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Workshop 4: Turning your idea into a Product
 

Workshop 4: Turning your idea into a Product

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    Workshop 4: Turning your idea into a Product Workshop 4: Turning your idea into a Product Presentation Transcript

    • Commercial Development Programme Commercial Essentials Workshop 4 – Developing Your Idea Into a Product
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Ross Golightly
    • 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
    • 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
    • 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)
    • 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.
    • 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
    • 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)
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS What are the Advantages of Strong Design and Product Development? .....
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Apple
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS “ Great Design Makes People Love Your Company” Business Week
    • 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
    • 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
    • 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)
    • 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
    • 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”
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 2: Mock Up Prototype Development
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 3: Pre-Production Prototype (developer engaged)
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS Case Study: Breeze Blockers Stage 4: Product Range Roll Out and Full Brand Concepts
    • 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
    • NORTHUMBRIA COMMERCIAL ENTERPRISES INNOVATION CAMPUS The Problem with not doing Research Development
    • 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…
    • 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
    • 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
    • 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.
    • 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.
    • 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.
      •  
    • 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 %
    • 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.
    • 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
    • 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%
    • 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)
    • 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 .
    • 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
    • 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
    • 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).
    • 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
    • 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
    • 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
    • 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
    • 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