I’ve worked on a lot of product development projects over the last 30 years, most of which involve printed circuit boards, microprocessors and firmware of some kind. Whilst massive changes in the electronics industry have come to pass over a generation there are some things that have not changed. First of all is time to market. We can build one of anything in six weeks, even amazingly complex things that would have taken a year or more if done the old fashioned ways, but it still takes a year to 18 months to get something into production. Admittedly things have gotten a lot more complex, particularly parts sourcing and blank PCB fabrication, but even with the better tools we have today it still takes the same amount of time to get things into production. Second, the 3X rule hasn’t changed significantly. The 3X rule is this: carefully account for all development costs and costs of components and prototyping. Come up with your best estimate for the total cost of developing the product, then multiply that number by 3X and that will put you fairly close to the total development cost by the time the product is ready for production. Regardless of how much you think or estimate that developing your product will cost, if you simply can’t tolerate investing 3 times that amount to develop the product to production, then just quit right now and not waste your money. Because product development WILL always cost more than you think.
The Consumer marketplace is perhaps the worst, or shall I say, most challenging market to design products for. Fewer than one out of ten products that actually make it to the mass production stage eventually succeed in recouping their development costs through product sales. Because the consumer market is the most price sensitive a great deal of competition boils down to simply who has the cheaper selling price. This in turn creates a relentless downward pressure all up and down the supply chain. Toshiba announced recently that it is completely exiting the television business, shuttering or repurposing its existing facilities. These kinds of shakeouts are constantly taking place among the largest players in the industry. Yet there seems to be no shortage of individual entrepreneurs willing to jump in with both feet. Web sites like Kickstarter have only emboldened more folks to get into the product development arena. So if you too fancy developing the next hot gadget keep a few things in mind:
- The 3X rule.
- The time involved. Even after your up front design work and prototyping have finished, there’s the year to 18 month slog ahead to get your product into production.
- Know your competition and seek to differentiate your product in such a way that you can bring greater value to potential purchasers so you won’t be forced to compete only on price.
- Know exactly what it is you want to build and make an honest appraisal of the effort.
- Avoid setting unrealistic cost targets too soon in the design cycle.
- Have cost targets in mind however to help avoid scope creep.
- Seek a manufacturing partner at the same time you are seeking a design partner. Final cost of finished goods greatly depends on how your product eventually will be built.
- Don’t assume the lowest cost producer will be found overseas, particularly in China. As of today labour costs in China are equal to those in Mexico.
Developing products with an overseas partner can be particularly painful. On several occasions we’ve had clients come to us to help with product development after they’ve tried relying on an overseas (ie, China) partner. The problem is that by this time they’ve wasted a year or more and all their development money has been spent and they have nothing to show for it. Product development, particularly in the consumer marketplace, is not for the faint of heart. Proceed cautiously.