The Product Development Process: An Insider's Prespective Part I

People not involved on the inside of product development tend to have relatively little insight into the subtle ins-and-outs of what goes into the development process. Often, people think things are easier and more straightforward than they really are. There are a whole host of intricacies ranging from executive personalities to vendors’ capabilities to company finances that shape and push the process, often in unexpected directions. This will be a peek behind the curtain into the real world of product development.

In this two-part series, we explore what really takes place inside those consumer electronics companies we like so much. We also shed some light on how product decisions are made and why things happen the way they do. In part one, we look at which stakeholders are considered when designing a product, and define a few categories that new products fall into. Some of this is bound to surprise you.

Editorial Note: All the examples, people, and occurrences that follow are generalized composites of the many events and individuals I’ve encountered over several decades. None of these stories should be construed by the reader as depicting any specific person or event.

Who's the Real Customer?

The very first thing any consumer products manufacturer has to do in order to be successful is to decide who their customer is. Whether you’re making cameras or skis or consumer electronics or perfume or refrigerators, you have to decide who you’re really making your product for. This is much more complex and multifaceted than it looks like on the surface.

• “Expensive perfume? Style- and fashion-conscious women 25-49, right?”
• “30 cu-ft refrigerators? Upper middle-class homeowners, right?”
• Not so fast.
  

There are several audiences for any given product, and the manufacturer needs to get them straight in their mind, and orient their products and policies accordingly. Here’s an example of the different layers of customers for electronics products, as seen through a marketer's eyes:

1. The Corporate Purchasing Agent/Buyer.

The Purchasing Agent/Buyer’s concerns are typically centered around issues like: profitability (dealer cost-to-retail markup), payment terms (does the manufacturer give 30 day terms? 60 day? A 3% cash discount if paid within 15 days?), distribution (does the manufacturer sell to every jamoke on the street, or is the line so exclusively distributed that no one’s even heard of it?), advertising allowances (how much will the manufacturer kick in to help the dealer pay for those web banners or fancy, expensive full-color newspaper flyers), freight policy (how large does the order have to be in order to qualify for pre-paid freight?), and return policy (can defects go back for credit, or for repair and return only? Will the manufacturer take back slow-selling goods?). These things don’t matter a hoot to the customer that browses the website or walks into the store, but they can and do greatly influence whether a buyer takes on a line of goods.

2. The Retail Salesperson
The salesperson has a different set of needs than the Purchasing Agent/Buyer. Some of their interests overlap and some don’t at all. Salespeople, whether they’re selling cameras, skis, perfume, appliances, electronics, anything else, want the product to demo convincingly for a quick, easy sale (if it’s a brick-and-mortar store), have great reviews and recommendations (if it’s a web retailer), be reliable (so they don’t have the hassle of returns), and pay well (high commission or spiff). The Buyer’s concerns, such as advertising allowances, freight terms from the manufacturer, payment terms, etc. do not matter to the salesperson.

Many companies target the Purchasing Agent/Buyer or the Salesperson first, and that product becomes what’s known as a “push” line, because the retailer will “push” it first, above other lines.

3. The End User
This is who outsiders traditionally think of as the manufacturers' “customer.” Does the product fit the way the customer intends to use it? Does it satisfy a need (whether that need is based on actual use-- like good sound, or enough freezer space—or whether that need is based on social/psychological needs, like status)? Is it a value? Does it fit where it’s intended to be used in the customer’s home (or car or boat, etc.)?

4. “Other” Customers

Then there are the peripheral target market groups, like critics and magazine/on-line reviewers. Many times, manufacturers will include a feature (like gold-plated bi-amp binding posts, for example) that increases a product’s cost just for the sake of impressing a reviewer, even if the end user doesn’t really benefit from it or will hardly ever use it and has to pay a higher cost as a result.

Some companies will target the End User above all others (it’s known as a “pull” line, because the name pulls customers in), to excess in many cases. The leading speaker company in the mid-1960’s, Acoustic Research (AR), was a good example of a pull line. They had terrific, innovative products along with great reviews. Their brand name and reputation “pulled’ customers into stores to buy the product. But AR did a poor job of making their line profitable and satisfying to sell. They ignored the needs of the Buyer and Salesperson, and eventually, AR was dropped by most retailers and they toppled off their high perch.

