Outsourcing development activities has become an essential component of any successful business strategy these days. As the global competitive market is gradually changing, product based companies are going against established norms following the trend of outsourcing activities. This article discusses about the logic behind outsourcing product development, elaborates on its benefits and discusses the other aspects to be considered when outsourcing product development.
What is Outsourced Product Development?
The outsourcing of specific activities or all activities related to the development and maintenance of a product is known as Outsourced Product Development.
Outsourcing enables product companies to get access into an untapped product-building expertise and global talent pools available with service providers. This helps in exchange of technology and varied work-process.
Why Outsource Product Development?
Every decision making panel of an organization stumbles upon a vital question—whether to develop a product in-house or outsource the same to a third-party expertise.
The product development market is becoming more competitive and mature. As the competition intensifies, product companies are under immense pressure to periodically release new versions in the market. Being an intensive activity, product development requires a lot of attention. The top management can’t afford to put all the emphasis on one activity, while overlooking the other phases of product development. It will end up affecting the profitability of the company.
When to outsource product development?
A typical product lifecycle involves the following activities: product development, product reengineering and migration, product maintenance, product implementation, and product testing. A product based company can choose to outsource one or more of these activities or it can outsource the entire string related to a particular product to a service providing firm.
The question, however remains as to when outsource an activity. There are several factors to be taken into account before outsourcing product development. It varies with company to company. Sometimes it is even seasonal and based on current marketing trends. Some factor can be summarised like this:
- One needs to understand the purpose of a product before outsourcing and weigh the importance of such product in the market. The biggest thing is, if you have an area of expertise where you really are the best in the world and if it’s the key to your business; that is something that needs to be kept inside. Surely, the success of a product doesn’t depend on R&D alone, as without marketing, sales, distribution, the success won’t move an inch. So the decision making panel need to sort out the area of expertise that the product company lacks.
- There are several products which are solely made by the parent company. But they might need enhancements to act as a catalyst to make it more user-friendly or well operable. This happens more often in software industry. You might have a software product of your own, or you might own a mechanical product but you need specific software designed to assist it in its operation. That is when you should consider outsourcing your product development activity. There are various companies out there that might specialise in this area and that might turn out to be your destination.
- One of the most, or maybe the most important factor in case of outsourcing product development is— availability of expertise. Sometimes this weighs in far more than other factors. There are some areas which needs specific expertise. Most firms are not entirely self-sufficient hence they have to look out for someone who can get the job done. For example, developing complex CAD roofing software would need people with CAD and mathematical software development expertise. With the advent of new generation automobiles, vehicle manufacturers outsource voice recognition feature to the OPD (Outsourced Product Development) partner who is an expert in such technology.
- Generally, some established companies have enough capabilities to run the entire product development lifecycle themselves. However, even these same organizations opt for outsourcing one or two activities to outside vendors. On the contrary, start-ups usually outsource a big chunk of their product development activity. This might be due to inadequate manpower, expertise, capital to afford means and various other reasons.
- Pertaining to the last point, besides lack of expertise, inadequate manpower also plays a role in outsourcing of product development. A company would rather outsource PD, to make up for manpower, rather than headhunting themselves. Time consumption, employment policy are few factors responsible for such decisions.
- Geography is another point to consider, if there are ongoing discussions about OPD. Last decade has seen big label organizations outsourcing various activities, including R&D, outsourcing their activities to locations like China, India and Eastern Europe. This has a lot to do with the low cost attached to it. Such nations provide manpower and particular expertise in affordable costs, thereby saving the organizations a huge expenditure. The low-cost geography has actually changed the dynamics of product development in such way, that big names have opened up their own R&D centres, sales and distribution office, factories etc in such locations due to lower cost factors.
Benefits of outsourcing product development
OPD has many benefits. A product owner need not worry about the outcome or excess expenditure if the activity is in right hands. Correct and well planned outsourcing saves a product company time, expenditure on systems and manpower, legal hassles. The best part is exchange of domain knowledge between the product company and the OPD, something that ensures better output in the future.
