How to Develop New Products: A Guide for Small Business Owners

Businesses develop new products to grow and thrive. That means developing new products well is one of the most important things a business can do. Fortunately, no matter what business you’re in, the process of creating new products is pretty similar, even if the outcomes are different.

Wikipedia even has a term for this process: new product development. “In business and engineering, new product development (NPD) covers the complete process of bringing a new product to market.”

In this post, we are going to walk you through the steps of new product development. By the end of this post, you will have a much better idea of how you can develop new products.

Developing New Products is Surprisingly Similar for Different Kinds of Businesses

Regardless of what business you run, or what product you are looking to create, the process of development looks fairly similar for everyone. Different businesses naturally create different kinds of products, but the overarching themes of product development remain the same.

Knowing which steps in the new product development process apply to you is critical. As similar as the product development process is across different businesses, some steps will naturally not be relevant for every business’s goals. Above all, keep your plan in mind and head into product development with a complete understanding of what you are looking to achieve.

We have broken down new product development into six phases. Almost every business will go through these six phases when developing new products, though specific steps may differ. These six phases are:

1. Idea generation
2. Idea evaluation
3. Research
4. Development
5. Testing
6. Product launch

Phase 1: Idea Generation – Where Do We Begin?

Idea generation is an iterative process that all businesses engage in from time to time. Businesses generate ideas to solve various challenges faced by their customers.

Idea generation includes both coming up with ideas and choosing criteria to select the best idea. As you can imagine, this process is varies quite a bit from business to business. In short, this is where you come up with potential ideas for your product.

Start by brainstorming potential ideas for products. This can be done by identifying the needs and wants within a specific market and evaluating potential opportunities you have.

Make sure when you are brainstorming potential products, you cast your net wide. Come up with several ideas. The more ideas, the better! Not every product you come up with will work out, so by coming up with lots of ideas, you have a greater chance of one of them working out!

Phase 2: Idea Evaluation – Making the Right Products for Your Audience

At this point, you want a list of ideas. You want to evaluate your ideas and determine which ones to research further.

Like we said earlier, not all of your ideas will make it to development. Most of them won’t even make it to the detailed research stage! Knowing which product ideas you are going to research further allows you to plan accordingly.

Think about the marketplace you are currently in and the one you would like to enter. Consider how customers will respond to your product. At this point, the objective is simple: eliminate ideas that are obviously not meeting needs or obviously not feasible.

It is so crucial to have an idea of which products will be received the best by your audience. You don’t want to push a product through the development process if there isn’t a chance that it will gain traction within your market. If your product doesn’t meet a real need, you won’t make much money from it!

Start setting up your business plan for your product. You don’t even have to make a massive business plan. Just taking a few hours to think through the manufacturing, shipping, marketing, and sales processes will go a long way.

Is having a business plan really that necessary though? We think so. One study showed that writing a business plan correlated with increased success in every one of the business goals included. Regardless of what it is that you are trying to develop, having a plan will help make that happen.

Phase 3: Research Before You Develop New Products

Before you start serving a new market, you need to do your research. It is very difficult to market if you do not understand your audience or their needs. You need to know what your prospective customers like and dislike, as well as what they respond to. Where do they get their information? What needs of theirs have gone unmet?

You need to research your competition as well. Your direct competition likely shares a similar audience as you might have. Take a look at what they are doing, and what seems to be working well for them. Understanding what they are doing can oftentimes show you what you need to do.

Don’t skimp on market research. Well-conducted market research has a tremendous return on investment. By thoroughly understanding the market you desire to enter, you can make smarter choices for you and your business.

We get it. Any money you spend, you want to earn back. We’re running a business, too, so we know all about that! Believe us when we say that by understanding your market, you have a better chance of making those investments worthwhile.

Phase 4: Develop Your New Product

Before you create a prototype, make sure you screen your product idea by your intended audience. This is called concept testing. You want to make sure your audience likes your product before you spend a lot of time or money on it. Screening with a small group of people from your audience will help you get a better feel for how people are receiving your product early on.

