Product Development Process: 7 Steps You Need to Know

Bringing a new product to the marketplace has its challenges, particularly if you’ve never done it before. It can be difficult to know where to begin, but following an established product development process will help bring your ideas to life.

From the initial conceptualization to the final deployment into a market, no two product developments are alike. The once carefully managed stringent waterfall process, where new concept requirements were defined upfront and implemented in distinct phases, has now become a more iterative and agile approach.

Let’s dive into the product development process, looking at ways to maximize the potential of your product.

What is a product development process?

A New Product Development (NPD) process refers to the steps taken to bring a product to the marketplace. The process begins with brainstorming an idea, followed by researching its potential market, before creating a prototype and then releasing the product to consumers. New and existing businesses, soles traders and freelancers use NPD processes. In large businesses, NPD processes bring together every department of a company, including design, engineering, procurement, manufacturing and marketing.

What does a product development process look like?

NPD processes don’t follow a singular blueprint. Instead, the complexity of your product or industry dictates the process you’ll follow. The NPD process also looks very different for an incremental advancement on an existing product than it does for a breakthrough invention.

For example, NPD processes for tech giant Apple look very different to those of fast-food chain McDonald’s. Apple is well known for creating innovative products that are equipped with high-quality hardware and software. Apple’s hardware is carefully designed, produced and assembled using costly materials, resulting in complex, expensive and demanding development lifecycles.

Alternatively, McDonald’s tends to develop temporary products, testing their popularity in the market before making them a permanent menu option. Food and beverage products are also relatively easy and inexpensive to develop, as you can tweak existing recipes or use common ingredients.

Despite the differences in their product development processes, both companies have thrived by understanding their target markets' wants and cleverly improving existing offerings while developing customer-favorite products, with competitors trailing behind.

Why do companies use product development processes?

Companies follow NPD processes to:

• Satisfy a market need or want;
• Compete against other market players with speed or scale;
• Successfully forge a place in the market;
• Achieve long-term growth;
• Test for technical feasibility; and
• Avoid capital deficits.

How long does product development take?

Like the outline of a product development process, the amount of time it takes also depends on several factors:

• Complexity of the product
• Complexity of the industry
• Urgency of getting the product to market
• Regulations and approvals
• Your company’s resources

When the fear of being left behind is so ever-present, it’s easy to feel like you need to rush the NPD process to get your product into the market as quickly as possible. However, NPDs are often more of a marathon than a sprint. Striking a balance between carefully ideating and testing a product with moving quickly and efficiently can help mitigate the risk of releasing a flawed product, or being left behind as trends change.

Apple offers us a great example of taking NPD slow and steady, but still being efficient and thoughtful. Apple’s iPhone was a latecomer to the smartphone market in 2007, with giants like BlackBerry then dominating the space. At the time, Apple specialized in computers and music, with no name in the smartphone market. However, Apple took its time to develop and test its iPhone, carefully analyzing the market and its competitors to understand what was working and what was not. BlackBerry was complacent in its market and lacked innovation, making it vulnerable to innovative and modern businesses like Apple.

The first iPhone, which featured a touchscreen and App store functions, sparked ground-breaking disruption. Consumers wanted the simplicity and convenience of a virtual keyboard with soft keys, which Apple engineered. What resembled a pocket-sized tablet ultimately contributed to BlackBerry’s demise. Timing was the key factor in this changeover – Apple didn’t hurry its iPhone launch, but took the time to perfect a product that outdid its competitors.

When to use product development processes

Companies engage in product development processes when:

• Consumers' preferences and behavior change;
• Competition intensifies; or
• A new opportunity to capitalize becomes available.

When a business identifies an opportunity to act, they will either:

• Develop a brand-new product;
• Improve or upgrade an existing product; or
• Introduce an existing product to a new market.

Each of these situations requires that companies engage in some version of the product development process. These processes last a product's entire life cycle, through introduction, growth, maturity and decline. Product introductions don’t stop at the initial introduction stage. Companies continue to collect and act upon consumer feedback throughout the life cycle, to reintroduce new versions by improving or adding new features. 

As your business grows and matures, so will its product lines. To remain current in the market, you must continue to respond to changing consumer needs by introducing new products. Coca-Cola, for example, uses AI in its vending machines to mine vast amounts of data and understand consumer behavior and brand effectiveness. The company draws on this collected data to develop new flavor releases. Coca-Cola released Sprite Cherry in 2017 after finding sales were up for both Sprite and Cherry flavored soft drinks.