Often businesses confront consumer preferences, increasing competition and advances in technology; credits to a rapidly changing market scenario. Your business may need to capitalize on an opportunity with the sole intent of getting a monopoly on your respective sector.
A common practice of companies is to engage in a process of understanding what their market wants, making smart product improvements, and developing new products that meet and exceed their customer's expectations. This entire procedure can be termed as ‘New product development’ (NPD).
New product development is the process which involves forming strategy, organizing requirements, generating concepts, creating product & marketing plan, evaluating and subsequent commercialization, thereby bringing a new product to the marketplace.
'New products' can be:
- Products that has never been manufactured or sold before but have been introduced to ther market by others
- Product innovations created and brought to the market for the first time. They may be completely original products, or existing products that have been modified and improved
NPD is not limited to existing businesses, but rather, new businesses, sole traders or even freelancers can forge a place in the market by researching, developing, and introducing new products. Similarly, one doesn't need to be an innovator to master NPD. One can also consider purchasing new products through licensing or copyright acquisition.
This article explains the importance of NPD and Industrial Design which is a subset of NPD and describes the steps involved.
Every product you have in your home and interact with is the outcome of a design procedure. All those products have come into being after long hours of planning, sketching, rendering, 3D modeling. Not to mention the numerous prototypes and testing it has gone through to finally hit the shelves. The ideation and the procedure to develop a certain product is collectively called Industrial Design process or simply ‘Industrial Design’ (ID).
Industrial Design is the professional practice of conceptualizing and designing products, which are to be manufactured through techniques of mass production, eventually to be used by millions of people around the world every day.
An industrial product design process incorporates inputs from diverse domains such as ergonomics, form studies, studio skills, advanced cad, research methods, design management, materials & manufacturing processes and social sciences.
An industrial designer’s purpose is to emphasize on — appearance of a product, the functioning, how the product is manufactured and the value & experience it provides for users. Their sole intent is aimed at improving your life through design.
Let us take a step back and walkthrough the definitions as presented earlier in this article.
New Product Development: The process which involves forming strategy, organizing requirements, generating concepts, creating product & marketing plan, evaluating and subsequent commercialization, thereby bringing a new product to the marketplace.
Product development is a complete cycle which starts from market analysis, product specifications to concept/industrial design, costing, scheduling, testing, manufacturing and ends at logistics, customer feedback, improvements and the final act of getting a product into the market.
Industrial Design:The practice of forming concepts and designing products, which are to be manufactured through techniques of mass production.
Product Design is complete process that includes product industrial design, user experience, 3D Cad modeling, design calculations, simulation. Responsibility of a good product design is to make product working as per design specifications. It is safe to say that product industrial design is one of the many stages of NPD. It is a crucial subset of NPD which is necessary for the successful completion of entire development cycle.
Over the first fiscal quarter of 2018, Apple accelerated investments in research and development operations spending more than $3.4 billion on new hires and initiatives which will keep the company competitive in a fast-paced tech market.
Product development is like the gasoline that keeps the wheels rolling. But what drives companies to spend valuable resources such as time, money, human capital, etc. on new product development? And why is it so important?
Here are five reasons:
Value for customers
The primary reason for any new product development is to provide value to its customers. The increasing demands of customers for innovation & new technology calls for the need to develop new or existing products. Otherwise, there is no reason to pour in huge amounts of money in the first place.
Keeping up with the competition
Staying ahead of the competition should always be the primary goal for any business. And increased competition is one of the major reasons leading to go for new products development. New products give us a competitive advantage over our rivals. Every firm struggles to fulfill and retain consumers by offering exceptional products. To offer more competitive advantage over the other and to satisfy consumer needs more effectively and efficiently, the product innovation seems to be needed.
Today’s market is more dynamic as compared to the past; it keeps on changing due to the wide variety of customer needs, all thanks to increased literacy rate, globalized market, heavy competition, and availability of a number of substitute. Consumers are constantly evolving which means their tastes and preferences change with them. It is the changing consumer behavior that drives the innovation and development of products. Plus, it also counters seasonal fluctuations.
