Product Development,

Operations, and Financial Plan

MODULE 4
 OBJECTIVES (MODULE 4)
1. Understand the fundamentals of product
development.
a. Develop a product or service description.
b. Create a prototype of the product or service.
c. Test the product prototype
d. Validate the service description of the product with
potential customers to determine its market
acceptability.
2. Describe the 4Ms (method, manpower, machine, materials) of operations in relation to the business opportunity.
a. Select/pinpoint potential suppliers of raw materials as well as technology/machine requirements and other inputs necessary for the production
of the product or service.
b. Discuss the value/supply chain in relation to the business enterprise.
c. Recruit qualified people for one’s business enterprise.
3. Develop the business model.
4. Forecast the revenues of the business.
5. Forecast the costs to be incurred.
6. Compute for profits.
7. Create the company’s five-year projected financial statements.
 INTRODUCTION

This module will introduce you to

the fundamentals of product
development and the operational
requirements of a business
represented by the 4Ms-
manpower, method, machine, and
materials.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

Before commercializing a new product or

service, the entrepreneur must focus first on
refining the product or service and validate its
market acceptability.

This product does not have to be totally new

product. It can be a:
New product line
Repositioning of
from existing A product line
An enhancement an existing
business of the extension
product
entrepreneur.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

PRODUCT DEVELOPMENT
- is the process of developing, testing,
and commercializing a product or service
with the ultimate objective of solving the
problem of the primary target market.
4 Sequential Steps of Product
Development
1. Developing a product or service
description
2. Creating a prototype
3. Testing the prototype
4. Validating the market
FUNDAMENTALS OF PRODUCT DEVELOPMENT

1. PRODUCT OR SERVICE DESCRIPTION

- it simply describes how a product or
service works and how it benefits the
customers. A clear product or service
description is important because this will
serve as the blueprint of all business
operations.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

IMPORTANT POINTS TO CONSIDER WHEN MAKING

PRODUCT OR SERVICE DESCRIPTION:
1. It should directly address the primary target market in a
personal manner using everyday language. The entrepreneur
should put himself or herself in the customer’s shoes, where
the product description will be addressed to.
2. It should highlight the features that will cater to the needs or
address the customer’s problems.
3. Realistic superlatives should be used for the product
description. Motherhood statements such as “world-class
service or product excellence” may not matter to the
customers at all.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

2. CREATING A PROTOTYPE OF THE PRODUCT

OR SERVICE
-after defining the product or service, you may now
proceed with one of the most exciting but also very
challenging parts of product or service development: the
creation of a prototype.

PROTOTYPE- is a preliminary model or sample of a

new product or service that is created to test a product
concept or service process.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

ADVANTAGES OF CREATING A PROTOTYPE

1. Creating a prototype enables the entrepreneur to engage in
trial-and-error; provides room for improvements and
refines the functionality of the product design or service
process. It is very expensive and risk-intensive to
commercialize a product without creating a prototype.
2. Creating a prototype provides the entrepreneur a window to
test the performance and specifications of various materials
and service processes. Every detail of the product or service
should be scrutinized carefully, and all flaws be addressed right
away before commercialization.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

ADVANTAGES OF CREATING A PROTOTYPE

3. A prototype helps the entrepreneur effectively describes the
product or service to the product team. Members of the
product team include marketing, operations, engineers,
suppliers, business partners, and legal and human resources. It
provides the product team the information needed to create the
right product or service as planned.
4. Creating a prototype elicits respect from key stakeholders and
customers. At the same time, a prototype gives credibility to the
entrepreneur. Some entrepreneurs only present vague and big
ideas but no details as to its feasibility and implementation.
FUNDAMENTALS OF PRODUCT DEVELOPMENT

ADVANTAGES OF CREATING A
PROTOTYPE
- Creating a prototype is the stage where the
entrepreneur can experiment, develop, and make
some improvements in the potential product or
service.
- The objective of the entrepreneur at this stage is
to verify if the product or service will work at the
simplest, fastest, and the cheapest way.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

TECHNIQUE FOR CREATING PROTOTYPE

1. Study the competitor’s product or service.
Product- scrutinize parts and functions, design etc. &
come with efficient and effective prototype.
Service- try availing competitors’ services and take note
of the aspects like delivery, location, ambiance etc.
2. Create a video presentation or a miniature prototype to
be able to explain the details if the product is to be viewed
by a panel specialist.
3. The scope should be related to the entrepreneur’s budget.
FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

 All the efforts exerted in the creation of a prototype will be put
to waste if the prototype will not be tested. Testing the
prototype is a vital process before an actual product or service
is launched to the market.
 Testing the prototype will uncover the final loopholes that
need to be fixed before commercialization.
 Improvements and changes must be completed first before
moving forward to the next step.
 After refinement, testing it for the last time after the changes
have been made will validate its readiness for
commercialization.
FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS
1. Focus Group Discussion
2. Legality and Ethical Test
3. Safety Test
4. Product Costing Test
5. Component Test
6. Competitor’s Product/Service Test
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

