Product Development: Testing and Commercialization

• Product development involves developing, testing, and commercializing a product/service
• The goal of product development is to solve a problem of the primary target market

Four Steps of Product Development

• Developing a product or service description involves describing how it works, similar to a blueprint
• Creating a prototype is the creation of a preliminary model or sample for testing that provides a tangible reality
• Testing the prototype is a vital process before launching to uncover of any final loopholes/issues
• A focus group discussion provides relevant insights during prototype testing.
• Legality and ethical tests ensure compliance with all relevant laws and regulations
• Safety tests confirm that the prototype is safe to use, consume, and apply.
• Product costing tests evaluate and finalize the costs involved
• Component tests ensure that components are tested independently to identify failures in goods or services
• Competitor product/service tests compare a similar line of products or the competitor's product/service Validating the market involves finding if the intended target market will buy the product, validating the business's success or not

4 M's of Operation

• Methods represent the day-to-day operations of a business and how it runs every day.
• Manufacturing goods involves translating raw materials into finished goods that are acceptable and has 3 elements:
• Inputs (Ingredients)
• Process (Manpower/Machine)
• Output (Result)
• Manufacturing sites can be home-based, however this option presents no financial capacity yet.
• Renting a commercial space is an option if a home-based site is not viable, allows for a more specialized and suited site
• Purchasing a commercial space involves the biggest amount of capital expenditure, freedom & flexibility
• Location should consider where the delivery of raw materials and finished goods are conducted for efficient and seamless process
• Internal layout or floor plan affects efficiency in how raw materials and finished goods can be effectively transferred, processed, and released
• A product-based and process-based layout are important considerations
• A manufacturing process flow serves as a step-by-step guide for manufacturing equipment
• The service delivery process involves services are intangible and saves a huge chunk in operational costs
• A service blueprint is relevant to minimize wastage with bottlenecks, must be addressed immediately
• Bottlenecks are part of the process where there is inefficient problems
• Distribution involves bringing the product/service to the customer
• A supply chain/distribution channel is used as it is not straight to customer
• Payment methods can include: Credit cards, installment plans
• Manpower involves a job description outlines: duties and responsibilities, scope, limitation, and terms and conditions of the employee
• The heading for the job description is the job title or summary of what the employee will do
• Also includes: compensation and benefit range with salary and benefits, responsibilities and accountabilities of the job, and work schedules with work hours indicated clearly
• Employee qualifications include: educational background, work experience, work attitude, specific skill or knowledge
• Preparatory selection of the job applicant involves pre-selecting of candidates, HR (Human Resources) will handle recruitment
• Selection of the job applicant involves preliminary screening by referring to qualifications
• Conducting interviews for shortlisted candidates with the objective of getting most qualified
• A job offer includes rank or position, list of responsibilities or deliverables and their scopes and limitations, salary and benefits (including vacation and sick leaves), work schedule, probationary period and qualifications to become regular employee, duration of contract, resignation procedure
• Employee development involves training people is one of the biggest investments
• Requires devising strategies to keep employees satisfied
• Training often starts with employee orientation: 1-2 day session summarizing business history, vision and mission, policies and procedures, and business norms

Machines, Equipment, and Technology

• Machines are the "best friend” of manpower, can replace employees, and is a very important aspect as it changes how entrepreneurs conduct business
• Equipment and other facilities must be strategically placed in the manufacturing site or service delivery area
• Facility plan: details the most economical way to manufacture a product/offer service by efficiently placing facilities
• Telecommunications and information technology makes business processes fast and convenient
• This includes: Website, landline phones, mobile phones, laptop and desk computers, pos machines
• Materials requires a number of dependable suppliers of quality materials
• Route options are: Manufacturing own products/services, Outsourcing to a third party, or Purchasing from present suppliers
• Logistics involves distributing products with distributor or agent aid
• Warehousing is storing finished goods manufactured in a facility
• Transportation refers to the process of efficiently transferring products to retailers/customers
• Inventory: in warehouses/distribution sites/facilities must be monitored

The Business Model

• Green lights target high-value customers, offer products/services with great value, and offer products/services with reasonable profits
• Red lights refer to satisfying customers becoming costly and irrational, warranty and after sales cost and or being a market leader is hard to sustain, and return on investments being too small/long

The Financial Plan

• The Financial Plan is one of the most difficult parts to develop; business opportunity can be considered real if it brings revenue
• Capital refers to money allocated to establish a business and the owner's investment of assets
• High value asset submitted by businesses to the bank when applying for a loan, subject to repossession if business defaults is considered Collateral
• Revenue: output of salt where sales price exceeds cost, considered as earned or deferred
• Factors affecting the estimation of revenue include: economy and external primary target market, and external competitors (direct and indirect competitors)

Computation of Gross Revenue

• Compute for market universe/total market
• Compute market share of competitors
• Plan to capture remaining market share
• Prepare realistic 5-year projected annual revenue

Types of Financial Statements

• Income Statement - deducting cost of sales, expenses, taxes, from gross revenue generated
• Balance Sheet - core financial statement describing financial position, has 3 elements:
• Assets are resources expected to have future economic value and may include Current Assets (mostly liquid assets exchanged to cash for more than one year)
• Noncurrent Assets refers to long term assets, also cash to more than one year
• Liabilities refer to what business owes to another person
• Owner's Equity is the owner's share of assets Cash Flow Statement