Every product eventually plateaus as consumers shift to alternatives. Some businesses will run a product to the ground, while others will redesign it to keep it relevant or in demand. This stage is a great opportunity to introduce new products, kickstarting the product development cycle all over again.

What are the stages of product development?

While we’ve already established that product development varies based on a range of factors, all NPD processes broadly follow the same seven steps. From big and bold tech ideas to small and safe food ideas, all development projects go through these steps. Although lengthy, and typically iterative, following the process is crucial to your product launch’s success.

Step 1: Idea Generation

The product development process starts by generating ideas for new products. You’ll discuss budding ideas are discussed in what can be grueling brainstorming sessions. You and your team can cover a lot of ground during a session. Consider documenting ideas in the form of a mind map to ensure your team members are equally aware and accepting of ideas and their functions and purpose. Mind maps also help to visualize how different ideas are connected and affect each other.

Tip: These days, collaborative mind-mapping and ideation programs and apps like Figma and Miro make this process even easier.

Discussions typically revolve around a few key factors.

a. Target market

Questions to ask:

• Who is the target customer of your product?
• What do they want and need?
• How big is the market for this product?
• How much of that market can I expect to capture?

Create a customer persona, which is a profile that outlines relevant information like demographics, behaviors, motivations and pain points. You need to identify your target market from the get-go, as consumers will make or break your new product. Having a clear understanding of what your customer wants and needs also helps you stay focused on the end goal of your NPD process.

You must also identify the potential for success in your target market early in NPD processes. Market sizing allows you to estimate not only the number of potential buyers for your product, but also how much of a market you can reasonably expect to win, making it an important step to tick off before you funnel too many resources into developing a product that won’t pay off in the long run.

b. Existing products

Questions to ask:

• What specific need(s) will your product satisfy?
• How can I refine or adapt an existing product to solve a different problem?

Entrepreneurs are often operating under the inaccurate belief that success stems from a swanky new idea. In reality, many of the best ideas are born from iterating an existing product by transforming or adapting it for a new target market or problem. Effectively honing an existing product to satisfy a present or future consumer need is a tried and tested path to success.

The SCAMPER brainstorming technique is useful in discovering new product concepts, by asking questions about existing products, and allowing you to refine and modernize old ideas.

c. Value-added

Questions to ask:

• Will your product bring value to the market?

Identify the purpose of your product, and whether someone would be interested in purchasing it. SWOT analysis is an effective way to assess your product's strengths, weaknesses, opportunities and threats, helping you build a well-functioning and attractive product.

Step 2: Research

Congratulations! You’ve developed an attractive, value-added idea. Now it’s time to evaluate your market environment. This step allows you to validate whether the market is affluent and fragmented enough to give your product the chance to thrive. Make sure not to rush this step; take your time to investigate the industry you’ll be operating in and analyze potential customers and competitors, as they may be the roadblock to your product's success.

a. Assess the market

Market research helps you gauge your market’s sentiment. Analysis may relate to how well or poorly consumers are responding to current products, whether gaps exist to exploit, and whether the industry’s life cycle stage (growing, mature, declining) can provide growth opportunities.

New product launches tend to be most prosperous in the growth stage of an industry’s life cycle. In this stage, early adopters begin to accept a product, with sales starting to grow and profits starting to flow. Market concentration is also low, enabling you to garner a large bulk of the sales and profits. Reaping profit in a mature market is more challenging, and mostly involves incumbent players honing their products to remain competitive.

For example, the Sleepwear, Underwear and Infant Clothing Manufacturing industry is in the decline stage of its life cycle in Australia. These goods are necessities, meaning upcoming entrepreneurs have a strong potential customer base. However, demand for Australian-made sleepwear, underwear and infant clothing has declined dramatically. Instead, consumers are increasingly opting for low-priced items manufactured overseas. The strong competition will likely narrow your chances of making it big with a new product in this industry.

b. Check your competitors

Industry analysis helps you understand your competitor's operations, and where you would stand in comparison. Analysis may relate to the number of companies creating similar products, whether customers are loyal to existing companies, or if current products are in dire need of a makeover.

The Cereal Production industry in the United States, for example, is highly concentrated. The four largest players in this industry account for over 70% of total industry revenue. Such a high concentration makes it hard for new players to gain market share and maintain profitability. This factor would be important to consider if you’re planning to create a new range of cereals - in such a concentrated market, your product really needs to stand out. Risk analysis is a useful tool to identify potential threats that could dampen your new product’s success in the market, such as strong competition.