The original Advent did a great job of appealing to all the predominant interest groups at once—they were a profitable line, easy to demo and sell, and they got great reviews. No wonder they enjoyed such success in the late ‘60’s through the mid-‘70’s.

The end user may very well be the predominant customer group for a manufacturer, but the point is this: The manufacturer better darn well know who their primary customer group is, or they’re headed for disaster.

Now, having put out those thoughts as a backdrop, let’s take a closer look at how manufacturers decide upon and develop their new products.

In a technically-oriented business (like consumer electronics), new product ideas are usually generated by one or more of the following broad categories.

Why Develop A New Product?

1. Tactical, defensive line fills and responses

This is the most common category of new product development. A company has a 100 Series, so next year it decides to do a 200 Series. Maybe they even did a little market research, maybe. Sadly, usually 4 or 5 complaints from dealers to correct that particular annoying behavior or add that new widget because Company XYZ already has it, is all the “research” that’s ever really done.

Or, there’s a hugely successful new product in the market that spawns really obvious products in response. The iPad is a good example, its success has led to all manner of defensive products from competitors like Samsung and others, and it has also given rise to a completely new category of iPad accessories. Still, these all fall into the ‘tactical/defensive’ category.

2. Breakthrough R&D Developments or Once-in-a-Lifetime Marketing Visions

Sometimes, a company really does develop a better mousetrap and creates a line of products that utilize the new technology. Acoustic suspension, the dome tweeter, direct-coupled amplifier output stages, phase lock loop FM circuitry, etc.—these were some of the major technical breakthroughs in audio in the last 50 years or so that companies have parlayed into major commercial successes.

Bose AM-5 Sub/Sat Speaker System

As for major marketing visions, certainly the Bose AM-5 satellite/subwoofer 3-piece system of 1987 is a prime example and it was a huge success. It addressed what the average customer wanted (good sound with strong bass), while largely eliminating the biggest negative that most people had regarding high-performance speakers: their big size and ugly appearance. Hold your comments on whether the AM-5 does or doesn’t meet your particular definition of “good sound.” It was, unquestionably, a great marketing recognition of how to deliver what the customer wanted. The marketing concept was brilliant and legitimate; whether or not Bose’s specific execution of that concept was to your personal liking is not the issue.

3. Pet Projects by Company Founders/Presidents

These happen all the time. Sometimes they’re good, like the Sony Walkman, which was the personal pet project of Sony founder Akio Morita. The story has developed over the years that Morita felt so strongly about the Walkman (the other execs objected to it) that he promised to resign if it was not a success.

But sometimes pet projects are a disaster, a self-indulgent surrender to a long-held dream that is either way past its time or was never feasible in the first place. Heads of consumer electronics companies usually get to that position because of some worthy vision they held in the first place. Whatever their eccentricities or personality traits, in my experience virtually all of these executives are close to flat-out brilliant in many ways, imaginative, driven and insightful. Therefore, for better or worse, they have the power and authority to drag the company into developing one of their long-standing ideas into an actual product. I’ve heard the phrase, “I’ve always wanted to do a….” so often, I want to run in the other direction.

Now that we know who a company’s potential customers are and how/where the idea for the product comes from, we can take a closer look at the design flow. Next,we’ll look at the decisions that are made (or avoided!), the choices that present themselves, the ramifications of those choices, how Sales, Engineering and Marketing interact, with either the executive wing or a sole Dear Leader as the (not always wise) arbiter.

We’ll also take a look at how outside suppliers can play a huge role, and what the effect is of Service and Manufacturing on new product development.

It’s a phenomenally complicated and unpredictable process, filled with ego, ambition, stubbornness, greed, altruism, professionalism and surprise. It’s never boring. One thing is for sure: It’s not like outsiders imagine! Not at all. Insiders laugh uncontrollably when they hear an innocent consumer say, “What they should have done…..all they had to do is……all it would have cost them is……”

An Insider's View of Home Audio Product Development Design Sequence

First, someone has an idea. Like we said in the previous page, the idea can come from any number of places, but once it’s a concrete idea that people agree is going to be explored, several things happen. 

After the idea, the Product Manager writes the Product Definition.

 

The Product Manager

 

Who the heck is the Product Manager and what is a Product Definition?

The Product Manager is a key player in this process. Every company has them, and although their actual roles and responsibilities vary a bit from company to company, this is (or should be) a pivotal person.

