To remain competitive in today’s relentlessly paced and ever-expanding marketplace, companies must think carefully about what products they’re developing and how they’re developing them, continuously iterating their processes to maintain a competitive edge. A finely tuned product development strategy is a holistic, cross-collaborative endeavor with the capacity to help any organization weather unforeseen events or market changes.

Consumers have access to more information than ever to compare products and brands. The relentless pace of technological advances can mean even the most innovative start-up finds a once-successful product suddenly out-performed or obsolete. And for legacy institutions with strong brand loyalty, existing products might not be enough to remain competitive over the long term.

With new markets and functionalities appearing almost overnight, product development can’t be a blind process. Successful companies fuse product development practices with overarching business strategies to ensure sustainable innovations that will resonate efficiently and sustainably with customers—both in existing markets and among new target audiences.

A successful product development strategy can:

• Diversify a product portfolio
• Enhance customer experience
• Improve sales and return-on-investment
• Support a growth strategy
• Support transitions into new markets

Traditionally, there have been three distinct ways for a business to grow through product development:

1. Create an entirely new offering
2. Tweak an existing product to cater to its target market
3. Enhance a product for introduction to new markets

But offering a better product, or manufacturing one at a lower cost, is only a small part of a successful product development strategy. Today, as many as half of all companies—and 70% of top-performing companies—use software developed internally to differentiate themselves in crowded markets. As more businesses become software businesses, a long-term development strategy that prioritizes continuous feedback and core organizational value is key to success.

While individual organizations may use slightly different templates, and there is certainly no universal strategy to guarantee the successful commercialization of an idea, there are seven common steps in the product development process.

Typically, these measures should be undertaken by a dedicated development team or through a product development partnership with an experienced and specialized consultancy. The goal is to systematize the development process from brainstorming to launch, outlining critical benchmarks and allowing collaboration across departments as well as review from multiple stakeholders. These seven stages of product development are:

1. Idea generation

Prioritizing the long-term strategic goals and core competencies outlined, a business should brainstorm new initiatives, product ideas, or product features. During this phase, cross-collaborative efforts should focus on ideation and iteration. Considering customer needs and the business’ strengths, the product team generates product concepts. Taking cues from multiple departments and business leaders, those ideas are then screened to ensure only those ideas most aligned with the organization’s goals move forward.

2. Research

During this phase, the new product idea is placed within the context of the current market. Firms might conduct market research related to their new feature or product line, solicit customer feedback, or engage focus groups. During this process, a business should extensively research similar products and fully investigate the new product’s competitive advantage over other offerings to forecast an accurate future market share. All this effort culminates in the validation of the new idea, which helps business leaders identify how the product will perform.

3. Planning

Once the idea has been validated, the planning stage of the new product development process begins. This will likely involve collaboration between the product design team, project management, sales, and other departments as the business creates a detailed roadmap for how the new product will be built and deployed. This might include plans for integrating the new idea with current products or existing business structures. Depending on the product, this phase may also involve wire-framing and modeling as well as costing the price of materials or server space.

4. Prototype

A prototype is a crucial step in the product development process. Often, companies will build several prototypes and make significant changes to their original plans as they assemble a model of their eventual product. Occasionally, it might be necessary to build a handful of variations with different features, material or capabilities.

The end goal should be to create what’s referred to as a minimum viable product (MVP). The MVP is the most basic version of the new product without most of the extensive integrations or features that might be added over the time. This will become the sample as materials and vendors are sourced for mass production. In software applications, it may be important to test the prototype with end users to ensure an adequate user experience.

5. Sourcing and manufacturing

During this phase, a business gathers materials and contracts with partners, if applicable, to create a detailed plan for actual production. Depending on the scope and nature of the product, this could be as simple as hiring additional engineers and as complex as implementing new supply chain processes across the organization.

This is where a product management team becomes increasingly important, as sourcing can require extensive collaboration between vendors and across multiple processes. In cases of complex global sourcing and manufacturing needs, a business may elect to use software or databases specifically built for the task.

6. Costing

During this final phase before launch, a business should calculate the total cost of its product over a pre-determined product life cycle to verify the retail price and gross margin of its new initiative. The detailed consideration of business value, customer value and product value should help guide and simplify the costing phase, as they’ve helped facilitate an accurate estimation of return-on-investment.

7. Commercialization

After a lengthy design process, it’s time for the product launch. Before launch and during the planning process, a marketing strategy will have been developed to ensure target customers have access to the new product and appropriate distribution channels have been engaged.

Good product development prioritizes on-time and on-budget production or deployment. Great product development prioritizes value-based outcomes over a product’s entire lifespan.

Before considering how to implement the product development process, it’s important to step back and evaluate a business’ core competencies and potential long-term needs.

• What are the organization’s essential advantages and skills?
• How do those competencies work together in a unique way?
• What competencies might be needed in the future?
• How do those competencies align with an organization’s long-term strategic business plans?

It may be useful to rank these advantages—for example, the ability to deploy software quickly or strong strategic sourcing—to capture a deeper sense of where the business stands. Some researchers recommend plotting these variables on a simple graph according to how strategically important they are and how strong their current position in the company.

As the early phases of the product development process begin, organizations should weigh how their product roadmaps will respond to and measure three crucial types of value:

1. Customer value: This metric describes the measurable impact when a customer uses a product, which essentially amounts to a basic value proposition. Will the proposed product or feature meet an unmet need?
2. Business value: This measures product outcomes within the context of key performance indicators (KPIs) and the broader business strategy. Will a product or feature drive specific and measurable business value?
3. Product value: This metric evaluates how much a product or service will be used against the resources required to build and maintain it. Will the benefit of a product or feature improve engagement and outweigh the resources expended?

Tracking these metrics can help an organization make a systematic plan to prioritize products and features. Even the most popular products won’t succeed over the long-term if they drain resources or fail to align with the business’ broader goals. These three value indicators are as important after a product is released as during initial brainstorming sessions. Testing a product and carefully evaluating its success should be a continuous and ongoing outcome rather than the final step in its development.

Historically, testing new product development strategies may have been the final phase of a project. But in today’s landscape smart business leaders iterate to provide continuous, value-based testing over a product’s lifespan.

The final phase of a successful product development strategy is open-ended. It involves the regular collection of data to analyze how products reflect an organization’s broader business goals. This may include soliciting user feedback over social media, tracking retention internally as customers use the new product, or periodically auditing the product to ensure it is capturing the best possible value for consumers and the business alike.

Today’s business leaders need to rethink competencies, operations, designing and sequencing workflows end-to-end with a way that unlocks, connects, and uses data where it is most effective.

IBM Engineering Lifecycle Management (ELM) is a comprehensive end-to-end engineering solution that stands at the forefront of the market, seamlessly guiding you from requirements to systems design, workflow, and test management, extending the functionality of ALM tools for better complex-systems development. By adopting an end-to-end view across the entire product lifecycle, enabling a digital foundation for data traceability, you can more easily track changes to minimize risk and reduce costs.