Product or service development

Course Overview
• Product planning and development
• Opportunity assessment plan
• Market and segmentation
Course Objectives
After completing this unit, you’ll be able to:
• Discuss the technology based product design and development
process
• Discuss the idea generation process
• Convert and idea into a design
• discuss the process to launch an idea
• Explain the disruptive technology concept
Course Contents
• Product planning and development
• Idea development process
• Launch the idea
• Opportunity assessment plan
• Disruptive technology
• Market and segmentation
Introduction
• A technology venture is often built around a new technological
product or service that solves a significant, presently occurring,
problem.
• In other cases, an idea, technology or product may first be created
and a market for that idea, technology or product would then be
thereafter developed
• Once an idea is conceptualized, it needs to be screened and
evaluated – through an appropriate systematic process.
• E.g. Lean approach can be used where evaluation of the idea-technology
product is performed as an integral part of the build-measure-learn
feedback loop involving presentation of successive minimally viable
products to consumers.
• The screening process needs to consider the degree of newness that the
new technological idea presents – the extent to which the idea involves
new technology or a new marketplace to the venture (include the
entrepreneurs, the distribution system and the consumer)
Product planning and development
• A standard approach used by many technology entrepreneurs to
evaluate new products and services is the product planning and
development process
• Consists of four stages, with an evaluation being done at the end
of each stage:
• Idea stage
• Concept stage
• Product development stage
• Test marketing stage
• To work effectively, evaluation criteria must be established and
employed at each stage to either reject an innovation or allow it to
proceed to the next stage
The idea stage
• The stage when the innovation is formulated and developed.
• There are many ways these innovative idea occur. Sometimes the
innovation comes from observing trends.
• There are several trends occurring today that will provide the
opportunity for new innovations.
• These include the organic food trend, the green trend, the health trend,
the clean energy trend, and the social media trend.
• Just look at the increasing aging of the population around the
world or the number of people tweeting, and you can see the
trends and their increasing size.
• Other sources of innovative ideas include assessing the inventor’s
own research, evaluating existing products and services in the
marketplace, listening to the consumers’ complaints and
suggestions, and observing new legal requirements to doing
business in a country
The concept stage
• After the innovation has passed the evaluation process in the idea
stage, it moves to the concept stage.
• In this stage, the modified innovation is tested to determine
market reaction and the degree of acceptance.
• Although various methods can be employed, one of the easiest,
cost effective methods is to discuss the innovation with
individuals in the defined market which so called
“conversational interview”
• Various features, price and promotional aspects of the innovation
should be discussed in comparison to competitive products or
services available in the market – particularly the ones presently
being used to fulfill the market need. Again, the information needs
to be analyzed using the evaluation criteria established before
passing onto the next stage – the product development stage.
The product development stage
• In the product development stage, a final version of the product,
based in part on the evaluations obtained in the concept stage, is
subjected to consumer input.
• Again, consumer feed back is obtained and the refined innovation
is evaluated against the evaluation criteria established
The test marketing stage
• Following a successful product development evaluation, the
innovation moves into the final stage for the final evaluation and
launch, which starts the product life cycle
• In this, the test marketing stage, a market test of the innovation is
done to help ensure successful commercialization.
• Due to the costs of the test markets and the nature of some
products or services, this stage is often bypassed with the
innovation going from the product development stage direct to
commercialization.
The idea development process
Describe the idea and competition