Run a business analysis once you nail down all of the details on your product. This is a critical step to manage through new product development. A business analysis is how you monitor all the financial impacts of your new product development.

Lastly, get to prototyping! A prototype is an early sample, model, or release of a product built to test a concept or process. By developing a prototype, you, as well as your audience, investors, and distributors get to see a real, tangible version of what you intend to sell.

Phase 5: Test Your New Product

Now that you have developed a product, it is time to test the functionality and performance. From here, you can zero in on any areas that need to be improved.

Develop a small batch of your product to release to the public to track and monitor the sales data. Going through this step serves as one last trial run before your product moves through to mass production. This is the last chance you get to make any final revisions to your product before launching!

Phase 6: Launch Your New Product

Finally, the day has arrived! When it’s time to launch your new product, you need to make sure several key issues are being adequately handled.

Before you are ready to take your product to the masses, make sure that you have all of your sourcing elements down pat. If you are running an online business, then know all of your shipping and fulfillment information. This means knowing every step of your supply chain throughout the whole process, for both you and your customers.

Figure out where you want to sell your product and how to get it there. Start drumming up attention by promoting your product prior to its launch too.

Bringing it All Together: Practical Steps to Develop New Products

As we said before, the vast majority of businesses will go through the same six phases of product development. The individual steps will be different for each business. With that in mind, we will now list specific steps that you can take to start developing new products. Keep the ones that work, drop the ones that don’t!

5 Steps for Idea Generation

All brilliant products start as ideas. Give yourself and your team time to be creative. Come up with ideas on your own and then seek out ideas from the outside world.

1. Identify the needs and wants of your target market.
2. Find a niche to serve.
3. Brainstorm potential ideas with no restrictions. Allow yourself to be creative and come up with ideas, even if you don’t think they’ll work!
4. Pick ideas you really like to take further into the idea generation phase.
5. Use market research techniques to find ideas from other sources. Do this after coming up with your own ideas so you don’t subconsciously copy what you have already seen.

5 Steps for Idea Evaluation

Even the best ideas don’t always make for great products. Here is how you winnow down ideas and decide what to focus on.

1. Rate all your ideas as A, B, and C. Give an A to ideas that are fantastic, B to ideas that are good, and C to ideas which are okay or bad.
2. Toss out C ideas entirely.
3. Determine whether each of your A and B are feasible. Toss out the ones that aren’t.
4. Do additional market research to evaluate market demand for your A and B ideas. Toss out the ones where you can’t identify market demand.
5. Start writing your business plan. Even a one-page document will help.

5 Steps for Research

With a handful of standout ideas, it’s time to really ask hard questions. Do people really need what you want to sell? Are you meeting real needs? To answer these questions, you will need to do thorough market research on a small handful of ideas.

1. Read our article A Crash Course in Market Research for Your Small Business.
2. Start by using low-cost research methods.
3. Ask your customers questions.
4. Research your competitors.
5. Implement your research.

4 Steps for Development

One you have found the one idea you want to pursue, it’s time to start development. This is different for every different kind of product, but the basics remain the same regardless of the product itself.

1. Nail down all the specific details of your product.
2. Run concept tests to see what people think of your idea.
3. Create a prototype.
4. Test your prototype with a small control group to see the initial response.

6 Steps for Product Launch

In the future, we are going to write a much more detailed guide on how to launch products, but in the meantime, be sure to follow these six basic steps.

1. Figure out where you want to sell your product.
2. Estimate demand.
3. Start manufacturing the product.
4. Double check every step of the supply chain to make sure you can deliver goods on-time.
5. Start promoting your product.
6. Launch your product to the public!

Final Thoughts

Product development is pretty difficult! However, once you understand how the new product development process works, you have a better foundation from which to work.

Iteration is key! It takes a lot of trial and error to make the perfect products, but it’s not so bad when you have a process in place. All that’s left is to get started. So good luck and we believe in your product!