A Time and Materials Approach to New Product Development
Developing a new product has many unknowns. When starting out, it is ideal to have a good understanding of what your customers will value in the product. This should be your primary goal at the outset, as it provides a solid foundation for your New Product Development Process.
Within the valuable features you have identified, there will be many unknowns and you will have made assumptions about the relative complexity involved in bringing them to life. In the reality of developing a new product some of these features will be easier to implement than initially thought, some will be harder. This occurs when knowledge grows, and as you spend more and more time developing the product. Ensure you always bring it back to your primary focus – valuable features, with the bottom line being that change is inevitable in New Product Development.
There are several approaches to select from when it comes to how to tackle the new product development process. The two most common are fixed price contracts, and a time & materials based contract. In the context of building a new product that results in a successful business, our opinion is the latter approach as we believe it brings the greatest reward…if it’s done correctly.
The Benefits of a Time & Materials Approach to New Product Development
It provides an opportunity to focus on what matters
Unlike fixed cost, time and materials methodology continually focuses on the outcome. This means that you and your development partner have a clear vision of what your customers will value in a final product. This helps enormously as it provides a way to make decisions when inevitable hurdles, risks and challenges emerge.
A time and budget approach allow you to focus on priorities and working towards those with the budget available rather than endless debates and wasted time on whether something is ‘in scope’ or not.
You’re in control
You’ll retain full control over your product and its development if you develop your product under a time and materials approach. There are many terms used to describe this role, such as Product Owner, but essentially it boils down to one thing – you know what your customers want and what they will value, your development partner needs to provide expertise, advice and recommendations on how to deliver a product that meets that vision, with the time and budget you have available.
No need for a crystal ball
Focusing on outcomes and the path to them is far more critical than panicking about an agreed scope and price. Fixed price methodology assumes the new product development process is a crystal ball and that you’ll have perfect knowledge of every risk and assumption that could possibly come up (and the solution) before you even start. Reality would dictate this is just not possible.
In contrast, a well-managed time and materials approach provides a structure to do what’s necessary with your time and money in order to produce the right product. Without the vision, structure and decision making process frustration can build..which leads to lost time and money – the two most scarce things when developing a new product. The ultimate casualty is the product, the grand vision you had for it at the outset gets chipped away at and you end up with a product that is not valuable and doesn’t set you up for a successful business.
Instead of getting to this point, start by asking the experts. Your Product Development company should be able to provide advice on how to best address change in a project. It is important here that you ask them how they assist you in making decisions that are in the interests of the best product possible with the time and money that is currently available.
This is the most difficult part because New Product Development is challenging and it is crucial to have a relationship that has open lines of communication as you will have plenty of honest and frank conversations along the way. But always remember your ultimate mission, your audience and the valuable problem you are solving for them.
Hi, we’re the award-winning engineering team at Procept.
We live and breath product development. Since 2006, our vision has been to make a positive difference through the application of the latest technologies to solve real-world problems and improve people’s lives.
Learn more about our product development services, engineering services, or joining our engineering team. To work with us on your next product development project, contact our team.