Determine the need

Modify and validate

Develop the marketing plan

Develop the final product/service

Launch the idea

Describe the idea and competition
• To describe the idea; evaluate any products or services that are
filling the same need; and determine the advantages, benefits and
features that provide these benefits of your idea.
• It is important to describe the details of the idea, the problem is
solves, and the need it fills as succinctly and completely as
possible
• Try to identify competitive products and services and their prices
and allow the determination of the unique feature of your
innovation (compared to the competitive products or services
presently on the market filling the same need) and the features
that deliver each of those benefits
Determine the need
• The second stage is to determine the need for your innovation.
This requires that the description developed in the stage one is as
in-depth as possible.
• At least three different groups of consumers or firms that might
benefit from your innovation should be identified, and a customer
profile for each group should be established.
• For business-to-consumer (B2C) groups, this profile should at least
include age range, income range, and gender. Listing family size,
education, occupation, and race are helpful, but not as critical.
• For business-to-business (B2B) groups, the profile should include
industry, type of product or services, location and size.
• A concept survey instrument should be developed that includes a brief
description and, where applicable, both a diagram of your innovation and
survey questions to elicit the desired feedback
• The result of the concept survey of members of each of the three groups
should be analyzed to indicate the important criteria that interest your
potential customers
Modify and validate
• Modify and validate, the third stage, involves developing a
prototype template of your innovation and interviewing
individuals concerning this prototype.
• The questions concerning the prototype should focus on features
and benefits of your prototype, the important aspects of this
particular product and the buying process involved
Develop a marketing plan
• Stage four involves developing a detailed marketing plan.
• The marketing plan focuses on pricing, distribution, and
communication (promotion). The pricing data obtained in your
competitive analysis (stage one)should be evaluated along with
cost data to determine an initial price.
• A distribution plan laying down the geographic area where your
innovation will be sold, how you will physically get it there, and
distribution channel(s) should also be developed when applicable.
• Finally all the possible marketing communication tools
appropriate should be considered, including the importance of
social media.
Develop the final product or
service
• The development of the actual idea is the fifth stage
• This involves the development of the features of the final idea, its
marketing theme, naming and packaging (if appropriate).
• The marketing theme needs to focus on key benefits or unique
selling propositions that appeal to your target customers.
• The package, when appropriate, has many aspects, the most
important of which is eye appeal when using a retail distribution
Launch the idea
The concept of newness
• One of the critical concepts affecting the successful launch and
sustainability of an innovation is its newness – its novelty and
disruptive nature.
• Even though, of course, newness or uniqueness is needed (and in
fact is an essential part of an innovation), the degree of newness
of the innovation affects its acceptability and the length of the
adoption cycle for consumers, the individual investor and/or the
organization, and the distribution system.
Newness to the consumer
• Regardless of whether the innovation is for the consumer market
(B2C) or the industrial market (B2B), if it is too far in advance of
the present state of the market, problems can occur.
• Consider the newness of the innovation in terms of its disruption
in the established consumption patterns or lifestyles of the target
market.
• The least disruptive innovations – continuous innovations – have
little impact or influence on the lifestyle of the purchaser and
therefore usually do not take very long in the evaluation and
adoption stage
• The majority of innovations are in this category.
• On the other hand, it takes time for truly disruptive innovations to
be accepted and adopted in the marketplace. Potential resistance
to replacing an existing base of still operating-old-technology
products should be evaluated.
Newness to the organization
• The newness of the innovation to the sponsoring organization is
also important to assess.
• The first time as individual invents, or the first time an innovation
is in a new area of endeavor for a venture, there are more
difficulties in developing and launching the innovation
• This is reflected in the rule that most venture capitalists use:
make use someone on the management team, if not the
entrepreneur, has experience in the industry of the new venture.
• When an innovation has not only technological newness but also
market newness for an organization (referred as diversification),
the highest level of problems (and even failures) is encountered
by companies regardless of size.
 New product classification system
Market
Technology newness