The Product Manager is the liaison between Engineering-Marketing-Industrial Design-Sales-Executive-Manufacturing-Service. Done right, this person is the glue that holds it all together and the grease that makes the parts work with each other.

A good Product Manager has a virtually engineering-level understanding of the product, has the political/negotiating powers of Henry Kissinger, the presentation abilities of Steve Jobs, and the sales ability of Lee Iacocca.

So, the Product Manager takes the idea that whoever came up with and writes it up into a very specific document called the Product Definition that removes all the vague, uncertain touchy-feeliness out of a new project and instead, nails it down.

The proposed Model XYZ will be:

• Size
• Weight
• Color/finish
• Materials
• Drivers (new or purchased)
• Performance goals
• Features/technology used
• Packaging
• Target cost of goods
• Target retail price
• Internal company profit margin analysis
• Target intro date
• Outside vendors to be used
• Tooling required and estimated tooling cost, etc.

Every specific that can possibly be spelled out is in that Definition doc.

The Def doc is accompanied by Marketing “proof”—why you’re doing it, how many you project to sell, what the potential risks are, the competitive landscape, the market direction, why this is more important than doing that other “must-have” project (you can’t do them all at the same time, no matter how much Dear Leader or Sales wants everything yesterday), etc.

 

Dear Leader

The Product Manager has to have all his ducks in a row, because when the Product Definition is presented for official approval and sign off (good companies do this; amateurish companies have very little formal process and it shows. This is not a function of a company’s size; it’s a function of a company’s professionalism and drive for excellence.), the Product Manager will be grilled up and down by everyone and they better be able to defend their statements and assumptions.

This is a complicated process. It’s not a matter of, “Hey, let’s do a new 100BX Series II.” Companies can’t afford to waste their time and resources, whether the industry is electronics, cars, cameras, household appliances, you name it.

It all starts with the Product Definition. Once it’s officially approved, it’s given to everyone in the company who’s involved with the development process and it’s forwarded out (under a Non-Disclosure Agreement or ‘NDA’) to the vendors.

Then, like a symphonic conductor, the Product Manager puts the various sections into play.

First up is Industrial Design (ID), the folks who decide what it’s going to look like. ID is usually handled by an outside consulting firm, but big companies have their own internal ID departments. The product’s appearance is often driven by the performance/engineering requirements and technical approach, but within those constraints, it’s got to look like something. Depending on the budget and the cost targets, the Industrial Designer will design several cosmetic studies using materials and construction methods that fit into the targeted cost structure.

It helps a lot if the ID people have some engineering/manufacturing understanding so they don’t waste everyone’s time coming up with things that either can’t be built or can’t perform properly. Experienced, knowledgeable ID people with a flair for dramatic, eye-catching design and the ability to make everything have the corporate-appearance “signature” are absolutely priceless. Priceless.

Concurrent with the ID design process, Engineering will start their preliminary work on performance prototype “mules.” If it’s a speaker, then the in-house wood shop will build some rough prelim cabinets and the Project Engineer will use on-hand drivers to get a feel for the basic viability of the design concept.

If there’s no in-house wood shop, then the company will either contract with a local vendor or ask their overseas cabinet vendor to supply some rough cabs to work with. If the company designs and makes their own drivers in-house (increasingly rare these days), the engineer will specify his needs to the transducer people. If the company uses outside driver suppliers, the Project Engineer will first see if existing drivers from other products will do the trick (which is often the case with tweeters); if different driver T-S parameters are needed after running the sims, then the Project Engineer will specify those to the outside vendor and request prototype samples.

 

The Project Engineer

 

Sometimes, the outside driver vendor actually makes what the Project Engineer requests!

Unfortunately, more often, the Project Engineer is forced to design around driver parameters that are barely close enough to what he originally wanted, because what he wanted is either too costly or will take far too long or is simply beyond the understanding/ability of the driver vendor. The vendors’ all-to-frequent inability to understand or supply what the company is requesting is a major problem. Sometimes it’s a language barrier. Sometimes, the vendor puts their less capable, less experienced “junior” people on the small quantity projects from the audiophile companies because those projects will never pay off like doing the boombox for Walmart. Companies very often have to make do with close enough, because that’s the best they’re going to get from that vendor—even from the so-called “famous name” driver vendors.