Just as consumer trends drive new products, advances in technology drives companies to invest in new products. If your company has not upgraded its technology arsenal for ten years, count yourself to be at the last one in the queue within a few years.
Reputation and goodwill
Building image and reputation as a dynamic innovation and creative firm boosts a company’s legacy. The new product development is approached. Company desires to convince the market that it works hard to meet customer’s expectations. In fact, company developing new products frequently has more reputation and can easily attract customers.
Industrial design is a very crucial part of the entire new product development process. We are aware of the fact that industrial design develops aspects of a product that create emotional connections with the user. It integrates all aspects of form, fit, and function, hence optimizing them to create the best possible user experience. Industrial design’s role in product development process is to establish the design language of a product, as well as the corporate branding and identity.
How successfully a company is able to carry out development or modification, incorporating the ergonomics aspect, can often determine the success of a product in the market. Firms that leave industrial design to the end of the engineering lifecycle, or out completely will struggle to find success in consumer-driven markets.
You might be a seasoned design professional thinking “What do my bosses sit around and do all day while I do the real design work".
This section outlines and explores the various early stages of the industrial design process that a product goes through. It does serve as a reasonable account of the overall and general product design process.
Ideating or initial ideas
Before any design work can begin on a product, there must first be a definition of what the product or product line might be. The idea’s genesis can be many factors such as:
Consumer demand – Reviews & feedbacks from the customers or even their ideas can help companies generate new product ideas.
Internal sources – Companies provide incentives and perks to employees who come up with new product ideas
Market research – Companies constantly review the changing needs, requirements and trends of the market by conducting plethora of market research analysis.
Competition – Competitors SWOT analysis helps companies to generate ideas.
An idea can be excellent, good, moderate or very bad. Once a suitable product opportunity has been identified, a specification document or design brief is created to define the product. It is usually created by the higher management of a company who’ll have access to information, such as budgeting and buyer/seller feedback. This step involves filtering out the good and feasible ideas which maintains the technical integrity while staying within realistic cost expectations.
Features such as a mechanical specification or a reference to an existing invention the product might be based upon, are outlined. Expectations, uses, and underlying intelligence associated to the product are included as well. Electronics, including sounds, lights, sensors, and any other specific inputs, such as colors and new materials may also be mentioned. Finally, a few reference sketches or photo images can be added to convey a possible direction.
Concept design & development
All ideas that pass through the screening stage are turned into concepts for testing purpose. A concept is a detailed strategy or blueprint version of the idea. In most companies, designers work up a design brief or product specification that guides their designs. It’s the designer’s role to make these ideas a reality. A professional designer has the ability to provide a large variety of designs in a quick and efficient manner. Many people can draw one or two ideas, but when asked to elaborate they often fall short. What separates the true design professional is depth and breadth of their presented ideas and vision in a clear and concise manner. Concept design generally means the use of hand-drawn or digital sketches to convey what’s in a designer’s mind onto paper or a screen.
A detailed business analysis is required to determine the feasibility of the product. This stage determines whether the product is commercially profitable or not, whether it will have a regular or seasonal demand and the possibilities of it being in the market for the long run.
With the help of 3D modeling software (CAD – Computer Aided Design), the ideas/concept is rendered a shape, thereby creating a 3D model. The technical and engineering team has the biggest workload during this phase. These 3D models will often show up problematic areas where the theoretical stresses and strains on the product to be developed will be exposed. If any problem persists, it is a best phase of product development to handle the design errors and come up with modifications to address the same.
Prototyping & pilot runs (preliminary design stage)
In this stage, prototypes are built and tested after several iterations and pilot run of the manufacturing process is conducted. This stage involves creating rapid prototypes for a concept that has been deemed to have business relevance and value. Prototype means a ‘quick and dirty’ model rather than a refined one that will be tested and marketed later on. Adjustments are carried out as required before finalizing the design.
Apart from continuously testing the product for performance, market testing is also carried out to check the acceptability of the product in the defined market and customer group. It is usually performed by introducing the new product on a very small scale, to check if there are any shortcomings. This helps to know in advance, whether customer will accept and buy this product on launching in the market. Test marketing is a powerful tool indeed.
