Building upon customer segments, developing channel partners, and finalizing the product or service to be launched.
You have the next big idea… and so far, you’ve determined that your idea is technically feasible and you’ve learned that there is a customer segment interested in your product or service. You are more excited than ever about the opportunity. Now what?
In past articles, I have outlined the process that we at the Illinois SBDC (Small Business Development Center) at Bradley University use to help startups commercialize a new innovation. To aid in commercialization, we advise our clients through a stage-gate process based on the Goldsmith Technology Commercialization Model and Lean LaunchPad. These stages include: Discovery, Feasibility, Development, Introduction and Growth. Each stage-gate focuses on assessing three elements of commercialization, including the innovation, the potential market and the business opportunity. I have previously described the Discovery and Feasibility stages; in this article, I will focus on the Development stage.
If you recall, the Feasibility stage is about proving that an idea is technically possible, as well as identifying and validating customer segments through discovery interviews and understanding the financial requirements of the business. After addressing the issues in the Feasibility Stage, we focus on the development of the product, the market and the financial model of the company.
The Development stage is about building upon identified customer segments, identifying and developing channel partners, and finalizing the specifications of the product or service to be launched. Questions to address in this stage include: Is the innovation ready for first sales? Does the business have the appropriate pieces in place to begin? Are the financial requirements, costs and revenue model understood? The elements to address in the Development stage include product development, market development and business model development.
Product development involves developing an engineered prototype of a product with the goal of demonstrating the manufacturing processes, materials needed, configuration and product function. This element helps to confirm that not only does the product work; it identifies production barriers and engineering issues in the manufacturing process. If it’s a software or service business, this element should be considered the beta-testing step. Questions to be answered include:
- Is there an engineered prototype of the product?
- What are the critical materials needed to make the product?
- Does the prototype function as needed?
- Has the prototype been performance-tested by a third party?
- Has a pilot production process been determined?
- How reliable will the manufacturing be?
Depending on the type of product, this step usually involves professional engineering and engaging experts in larger-scale manufacturing. In the Feasibility stage, off-the-shelf materials or even waste materials could be used to demonstrate a working model, but in this stage, significant improvements in materials and design, as well as better cost estimates, are required. Options for production might include contract manufacturing or assembly. We often connect our clients with professionals and faculty who might be helpful in achieving these objectives.
Through direct customer discovery, the goal of this element is to further define the competitive advantage of the company and the product, validate the company’s value proposition, determine packaging, select a niche market to launch, and determine channel partners for distribution. Some of the questions to address include:
- What are the competitive advantages for the product?
- What is the company’s value proposition?
- What are the detailed demographics of the customer?
- What is the selected price, and why?
- Who are potential channel partners?
Utilizing the Business Model Canvas, we help our clients develop a plan to answer these questions. Using licensed databases, established networks and professional experience, the Illinois SBDC staff helps clients identify methods and provides resources to develop marketing, channel partner and pricing strategies.
Business Model Development
In this element, the business is making critical decisions concerning revenue models, financing, organizational structure, marketing approaches and strategic partnerships. Pro forma profit and loss statements and cash flow projections should be achievable. Questions to address in this element include:
- Is there a formal financial plan outlining costs, revenues and funding requirements?
- Is the appropriate management team identified, or in place?
- Are intellectual property requirements understood and addressed?
- Has a strategic business model been developed?
Providing financial templates, identifying revenue models such as licensing or manufacturing, and connecting clients with investors and bankers are ways that we help clients navigate these important issues. Dry-run investor pitches, “Starting a Business in Illinois” workshops, seminars on a multitude of topics and one-on-one advising are just a few examples of the assistance we provide.
One of the primary purposes of the Development stage is to ensure the business is ready to launch. At the end of this stage, the company should have a validated business model canvas or business plan developed, which it should be able to present to investors and bankers. The company’s founders should feel confident that they have identified and put together a plan that has removed much of the risk that startups face. iBi
Chad Stamper is Director of Technology Commercialization at the Illinois SBDC at Bradley University, with more than 12 years of experience in bringing new products to market and launching companies.