1. Focus Group Discussion

- the participants will provide relevant
insights about the new product or service.
The objective is to identify errors,
deficiencies, and issues that may impede the
success of the product
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

2. Legality & Ethical Test

- prior to launching, the entrepreneur
must ensure that the product or service
complies with all relevant laws and
regulations and has a necessary license or
permit to operate a particular business.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

3. Safety Test
- the entrepreneur must ensure
that the product is safe to use, safe to
be consumed, and safe to be applied.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

4. Product Costing Test

- the entrepreneur must examine every stage
of the manufacturing process or every process of
the service blueprint to evaluate and finalized the
costs involved. This is the time when the
entrepreneur can match the expected cost versus
his or her budget.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

5. Component Test
- each component of the product
must be tested independently to identify
component failures for good s or
services failures for services.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

TESTING METHODS

6. Competitor’s
product/service test
- the entrepreneur must test a similar line
of products or the competitor’s product or
service itself to compare and get the best
practices to be applied to the new product or
service.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

3. TESTING THE PRODUCT PROTOTYPE

 Testing the product prototype is mandatory to ensure that the
product or service will not fail the customers and will deliver its
definitive purpose.
 This will elicit customer satisfaction and eventually, customer
loyalty and retention.
 This is the time to prove that the concept formulated by the
entrepreneur will work and is feasible in real life.
 All the mistakes accounted for and the improvements to be fixed
should be performed first prior to commercialization of the
product or service.
 Reflect Upon

Based on what you have observed, do

you think Philippine entrepreneurs
test their products or services first
before launching them to the public?
Why?
FUNDAMENTALS OF PRODUCT DEVELOPMENT

4. Validation of Market
Acceptability
- Validation of market acceptability is the process of
finding out if the intended primary target market
will be buying the product or availing the service.
- Market acceptability is a critical factor that the
entrepreneur must validate before launching the
product or service, because this can strongly
suggest if the business will be successful or not.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

4. Validation of Market Acceptability

- It either validates or disconfirms the perception of the
entrepreneur about the suitability of the chosen primary target
market.
- It also tests whether the VP and the USP are appropriate or
there’s a need to improve them.
- This is also the time to deeply understand the value that the
product or service brings to the customer and their prospective
purchase behavior, because it helps the entrepreneur build a
more relevant and meaningful product or service.
- The last step before the product or service can be introduced to
the market.
FUNDAMENTALS OF PRODUCT DEVELOPMENT

4. Validation of Market Acceptability

The following objective questions are more likely to be
answered in the whole process of Market Acceptability
Validation.
1. Will the primary target market like the product
or service?
2. Will the primary target market buy the product
or service when it is already in the market.
FUNDAMENTALS OF PRODUCT DEVELOPMENT

4. Validation of Market Acceptability

ACTIVITIES/PROCEDURES
1. Use the most strategic marketing tool (FGD,
survey, observation, interview, online survey, e-mail, or
combination of these), wherein the entrepreneur can get
the most relevant answers in the cheapest way possible.
2. Prepare relevant open-ended questions that
answer the objectives above. Do not go around the bush
and be straight to the point. Keep the questions to a
minimum because the target market might get bored
and not finish the whole questionnaire.
 FUNDAMENTALS OF PRODUCT DEVELOPMENT

4. Validation of Market Acceptability

ACTIVITIES/PROCEDURES
3. Find market experts who also target the same
market but are not directly competing with the entrepreneur.
The entrepreneur can leverage on the knowledge of the market
expert regarding that market segment because they almost
have the same demographic requirements. The entrepreneur
may used these data to improved the product or service.
4. Collate all the data, analyze them, and prepare a
summative report that answers the objective questions that
were mentioned earlier.
QUESTIONS?
 ACTIVITY/ASSIGNMENT

Assume that you have available capital that can

finance any original product or service you have in
mind. Using the original product or service, apply
what you have learned in product development.
1. Prepare a product or service description
2. What will be your game plan for your product
or service prototype? How will you test it?
3. How will you execute your market
acceptability validation?
 Assignment: Go Online

Read this article written by Ezra Ferraz of Rappler

entitled” 10 Filipino Entrepreneurs to Inspire You”
from
http://rappler.com/business/features/67753-executiv
e-edge-inspiring-filipino-entrepreneurs
.
Choose one Filipino entrepreneur who really inspired
you on the aspect of product management. Did he or
she create a prototype of the product or service and
validated the market before commercialization? Cite
his or her best product management practices.
Thank you!