As the common adage in the startup community goes - hardware is hard. Considering this, it's fair to ask yourself why is product development so costly? There are many reasons why building something is seldom cheap, so we will explore the main influences to help you get the most bang for your buck.
‘Product development’ is a broad umbrella term, but in this context, I am referring to physical products with moderate to high complexity (multiple parts, mechanisms, electronics and the like).
Validation of the idea
Despite the vast number of books, stories, courses and advice stressing the importance of idea validation, many companies fail to ensure product/market fit. Be it fresh graduates pursuing a hobby project to major multinational brands, there are casualties abound.
Even the almighty 'Apple' have a whole host of products which failed in the marketplace. Products which were snuffed at by their audience. Products which, for one or more reasons failed to be validated adequately.
It goes without saying, the cost of recognising poor product/market fit post-launch would be immense. For small businesses it can be a death wish. Going through the entire product development cycle, without knowing if you have willing customers waving credit cards at the end is quite frightening. Mitigate this risk, by including the end user throughout the development process, to avoid existential threats during failed launches.
Development is iterative
From the early whiteboard sketches to tweaking before the production line, development is a long road. Many iterations are required before landing on a solution which solves a problem reliably, is loved by users and can be produced for an economically-viable price.
Iterations should be embraced, because they are the process which optimise the product. But while revision rounds are inevitable, doing so in the most efficient manner doesn’t come by default. The practice of doing it effectively, can be tied to the ‘build, measure, learn’ feedback loop (pioneered by Eric Rees, the Lean Startup).
The goal is to build, test, gather data and iterate as quickly as possible, to improve the product and avoid soldiering on when it's otherwise destined for failure. While this concept was mostly intended for digital products, the same principles apply to hardware. If you haven’t read Eric’s book yet, you should.
Manufacturing
Whether it’s in-house prototyping or outsourcing full-scale manufacturing, getting things made can get real pricey, real fast. During development, this typically involves parts and prototypes in small volume, but due to the shear lack of volume the cost can be ugly.
It can also be really difficult to establish relations with large suppliers, who typically shrug off the small players. When you're starting out, it's difficult for them to justify the input required for such small order quantities.
Thankfully, the advent of online suppliers who machine, mold, cut, print or fabricate your uploaded files has been a HUGE game-changer in terms of accessibility, efficiency and debatably price. 3D printing has revolutionised a lot of prototyping needs, enabling affordable, high quality parts in small numbers.
Depending on your in-house capacity, the production and assembly of prototypes will likely be outsourced. While this alleviates some headache in terms of sourcing parts, the costs can accelerate quite rapidly. If you don't mind getting your hands dirty and don't have a workshop handy, you could always try to source a local maker space.
Another overlooked aspect to manufacture is not the cost of the parts, but the cost of time it takes to create the parts. Your whole development team can be stalled for weeks, simply because your supplier is busy or closed for summer holidays. One of the most valuable choices you can make, is to build solid relations with your supplier and involve them in the process as early as possible. Try to anticipate when you will need their support.
Intellectual property
The world can be a cruel place - so launching your baby without any legal protection could be poor move. During development, it's wise to get the IP litigation in order - but doing so can be eye-wateringly expensive. Many newcomers think a patent (for a physical device) is the immediate answer - but that's not always true. Over-protecting your invention, can be a really effective way to burn your budget fast, so choose wisely!
PDS
Interpreting a founder’s vision can be somewhat cloudy. This can lead to contractors, suppliers and even employees misinterpreting the objective and creating undesired results. This can be avoided by being totally clear on the product characteristics.
Thankfully, there is a useful document called a Product Design Specification, which can reduced said cloudiness. It's a live document, that details broad aspects of the product design, in bullet-style format. Some of the topics include performance, ergonomics, target cost, service life and even disposal. You can find examples of such PDS' online, and tailor to your needs.
What can I do to minimise costs?
Here are some synthesised points from the article, to help move your development in a more financially-friendly direction:
Involve users as early as possible. Create light prototypes and test immediately. Gather feedback and iterate based on it.
Don’t continue pursuing a solution which the data shows to be ineffective (Can’t polish a turd).
Limit features. Reduce complexity. The more novel or complex a product is, the more research, skills, iterations, time and money are required.
Develop meaningful relations with trustworthy partners, who share your vision.
Don't pursue a patent unless you have validated your idea and you're absolutely sure it will deliver value.
Be profoundly clear in your objectives. Create a Product Design Specification and ensure all collaborators are on board with it.
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