Must show demonstrable economic and financial outputs to Business Link (i.e. high growth)
  • 33. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design - Business Link Solutions Funding
    • Prototype creation is not normally funded strictly speaking, although “design consultancy” and such
    • like can be
    • Pre-start funding covers up to 6 months pre-trading and 6 months into trading
    • Pre-start high-growth business (ability to achieve £500k in turnover within 3 years) receive up to
    • 70% to a maximum of £45,000
    • Non high-growth (i.e. lifestyle) receive up to 70% to a maximum of £8,000
    • Existing trading businesses outside of “pre-start” stage receive up to 50% at an uncapped level
    • within state aid rules
    • Product development areas that could be funded include branding, concept creation, visualisation,
    • product design consultancy, feasibility studies, technical consultancy and such like.
    • Good private sector providers include Design Right Solutions, Redfox, Octo Design and Product
    • Group .
  • 34. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – Design Network North
    • Public programme managed by RTC North to co-ordinate product design activities in the
    • North East
    • 100% funding available to support design and development or innovative products
    • Funding awards are selective / meritocratic and not guaranteed – businesses must “pitch” to
    • a panel
    • Must be able to evidence high market potential and value of creating the product
    • “ Design Exemplar” awards given to products with major design value
    • This provides 100% funding towards engagement with a product development consultancy
    • Material costs and purchases also paid for
  • 35. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – DTI Grant for R&D
    • Grant for businesses at the R&D stage (i.e. pre-prototype) needing funding for
    • investigative analysis
    • Must be a business operating in a high technology or science field with an element
    • of risk – i.e. unprovable technology
    • Can be for products and processes (but must be technologically innovative)
    • Selective intake – businesses must complete an in-depth application form setting
    • out R&D programme and selection process is based on level of innovation,
    • commercial potential, exploitation prospects, management team capabilities,
    • financial viability and financial case for the grant.
    • Micro Fund (45% grant at between £5k and £20k) for companies with less than 10
    • staff and a turnover of £2m for a project of less than 12 months to develop a low-
    • cost prototype
  • 36. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – DTI Grant for R&D
    • Research Fund (60% grant at between £20,000 and £100,000) for companies with
    • less than 50 staff and a turnover of £10m to investigate technical and commercial
    • feasibility of innovative new technologies, leading to an experimental model (not a
    • pre-production prototype).
    • Development Fund and Exceptional Fund also exist but for much larger
    • businesses.
    • Match to grant can be made from the business via attributable salaries, R&D
    • expenses or other finance sources that have been accessed for the same project
    • (e.g. POC).
  • 37. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – Digital Factory
    • ERDF funded programme to provide prototype and product development support
    • Funded support at up to 50% with discretion to exceed this in some cases
    • No application process and relatively easy to access
  • 38. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – Manufacturing Advisory Service (MAS)
    • Although not direct product creation, support is available on the manufacturing
    • issues around this
    • Initial diagnostic provided on a 100% funded basis
    • Can support on finding manufacturing sub-contract partners
    • Follow-on funding of up to 50% towards direct project interventions
  • 39. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – Proof of Concept
    • Debt, equity or convertible loan fund managed by North Star – not a grant
    • For pre-revenue businesses at the concept development stage
    • Usually accessed for feasibility work and product development
    • Must have a well thought-out Business Plan to apply and be able to get to revenue
    • quickly
    • Investments made at flexible levels averaging c £90k per year
  • 40. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS
    • Sources of Funding for Prototype Development, R&D and Product Design – Technology Fund
    • Debt, equity or convertible loan fund managed by IP Group
    • Investment in early-stage technology development ranging from £50k to £1.25m
    • Businesses far from market and needing intensive R&D would probably transact
    • on an equity basis
  • 41. NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Thanks for Listening ... Q&A Ross Golightly [email_address] Tel: 07984 379 558 / 0191 4604126 www.twitter.com/RossGolightly www.spheraconsulting.co.uk

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