THE TRUE COST OF GOING “SLOW-TO-MARKET”

It’s commonly understood that in the world of product design & development, speed-to-market matters, a lot. One challenge we face as product development service partners is helping show prospective customers not the advantages of going fast (the reasons are quite obvious) – but rather the lost opportunities of going slow by “saving money” using inexperienced designers and engineers or overloading existing staff.

“Yes we want to get to market in 12 months, but this project cost estimate is more than we planned for at this stage.”

We get it. Going fast with a high-performance innovation and product development team can come with a hefty upfront sticker price. While you really want to develop and launch your new product quickly, you don’t want to spend “that much.” What we often see is that entrepreneurs or small teams will look to save money by trying to take on much of the early planning, product design & development work themselves. At this point, they may think they’re saving dollars in the long run, but in almost every instance we’ve witnessed, what’s actually happening is they’re simply delaying their profit and return for investors.

As tough a pill as it is to swallow, looking at the upfront costs without considering the downstream business and return on investment is short-sighted. To help illustrate this we’d like to share a quick payback analysis to compare 2 different approaches (and budgets) to bringing a product to market. Play the video below for the complete graph.

“Slow Launch Larry” Investment: Spends 500k on part-time or inexperienced (ie. low cost) product development plus 20k per month on overhead expenses. His limited spend translates into fewer resources and longer development timelines. It takes Larry 36 months to get to market. Overhead plus initial spend comes to 1.22M.

“Fast Launch Fran” Investment: Spends 1M on “high-speed expert” product development plus 20k per month on overhead expenses. Her spend translates into more upfront resources and shorter timelines. It only takes 18 months for Fran to get to market. Overhead plus initial spend comes to 1.36M

Here’s where things get interesting:

Because “Fast Launch Fran” got to market in 18 months, Fran began generating revenue sooner, reached break even at month 29 and begin amassing profit.

Meanwhile “Slow Launch Larry” gets to market 18 months later – at month 36, and hits breakeven at month 45.

By the time Larry starts seeing profit, Fran has already generated 900K more in profit with only a marginally higher initial investment.

What we’re trying to reinforce here is the idea that trying to cut corners in the beginning ends up being more expensive in the long run. We’re aware that in many cases, limited cash flow is a very real constraint. The unfortunate outcome is that the lost opportunity cost can be very high. When you’re thinking about developing your next product, make sure to weigh the cost of the opportunities you’ll miss out on, against the cash you might be “saving” by trying to tackle too much with too few resources. Another way to look at it is to ask yourself, how much does a 1 month delay in launching the product cost your business? You’ll need to know this in order to make smart investment decisions.

Finally, remember, if you scrimp on design, engineering and validation and you’ll be paying 3-5x more down the line on reworking designs for manufacturing.

If you’re in the midst of planning your first product development project (or your next) we can help. You can register for a free 30 minute consultation with one of our product development specialists here.