“Outsiders” have absolutely no visibility to this.

The day the ID person comes in with his drawings or renderings or models is a big day. It’s like Christmas. Everyone gathers around the conference room table to see the “gifts”—Dear Leader, VP Sales, VP Marketing, VP Engineering, the Project Engineer, and the Product Manager.

Four or five different alternative drawings or models come out. Everyone oogles and oggles. Marketing likes #5. Dear Leader likes #1. VP Sales says that only #2 is saleable in the marketplace. VP Eng says that only #4 will perform correctly.

 

Dear Leader

It’s a good thing VP Manufacturing isn’t there, because he would say that none of them can be built. VP Service will complain that none of them can be serviced quickly or economically. Good thing he’s not there either.

The Product Manager quickly surmises that only #3 will work, and we’d better choose it or the entire project will be set back way off schedule if we don’t make a decision now and avoid sending Mr. ID back to the drawing board. This is where the presentation skill of Steve Jobs and the sales skill of Lee Iacocca come in real handy.

But, inevitably, we do send Mr. ID back to the drawing board. The Product Manager lies and says we can still meet the original target intro date even if we don’t see the new designs for two weeks. Dear Leader shoots Mr. VP Engineering a look, but Mr. VP Engineering is too scared of Dear Leader to disagree with that, and besides, the Product Manager is the one who just put his neck on the chopping block.

 

Mr. VP Engineering

 

So Mr. ID leaves with new, conflicting, vague marching orders. The Project Engineer continues his prelim work and the Product Manager hopes it’s not all in vain.

During the ID meeting, Dear Leader voiced a few random thoughts about performance and appearance. Mr. VP Sales piped up with some brand-new costing and timing requirements that he’d never uttered before, when the original Product Definition was being written.

 

Mr. VP Sales

 

Now, the Product Definition has to be re-written to accommodate these new requirements. This is known in the biz as the “fuzzy front end.” When the requirements and definition keep changing at the front of the development process, it pushes the eventual completion/delivery date further out at the other end.

The fuzzy front end can really get pretty fuzzy. When the Product Definition is being reviewed by the committee, someone will unfailingly say, "You know, we should add optical and RCA connectors in addition to the HDMIs. After all, Competitor ABC has them. How much will that add to the cost?"

The questioner looks at Mr. VP Eng. Mr. Eng blurts out, "Two bucks, tops." 

He has no idea. It's a ballpark-at-best guess, but he doesn't want to look bad in front of Dear Leader. "And we'll have to change the tooling drawing to accommodate the through-holes. And we'll have to re-spin the PCB. But no sweat, sure, we can do it."

A little feature here. A switch there. Another circuit between friends. Nothing too much, right? A buck or two, a new drawing in a week, another PCB a week after that.

This is the Product Manager's nightmare: the dreaded Feature Creep. It's when the Product Definition is a constantly-moving target and nothing really gets done because you can't decide on when enough is enough.

Remember, a final, approved Product Definition complete with final, approved ID drawings is sent to the outside vendors (under NDA), but if the Def keeps changing and is never done…….

All right, let’s move on. At some point, the Definition is “frozen,” as they say, and the ID drawing is approved. The vendors have their info. Engineering is working with solid, immoveable performance targets. Work proceeds apace.

The first voicing prototype is ready for listening. The Product Manager and Project Engineer spend umpteen hours listening, comparing, A-B’ing, all kinds of things. This is where the PM’s technical knowledge comes into play, because he’d better know enough about loudspeaker theory and engineering to make useful observations and suggestions that the engineer will take seriously. All the while, the PM must bear in mind the cost and timing implications of everything they discuss together. If the Product Manager says, “How about film caps or air core chokes or a long-throw backplate,” he’d better know

1.      Will it make an audible difference?

2.      Can he parlay the “advantage” into an effective sales/marketing benefit? and

3.      What is the cost implication to the target cost?

  

Audiophile cap            “Cheap” cap

Getting People to Make Decisions

This is an incredibly difficult thing to get done, something that hampers the process more than just about anything else. As the product goes through its various stages of development, something will inevitably crop up that only Dear Leader has the authority to decide. The presidents of companies generally hate being personally accountable for anything, most often preferring to being able to foist the blame onto others, while retaining the right to grab the glory for a successful product for themselves.

