Originally Published MDDI April 2002
New Product Development: Putting Strategies into Practice
Paul Levesque, a principal at the management consulting firm MedStar Partners, identifies some key aspects of medical product development.
In today's increasingly competitive medical technology market, new product development is vital to a company's prosperity. The medical device industry as a whole reinvests an estimated 7–11% of its total revenues into R&D each year, and medical product life cycles are now averaging four to five years. In such a competitive environment, even the most successful medical device companies should periodically review their approach to product development. To assist in this process, I offer the following suggestions. Some may seem obvious, others less so, but I have found all to be critical to the effective development and introduction of new products.
TIMELINESS ABOVE ALL
Moving quickly through the product development process is important to beating competitors to market and, ultimately, to significantly boosting a company's total revenues. Admittedly, this observation is obvious. But how to put it into practice is much less clear. Whatever strategies they adopt, in the end, companies can only succeed by creating a time culture within their organizations. In a true time culture, time commitments should be treated as internal contracts. These contracts should be broken only when everyone in the company understands and accepts the necessity of doing so. Timeliness must be both an R&D touchstone and an integral part of the firm's overall corporate culture.
In many companies, product definition is a critical element of the product development process. New, unprecedented product concepts will require a definition time of four to six months; simpler product enhancements might only require a few weeks. Regardless of the product type, a company must write up its specifications for the product, revisit the original product hypothesis and development rationale, and make adjustments. Concurrently, the marketing department should build a framework for the product's marketing plan and begin drafting promotional copy.
RESEARCHING THE MARKET
Although most companies know the importance of performing thorough market research, they don't always do it early enough in the development process to make much of a difference. Research should be conducted before product definition and positioning. A research team that includes both product development personnel and sales and marketing staff produces the best results. Firms should plan to spend 5 to 10% of their total projected product development budget on market research.
ASSEMBLING THE RIGHT TEAM
Marketing staff should be responsible for more than just product promotion and sales support: they should be involved in defining new products. Because of their role in product definition, marketing personnel should have some analytical and basic financial skills in addition to business sense, and a degree of technical knowledge is useful as well. Finally, the marketing staff must be credible and confident as they work closely with the product developers.
The people involved in developing and marketing a product directly influence the success or failure of the project. Because motivated employees have a positive effect on product development, they should be rewarded when milestones, such as product introduction and revenue yields, are passed. Rewards can take the form of cash, stocks, or on-the-spot bonuses: the important thing is for the product development team to be appreciated and valued.
From the very beginning of the product development project, those involved must think in global terms. The rapid globalization of the world economy, diminishing trade barriers, and the emergence and acceptance of international product standards make global trading much more feasible than it used to be. Companies that plan for international trading gain a competitive advantage and are positioned for greater revenue opportunities. Designing products only for domestic use and waiting to consider the international applications is poor planning.
As a guideline, companies should invest roughly 10% of their total revenues into product development. Of that investment, 5 to 10% should be allocated to marketing. Another 10% of product development funds should be directed to an advanced development group or an applied research department to ensure sufficient resources for meaningful exploration of promising new technologies.
Once the funds are in place and a time culture is established, strategic—and ultimately profitable—product development can begin.
Copyright ©2002 Medical Device & Diagnostic Industry