Product No Technological Improved Technology New Technology

Objectives Change
No market Reformation Replacement
change Change in formula or Replace existing product
physical product to optimize with new one based on
costs and quality improve technology
Strengthened Remerchandising Improved product Product life extension
market increase sales to Improve product’s utility to Add new similar
existing customers customers products to line, serve
more customers based
on new technology
New market New use Market extension Diversification
Add new segments Add new segments Add new markets with
that can use present modifying present products new products
products developed from new
technology
Newness to the distribution system
• The final area of concern is newness to the distribution system
• Like consumers, individuals and organizations, distribution
systems have lifestyles – ways of doing thigs.
• An innovation outside its typical product category, size, shelf fit, or
packaging will have a more difficult time gaining access.
Opportunity assessment plan
• Probably one of the best methods to use to ascertain the
marketability of an innovation is the opportunity assessment plan
• An opportunity assessment plan is NOT a business plan, it should:
• Be shorter. focus on the opportunity and market rather than the business;
and has no financial, marketing or organizational plan.
• Have no computer-based spreadsheet
• Be the basis to make the decision on whether to act on an opportunity or
wait until another, better opportunity comes along
• It is used to determine if the innovation has at least three or five
unique features (unique selling propositions) compared to the
competitive product or service presently on the market and filling
the same need
• It also determines if the product or service has a viable market
that is large enough, growing and accessible enough to warrant
pursuing the innovation
Opportunity assessment plan
• Part 1 – a description of the product or service
• What is the market need for the product or service?
• What are the specific aspects of the product or service (include any
copyright, patent or trademark information)?
• What competitive products are available filling this need?
• What are the competitive companies in this product market space and
their strengths and weaknesses?
• What are the unique selling propositions of this product or service?
• Part 2 – an assessment of the opportunity:
• What market need does it fill?
• What is the size and past trends of this market?
• What is the future growth and characteristics of this market?
• What are total industry sales over the past 5 years?
• What is anticipated growth in this industry
• What is the profile of your typical customers?
Opportunity assessment plan
• Part 3 – entrepreneurial self-assessment and the entrepreneurial
team:
• Why does this opportunity interest you?
• What are your reasons for going into business?
• How does it fit into your background and experience?
• What experience is needed to successfully launch the product or service?
• Part 4 - what needs to be done to translate this opportunity into a
viable venture?
• Establish each critical step in order
• Determine the time and money needed at each step
• Determine the total amount of money needed and its source
Disruptive technology
• The newness of a product or service can cause difficulties to the
consumer, organization, and distribution system (if applicable).
• When the technology is disruptive, the difficulties are heightened
• In disruptive technologies, multiple players are involved and need
to be dealt with
• Sometimes this requires the assembly of different downstream
resources
• E.g. Thomas Edison not only invent but also developed he infrastructure
needed to employ the light bulb such as coal-fired generators,
transmission lines and the wiring system for streets and building
• Many disruptive technologies are not as clearly groundbreaking as
the light bulb (previous example) or the internet. Innovations
making existing products or services better, cheaper or more
acceptable to the market can be disruptive
The impact of sustaining disruptive
change
Progress due to sustaining
technologies
Performance
demanded at the high
end of the market
Product performance

Performance
demanded at the low
Disruptive Progress due to sustaining end of the market
technological technologies
innovation