New product launch
This is the final stage in which the product is introduced to the target market. Production starts at a relatively low level of volume as the company develops confidence in its abilities to execute production consistently and marketing abilities to sell the product. Product manufacturing expenses depend on the density of the product, if there are numerous parts, material selection etc. The organization must equip its sales and customer service entities to address and handle queries. Product advertisements, website pages, press releases, and e-mail communications are kept on standby on the launching day.
Product development is an ever evolving fluid process and cannot be summed up in a few steps. The entire procedure sees insertion of additional stages or even eviction of a crucial part, depending on the nature of the project. Each group of professionals, whether designers, engineers or marketing, sales; has their role to play in this methodology. It is the company’s responsibility to continuously monitor the performance of the new product.
Before you get an answer to that question, take a moment to ask yourself - what are the advantages of having a real estate property to your name?
- You can rent it
- You can use it for your own business venture
- You can prevent others from using your property without your permission
- If things are not working, you can simply sell it
On similar terms, patent is an intellectual property that has all the advantages stated above and one needs to claim it on his/her name.
A patent is the granting of property right to an inventor, by a sovereign authority.
This grant provides the inventor exclusive rights to the design, or invention for a designated period (usually 20 years), in exchange for a comprehensive disclosure of the invention. Patent process is generally invoked when the product/process Iprovides a new way of doing something, or offers a new technical solution to an existing problem.
Filling for a patent comes with many advantages. Understanding the pros can enable an inventor to make an informed decision.
Advantages of Patents
- When an inventor or startup is seeking capital for an idea, they may disclose their invention to potential investors and licensees. It is important to patent an idea to prevent someone else from stealing it, by filing a patent application first.
- Invoking a patent gives the inventor a legal monopoly on selling, using, distributing, importing, or exporting their creation for a specified time period. This keeps others out of the market for the invention, which can be extremely profitable and beneficial.
- An inventor may seek a patent to prevent another competitor from improving a product, if the inventor has an idea that infringes on the competitor’s patent.
- A patent holder can typically charge a premium for an invention because of the restricted competition.
- Patenting an idea can also help to restrict the competition. A properly filed patent can limit the competition's ability to produce the product and even allow the inventor to demand that they cease production if they are producing the item as well and have never patented it.
- Patents are extremely valuable for small businesses as they may be able to find investors willing to invest merely for rights to a patent.
- A patent can provide increased credibility to an inventor and their company.
- A patent holder can exclude the competition from recreating their product or service.
- An inventor can profit from selling licenses or selling the patent outright. Though royalties can be a better option for many inventors who may be unable to foot the expense of bringing the idea to market.
Bill of materials (BOM): A table containing a list of the components and the quantity of each required to produce an assembly.
Brief: Instructions and requests provided to design team prior to the commencement of a project.
Business analysis: The practice of identifying business needs and determining solutions to business problems.
Commercialization: The process of introducing a new product or production method into the market.
Concept design: An early phase of design process, where the broad outlines of function and form are articulated.
Ergonomics: Application of principles that consider the effective, safe and comfortable use of design by humans.
Ideation: Idea generation or brainstorming.
Industrial design: The process of designing products used by millions of consumers around the world.
Market research: An organized effort to gather information about target markets or consumers.
New product development (NPD): The complete process which involves transformation of a market opportunity or product idea into a product available for sale.
New Product Introduction (NPI): New product introduction is the complete process of bringing a new product to market.
Patent: An exclusive right granted to an inventor by a sovereign authority, for a specified time period.
Pilot Run: An initial small production run produced as a check, prior to commencing full-scale production.
Prototyping: An early sample, model, or release of a product built to test a concept or process or built to act as a commodity to be replicated or learned from.
Sketch: An image that is quick to generate and does not contain complete detail.
S.W.O.T: Analysis framework for a company relative to its competitors, market, and industry: Strengths, Weaknesses, Opportunities & Threats.
Test marketing: An experiment conducted by companies to check the viability in the target market before full scale manufacture.