Step 3: Planning

You have the idea, and you have a favorable market. Now it’s time to make plans to materialize your idea. In this stage, you will hash out the details of your initial idea, formulating a final product and a comprehensive roadmap to bring your concept to life.

Planning can help you:

• Set deadlines;
• Establish a production budget; and
• Identify resources needed to create your product, such as labour, capital, raw materials, and suppliers.

Imagine you want to create a new line of women’s jeans to sell in the UK. After thorough market research, you find potential in the niche and sustainable areas of the Clothing Manufacturing industry, leaving you inspired to sketch your final design. To turn the sketch into a finished product, you’ll need to understand your supply chain and build relationships with suppliers, such as cotton, synthetic and natural textile manufacturers. You must also acquire equipment and technology to produce jeans, including sewing machines and material-cutting machinery, which can be a substantial up-front investment. Thinking of all the necessities can be overwhelming, but effective planning will help you coordinate this complicated task.

Planning involves crafting a marketing strategy that will boost customer interest. While you may revise the initial plan, deciding on which channels (e.g., social media, radio, TV) you want to use promote your product early on can streamline the launch process. Planning also involves establishing a pricing model for your product that works for both you and consumers.

Step 4: Prototyping

It’s time for your product concept to come to life. In this stage, you’ll develop a sample product or mock-up of what will eventually launch for consumers. Rarely does the prototype succeed on the first go. This stage typically involves experimenting with several versions and materials, adjusting or eliminating options along the way.

The prototyping process varies in price and duration, depending on the product’s complexity. For electronics, you may require 3D rendering or designers and engineers that are trained in computer-aided design and drafting software. In this case, entrepreneurs would need to subcontract labour. Immense work and secrecy went into creating the iPhone, with an entirely new hardware system and user interface, which boosted costs for Apple. In comparison, food prototypes are easy and inexpensive to produce, as you can typically make them yourself.

The outcome at this stage is a minimum viable product (MVP). The MVP is a preliminary model of your product with just enough functionality to test it before building the real thing. Doing so helps validate your product concept early in the product development process, while cutting back on initial investment costs. Apple takes a more sophisticated route when building a prototype, investing immense time and effort into maximizing the prototype's functionality. Netflix, on the other hand, opts for a rough prototype with a focus on product testing.

Step 5: Validating and testing

It’s time to validate and test your mock-up and marketing campaign. This stage is critical to identify any risks before you begin mass production. Whether technical glitches need fixing, functions need revising or features need adding, this stage is one of your last chances to make changes. You must continually ask yourself, is the product effectively solving your customers’ needs?

Testing typically includes:

• Alpha Testing (inside the firm), which refers to internal acceptance testing where a company tests a mock-up product in a lab or stage environment.
• Beta testing (outside the firm), which refers to user acceptance testing where a company gives a mock-up product to a group of target users in a real-world environment and asks for feedback. Netflix, for example, uses a beta testing app to roll out updates on a select group of users, before releasing them to all customers. This process ensures the new application is stable and working correctly, leaving room for tweaks.

Step 6: Detailed Design

Almost there! In this stage, you create the final product that will be released to your customers. The design should build on your prototype, taking on board the insights gained from testing your MVP. From here, you can begin mass production.

As you will be working with numerous stakeholders and teams during this stage, including product and project management, design, sales and marketing, conducting a stakeholder analysis can be useful. This process determines the relevant parties in your product development design, allowing you to assess and prioritize their demands.

Step 7: Commercialisation

You’ve made it to the final stage! You should now have a profitable and market-ready product. In this stage, you will introduce your product to the marketplace. Your marketing team will take over the project, gearing up for the launch.

Launch campaigns make your audiences aware of your new product, to help stimulate buzz and prompt people to purchase. Nike’s continued dominance in the sporting apparel market and success in new-product launches can be attributed to its marketing strategy. Nike relies on direct marketing, particularly through social media, with most new products heavily advertised and featuring a high-profile individual. Whether you have a big or small marketing budget to work with, you can choose from a range of marketing tactics, including:

• Television, radio or billboards
• Emails
• Blog posts
• Social Media posts
• Social Media ads
• Search Engine ads
• Search Engine Optimization (SEO)

Although this is the final stage, many businesses will continue to improve their products, repeating the cycle. Apple, for example, annually debuts a new iPhone model. Imagine the product development process as a revolving door: your first step marks a shiny new idea, and turns into something market ready as you move through the cycle. Once your product has gone through the process, it will be released out of the door, to then be replaced by a newer idea, or refreshed and rotated back in.