Time
The market
• Regardless of the nature of the technological idea and its degree of
disruptiveness, it is essential for every idea to have a market.
• From an economic viewpoint, a market is a mechanism that
bridges the gap between supply and demand and consists of a
group that may buy the product.
• There are three types of markets for a technological product or
service:
• Consumer markets
• Industrial markets, and
• Government markets
The market
• The consumer market, also known as the B2C market, consists of
private individuals who purchase products or services for
personal satisfaction and use
• The industrial market, also known as the B2B market, consists of
a variety different entities involved in the purchase or resale of
the product or service not for final consumption or use like the
consumer market.
• The industrial market purchases for further process, use in operations,
and resale and can be classified as retailers, wholesalers, institutional
users, and manufacturers
• The government market (B2G) is composed of purchasers in four
broad categories: municipalities, county governments, state
governments, and the federal government
The market
• To meet the definition of a good market in any of these three
markets, the following criteria must be present:
• Measurability
• Accessibility
• Profitability, and
• Stability
• Measurability
• Determines the degree, size and other aspects of the market that can be
determined.
• Some markets for technical products or services are more difficult to
determine
• Accessibility
• The second criteria, measures the capability of the company to effectively
market and deliver the technical product or service to this defined market
The market
• Although the market identified may be of sufficient size, the venture may
not be able to reach its profitably
• The profitability criteria
• Defines whether the market identified is large enough and easy enough to
be worthwhile
• The size of the market identified needs to be large enough to justify the
effort and expense of reaching and serving it.
• the political stability
• The political stability of the market now and in the future needs to be
favorable
• Many technology product that could be successful in developing
economies may not be profitably marketed due to instability of the
market or country
• The risk of building a plant which may soon be nationalized by a country
precludes some products from being produced and marketed there
 market segmentation
• Market segmentation or further defining the market by some
criteria, is important to focusing the efforts of the technology
entrepreneur
• Although a technology entrepreneur may think his or her
technical product or service is ideal for every market identified,
rarely if ever is that the case.
• A market segment, a smaller subset of the market, should be
identified, and the appropriate marketing strategy (the right
combination of product, price, distribution, and promotion), can
be developed and created
 BASIS FOR TYPE OF MARKET
SEGMENTATIO
N CRITERIA CONSUMER (BUSINESS TO INDUSTRIAL (BUSINESS TO GOVERNMENT (BUSINESS TO
CONSUMER) BUSINESS) GOVERNMENT
Demographic Age, family size, education Number of employees, size of Type of agency, size of
level, family life cycle, sales, size of profit, and type of budget, and amount of
income, nationality, product lines autonomy
occupation, race, religion,
residence, sex, and social
class
Geographic Region of country, city size, region of country Federal, state and local
market density, and climate
Psychological Personal traits, motives, and Degree of industrial leadership Degree of forward thinking
lifestyle
Benefits Durability, dependability, Dependability, reliability of Dependability, reliability of
economy, esteem seller and support service, seller, and support service
enhancement, status from efficiency in operation or use,
ownership and handiness enhancement of firm’s earning,
and durability
Volume of use Heavy, medium, and light Heavy, medium, and light Heavy, medium, and light
Controllable sales promotion, price, Price, service, warranty, and price, reputation of seller
marketing advertising, guarantee, reputation of seller
elements warrant, retail store
purchased service, product
attributes, and reputation of
seller
Market segmentation by type of
market
• The basic segmentation criteria – demographic, geographic,
psychological, benefits, volume of use, and controllable marketing
elements – can be effectively used by the technical entrepreneur
to define a target market for focus in the launch of the new
technical product or service
• Demographic segmentation is one of the most widely used
segmentation techniques for identifying potential individuals who are
most likely to purchase and use the new technical product or service
• This is in part because most published data on each of these markets is collected on
some demographic basis
• The most widely used segmentation criteria are age, gender, and income in the
consumer (B2C) market, type of product, sales and size of profit in the industrial
(B2B) market, and size of budget and/or number of employees in the government
(B2G) market.
Market segmentation by type of
market
• Most all demographic data regardless of market is collected on a
geographic basis – the next segmentation criteria.
• These geographic clusters look at the demographic information based on country,
region, state, province, or municipality.
• This allows for a focused launch because only a certain geographic area will be
approached in the first year.
• This selected area is the basis for the rollout of the technical product or service in
future years.
• Psychological segmentation is not frequently used by technical
entrepreneurs, particularly in the heterogeneous consumer market due to
the absence of published data and the high cost of collecting new original
data on such things as personality traits motives or lifestyles of the
market.
• If original data can be collected, it is beneficial for the technical entrepreneur to
particularly evaluate the technical product idea with those already on the market
through psychological segmentation
• Positioning the new idea in terms of market perception of it and existing leads
provides a significant advantage to te technical entrepreneur.
Market segmentation by type of
market
• Benefit segmentation, the fourth segmentation criteria, can be one of the
most effective segmentations for the technical entrepreneur.
• This is particularly true when very specific benefit segmentation criteria can be
identified in the consumer (B2C), industrial (B2B) and government (B2G) markets
• A very technical product or service criteria need to be identified for this technique
to achieve the best results
• An extremely successful new product or service launch can be achieved when the
technical product or service attributes or its unique selling propositions match the
specific wants or needs, or both, in the markets.
• The volume of use segmentation criteria clarifies the market
based on size. Because this occurs based on some demographic
dimension anyway, it is not a widely used segmentation criteria
• This is similar for controllable marketing elements criteria; the
specific aspects of product price, distribution, and promotion are
selected in the marketing plan used to launch the new technical
product or service.
Target market and positioning
• The smaller subset of the market – selected through market
segmentation – is the target market, all of part of which is the
focus of the launch of the new technical product or service.
• Specific market positioning concepts for this target market need
to be identified and the appropriate marketing mix needs to be
developed for the launch
References
• T. N. Duening, R. D. Hisrich and M. A. Lechter, Technology
Entrepreneurship: Taking Innovation to the Marketplace, second
edition. Colorado, Academic Press., 2014.
• J. C. Leach, R. W. Melicher, Entrepreneurial Finance, fourth edition.
South Western, Cengage Learning, 2010
• C. E. Bamford, G. D. Bruton, Entrepreneurship: The Art, Science
and Process for Success, second edition, international edition,
Singapore, McGraw Hill Education, 2016
Question & Answers