Identify the first stage of the product development process:

The small business environment today is very dynamic and competitive, and new product development is a crucial process if you want to survive. For small enterprises to withstand competition from multinationals, they have to continuously update their products to conform to current trends. The new product development process is the cycle that a new product has to undergo from conceptualization to the final introduction into the market.

Tip

Five phases guide the new product development process for small businesses: idea generation, screening, concept development, product development and, finally, commercialization.

Phase One: Idea Generation

This is the initial stage where a business sources for ideas regarding a new product. Some of the sources for new product ideas include the business customers, competitors, newspapers, journals, employees and suppliers. Small businesses may be limited when it comes to technical research-based idea generation techniques. This stage is crucial as it lays the foundation for all the other phases, the ideas generated shall guide the overall process of product development.

Phase Two: Screening

The generated ideas have to go through a screening process to filter out the viable ones. The business seeks opinions from workers, customers and other businesses to avoid the pursuit of costly unfeasible ideas. External industry factors affecting small businesses, such as competition, legislation and changes in technology, influences the enterprise's decision criteria. At the end of the screening process, the firm remains with only a few feasible ideas from the large pool generated.

Phase Three: Concept Development

The enterprise undertakes research to find out the potential costs, revenues and profits arising from the product. The business conducts a SWOT analysis to identify the strengths, weakness opportunities and threats existing in the market. The market strategy is set out to identify the product's target group, which facilitates segmentation of the product’s market. Market segmentation is important as it enables the firm to identify its niche. The identified niche influences most of the marketing decisions.

Phase Four: Product Development 

Product development entails the actual design and manufacture of the product. Development commences with the manufacture of a prototype that facilitates market testing. Based upon the results of the tests, the business owner decides on whether to undertake large-scale production or not.

Phase Five: Commercialization and Rollout

Favorable results in the development stage precede large-scale production and commercialization. Here, the business launches its promotion campaign for the new product. The market research conducted during the conception stage influences the timing and location of the product launch.

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What Is the Product Development Process?

The product development process encompasses all steps needed to take a product from concept to market availability. This includes identifying a market need, researching the competitive landscape, conceptualizing a solution, developing a product roadmap, building a minimum viable product, etc.

Who Is Involved in the Process?

Because they are ultimately responsible for the success or failure of the company’s products, product managers typically drive the product development process from a strategic standpoint. But this process is not strictly a product management function. Product development requires the work and input of many teams across a business, including:

• Development
• Design
• Marketing
• Sales
• Finance
• Testing

Product managers act as the strategic directors of the development process. They pull together the cross-functional team, communicate the big-picture goals and plans for the product (via the product roadmap), and oversee the team’s progress.

What are Common Flows of the Product Development Process?

There are several popular systems for new product development. Below are a couple of examples of frameworks that suggest specific product development process steps.

The Design Thinking Approach

Design thinking is a framework for developing new products based on first identifying a problem or need from the user’s perspective. The steps involved in the design thinking process are:

Step 1: Empathize with users

Step 2: Define the problem

Step 3: Brainstorm potential solutions

Step 4: Build a prototype

Step 5: Test your solution

For a more detailed discussion of each of these steps, see our page on design thinking.

The New Product Development (NPD) Framework

This is a standard, composite approach that businesses often use to develop physical products — as opposed to digital products like software. There are many variations to the NPD framework. Some organizations use a five-step approach, while others break it into as many as eight stages. Here is a common approach that divides the process into six steps:

Step 1: Ideate

Brainstorming, sometimes called the Fuzzy Front-End step, where the team shares all of its innovative ideas.

Step 2: Research

Validating your idea with potential users, and reviewing competitive offerings.

Step 3: Plan

Sourcing suppliers, estimating the production budget, determining how to price your product, etc.

Step 4: Prototype

Developing a sample of your finished product to share with key stakeholders. Note: this is different from the minimum viable product, which is for early adopters.

Step 5: Source

Putting together a plan for vendors, materials, and other resources needed to turn the successful prototype into a mass-market product.

Step 6: Cost

Documenting all of the costs required to bring the product to market. This should include line items for manufacturing, materials, setup costs, storage and shipping, taxes, etc.

Another approach to the product development process is rational product management. Based on the rational development process used by the software industry, this approach offers a framework to strategically plan, iteratively develop, continuously verify quality, and control changes.

What are Best Practices for Your Product Development Process?

Although their specific approaches vary, most companies that repeatedly deliver successful products to market share certain strategies. Below are some of these best practices for new product development:

• Start with your users’ needs and frustrations in mind.
• Use market research and your own users’ feedback. (Don’t innovate in a vacuum.)
• Communicate regularly across your company. Share knowledge and insights.
• Use one of the many available frameworks for your product development process. (Don’t try to develop without a system in place first.)
• Validate your product concepts as soon in the process as possible. For some products, this might include a “soft launch” in which you test the product with a small group of early adopters, before a full-scale market release.
• Invite your cross-functional team into the ideation and brainstorming stages. (Great insights about your market can come from everywhere.)
• Set realistic development timelines.
• Focus only on ideas your organization has both the resources and the expertise to execute on.

What are Real-World Examples of Product Development Processes?

The founders of Airbnb had neither a business nor funding, but they intuitively understood one of the most important elements of successful product development: validate your product concept before you begin production.

Airbnb

They tested their idea for peer-to-peer rental housing online by posting the details of their own apartment and offering it as a short-term rental. When several users signed up to stay in the founders’ home, they knew they had a viable product idea.

Crystal Pepsi

PepsiCo made a critical mistake when they introduced Crystal Pepsi — the new soda they marketed as healthier than their other soft drinks. The company failed to validate their concept before its market launch. Because they didn’t gather enough early feedback from their target customers, or use a soft launch to validate the product with early adopters, Pepsi’s management was blindsided when their full-scale release of Crystal Pepsi proved a failure.

What is One Key Difference Between Developing Products at a Startup vs. a Large Business?

These examples highlight one of the differences between the product development process in a startup vs. developing a new product within an established company. Because the Airbnb founders did not have funding, a large team, or any track record, they had no choice but to validate their idea with real-world users before spending any time or money on development.

PepsiCo, by contrast, could afford to pour hundreds of millions of dollars into its Crystal Pepsi launch (which they did, including Super Bowl ads) without first investigating whether or not the clear-colored soft drink would resonate with customers. In other words, they had the means and a corporate culture that allowed them to skip the research, validation, MVP, and user testing stages of the product development process. As it turned out, though, this was a mistake.

This is one example of why in some cases it can be easier to develop new products for a startup than within a large, well-funded organization. The smaller, newer business doesn’t have the resources that give it the luxury of developing a product without first checking with that product’s intended customers. It also doesn’t have the bias, based on its previous successes, that could lead its product managers to assume they had a viable idea when in reality their customers would reject their new project.

One key takeaway, then, is to develop new products as though you were working for a startup — even if you are a product manager within a big company. Treat every product concept as though it needs market validation before proceeding with development.

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