There are two very humorous examples of this that come to mind. Each serves to illustrate why Product Managers get gray fast and why the PM position is such a thankless job.

Here’s the first:

A well-known speaker company was developing a 3-product family of floor-standing speakers. One of the features that Marketing wanted was a 1-inch thick baffle board, so they could boast about the cabinet strength, the solidly-anchored drivers, etc. Fair enough.

But Dear Leader hates things like this. He felt that no one would ever hear the difference between a ¾” baffle and a 1” baffle, especially since the cabinet already had significant internal bracing. The cost differential was about $1 per cabinet. “We’ll sell 20,000 of these speakers in a year, so that’s 20 Grand right out the window. How about if we take that out of your salary?”

“But Marketing wants it, they feel they can play this into a nice competitive advantage in this price range, and the cabinet vendor is waiting for our final decision so they can make our prototype cabinets. What’s your decision—1-inch or ¾-inch? ”

He walked out of the room, down the hall, towards the front door. He was leaving on a three-week vacation. We needed his decision—right now!—or the project would be delayed.

“3/4 or 1-inch?” the Product Manager said to his back.

He kept walking and went out the door without looking back. You think this is easy? Now it’s all on the Product Manager. So the PM goes to the VP Engineering, explains the situation and asks what to do.

Mr. VP Eng says, “What do you want to do?” The Product Manager says, “I want 1-inch.” So Mr. VP Eng says, “OK tell the cabinet vendor it’s 1-inch and don’t delay the cabinets.”

They ended up being 1-inch, and the product was successful, sold well, and garnered great reviews. But you just know that Dear Leader complained about those 1-inch baffles for the life of the product, never saying to the Product Manager, “Good job, good decision.” Instead he complained about the added $1 cost for 4 years, at every meeting, at every opportunity.

Second Can’t-make-a-decision story:

Another well-known speaker company was coming out with a fairly high-end product (a medium-sized floorstander) that used some cutting-edge, very clever technology. They had to decide on the cabinet finish. Originally, it was going to be a gloss piano-black finish, hand-rubbed to a nice luster. This is a fairly standard high-end finish, because unlike wood veneers, gloss black goes in any décor and looks very expensive.

The problem with gloss black is that it’s very sensitive and shows fingerprints, scratches, etc. very easily. The Product Manager and ID firm had a great idea: why don’t we do a gloss black with subtle silver metallic flakes infused just beneath the clear-coat surface? Sort of like a premium metallic-flake automotive finish. From afar, it would look very much like a traditional gloss black finish, but up close, the metallic flake character would help hide and deflect visual attention away from fingerprints and small scratches. This finish would be far more “tolerant” than a straight gloss black finish.

Everyone says, yes, great idea, so let’s order sample finish boards from the cabinet vendor.

Two weeks later, we get six sample finish boards—one straight gloss black and five different variations of metallic flake. They’re all real nice, but pretty soon, everyone around the conference table has narrowed it down to one metallic flake version and the straight regular gloss black.

The Product Manager turns to Dear Leader and says, “It’s your call.”

As we said earlier, the heads of companies hate being put on the spot and made unequivocally accountable for a tough decision.

Dear Leader goes around the table and polls everyone. There are six other people. The vote splits 3-3.

The Product Manager says again, “It’s your call.”

Dear Leader says, “Well, I always said that if you’re booking passage on the Titanic, might as well get a first-class ticket. Ok, ok, we’ll go with the metal flake. But if this doesn’t work out well, I’m holding all of you responsible.”

 

Dear Leader

Another profile in Corporate Leadership Courage.

By the way, consumers and reviewers ended up loving the metallic-flake finish. It was lauded for being different and more elegant than traditional gloss black, and it did indeed prove far more immune to small scratches, blemishes and imperfections than conventional gloss black. Dear Leader never said a nice word to the Product Manager for coming up with the idea in the first place.

Oh, one more thing about decision-making: Once Dear Leader finally does make a decision—any decision—he invariably follows that up with the words, “And tell the vendor to put this on the fast track. Have them turn up the heat. We need this product pronto.”

As if we didn’t know we needed it fast. As if we weren’t already trying to get things done as fast as possible. If you could make a decision or two on time, that would help……

OK, so now the company has pretty much decided what it’s going to make. That’s only half the fun. Read Part 2 of the Product Development Process to see how it actually comes together—against all odds.