How to Create a Better Product Development Budget

Product development projects are notorious for going over budget. Often way over budget. This is particularly true in small companies. The opportunity to develop products is generally less frequent in a small business.

Sometimes years can go by before another new product is developed and the team that developed that last product may no longer be with the company. Small businesses just do not get the experience necessary to be good at a task that is hard, even for those who do it every day.

Worse, small companies are more sensitive to product development budget. They do not have the ability to sell a large quantity of units to offset unbudgeted tasks. If the budget is wrong, the project may never produce a positive return on investment and could be shut down after wasting significant funds.

Understanding the dynamics that can cause a product development budget to go awry is key to improving the budgeting process.

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The 3 Phases of a Tech Startup

Most tech startups go through three phases: 3Fs, Seed and VC/Scale. Understanding these stages, and the objectives for each, is an important factor in strategy development and decision making. Not understanding the stage you’re currently in is one of the most common reason tech startups fail to move forward, or worse, fail.

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Why Product Development is Different in a Small Company

Small niche companies are great. They typically have high gross margin, little competition and long product cycles. What they do not have is scale; a niche market will never sell millions of units.

The characteristics of small niche businesses create some unique challenges when it comes to developing products. Compared to larger companies, small businesses have limited product development budgets. Small companies simply do not have the scale or cash flow to support large product development budgets. They do not have to develop products as often as large companies (longer product cycles), but that also means they cannot afford the fixed cost of a full-time product development team. This lack of team means they will likely be less efficient than larger companies — making the problem even worse.

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The 3 Rules of Product Development Success

In their book “The Three Rules”, Raynor and Ahmed attempt to find rules for business that are always true – regardless of industry, type of company, the economy, etc. They found three: Rule #1: Better before Cheaper Rule #2: Revenue before Cost Rule #3: There are no other rules. “Better before Cheaper” means that if you are faced with a choice between making your product better, or making it cheaper, always choose better. Apple did not focus on finding ways to design and manufacture for less cost, they were focused like a laser beam on how to design and manufacture a great product.

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Three common product development mistakes — and how to avoid them

There is plenty of advice out there about how to succeed at product development. This advice is often based on studying successful product development and trying to identify the behaviors and techniques that led to this success. Although this type of advice is necessary, it is not sufficient. In order to be successful, you must also avoid those behaviors that lead to failure. In order to know what causes failure, you must study failure, not just success.

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The importance of teamwork and culture in product development

Why do some products succeed and others not so much? Seemly identical product ideas can have widely varying levels of success. Take the iPod and Rio. Both played digital music, and their technical specification was very similar. The Rio actually beat the iPod to market by several years (1998 vs. 2001). Keep in mind, during the development of the iPod; Apple stock was hovering around a dollar a share; it’s now more than $180. Meanwhile, Rio was a profitable, growing company. Why is one product still famously successful and other seemly identical product lost to the pages of history?

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How Company Culture Affects Product Development

CMs (Contract Manufacturers) are amazing—they can do ten thousand things and not make a single mistake. Their business must work this way to stay competitive.

Product development, on the other hand, is different. In product development, you are lucky if you do ten things and get one right. For example, I just spent many hours researching a dozen Bluetooth ICs, and only one was chosen to be included in the product. I got one right out of twelve attempts.

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Want to Build a Winning Team? Don’t Ignore These 4 Essential Elements

Why do some companies consistently grow profits and revenues every year and others, seemly in the same type of business, crash and burn? Certainly, there are many factors, including many that are not within our control (luck).

However, there is one very important predicate to success, and it is completely within our control: A Functional Team.

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The Upside of Outsourcing

Over the past few years, outsourcing has become a dirty word. The word conjures up images of sweatshops in some far distant land where some faceless multinational company exploits workers. Whether or not there is any truth to these portrayals I have no idea; however, I will argue that outsourcing is responsible for the success of modern society.

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The Importance of Conceptual Design in Product Development

Why are successful people successful, while others are not? Successful people do what unsuccessful people are not willing to do.

Let’s take Steve Jobs who took over Apple on the verge of bankruptcy and made it the most valuable company in the world. Did he take short cuts? Did he look for easy answers? Did he hire people because they were cheap? No, he knew there were no shortcuts to victory, only hard work. He knew this was especially true when it came to conceptual design. He endlessly obsessed over every detail of every product even to point of proclaiming “A lot of times, people don’t know what they want until you show it to them”

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How to reduce product development costs in your company

Big companies have the luxury of scale. When you sell millions of a product, even a few dollars per unit is a big product development budget.

Small companies in niche markets do not have scale. When you sell a hundred product per year, even $100 per unit is often not enough margin to pay back product development costs. Small companies need to implement strategies that keep product development costs to a minimum without increasing the risk of product failure. Some strategies work and some do not.

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4 Reasons Startups Fail And How To Avoid Them

Startups are hard – much harder than running an existing business. There is no existing market to instruct strategy. There is very little capital. There is very little time for the team to find its way to being functional. There is no product, processes or history to guide decisions.

Many startups fail, but some, despite all the impediments, succeed. Why do some succeed and others fail? Our research has shown the answer is simple: successful startups are willing to do what the unsuccessful ones are not – namely, follow the four golden rules.

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The Four Rules for Startup Success

Is all startup advice equal? Are there “rules” that always work? Startups come in all shapes and sizes: mom and pop, technology, bootstrap, franchise, etc. and they compete in many different industries.

Is there a set of tenants an entrepreneur can use to guide them on their journey that is always true regardless?

We set out to answer precisely this question. Our work with hundreds of startups led us to an interesting conclusion: some rules work in some situations and four of them always work. Read more:

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How to Be a Great Product Manager

There are good product managers, and then there are great product managers. What’s the difference? Both good and great product managers (PMs) are more than competent when it comes to the basics, but our research has shown that the top 1% of product manager goes beyond the basics and do the following:

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How Startups Can Keep Product Development Lean

The lean start-up movement has been based on a single insight – which the purpose of a start-up is to discover a business model that works. Instead of the “entrepreneur that knows what the market wants”, we move to the “entrepreneur that knows how to discover what the market wants”. This subtle difference has been key to the success of companies like Groupon, Dropbox and Intuit to name a few.

In this article we explore the unique challenges of a lean start-up and how Outsourced Product Development (OPD) can be used to overcome them

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How to Develop Products for Niche Markets By Steve Owens

Small companies have very long development cycles. They are not in a hyper competitive world – they are in a niche market. In these types of companies, a product is developed and then many years are focused on manufacturing, marketing and servicing the product. During this time, product development is not important. No one is going to spend capital to compete with a niche product that just came on the market as that would only erode margin.

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