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Suzy CA USA

My posts are presented as opinion and commentary and do not represent the views of LabSpaces Productions, LLC, my employer, or my educational institution.

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Awesome Stuff
Tuesday, February 8, 2011

Think about all of the products you use every day, both at home and at work. Every single thing you use started out as an idea or concept from someone who thought, “If I had something like this, it would make life so much easier.” We all have those ideas. But how does a product go from concept to solid object sitting on a shelf waiting for you to buy it? The process is long and complex and involves many people. Even the simplest more inexpensive item requires the touch of dozens and sometimes hundreds of people.

Most of us never think about how that thing or kit came to existence and what was involved to make it happen.  But if you knew how much work went into every last detail down to the way it looks when you open it and how you heard about it, you would never look at a product the same way again.

Today I am going to tell you how this works.  Naturally this process varies greatly depending on the size of the company and the type of product (for example, software vs a DNA kit, vs a sequencing service are totally different). I am going to describe the process in more general terms. Because the truth is that even in a small company, this process must be followed. The system is in place to make sure mistakes are not made, that lemons are killed before too much time is spent on them, and to make sure that the product has the best chance for success. When this process is not followed, this is when you get products that don’t work well or have protocols with mistakes, or are falsely advertised as to how they work.

To do a good job on this subject I am going to break this up into two parts so it isn't so long.

To begin, I’d like to first describe the two major types of approaches used by companies in life sciences when it comes to new product development.  One type of company is R&D driven. The other is marketing driven.  Most companies fall into one or the other category with only a few finding the happy medium, successfully blending marketing and R&D.

In an R&D driven company, the scientists are leading the decision making, including the ideas for new products, talking to customers, and deciding the specifications for products. They then tell marketing: here is a product, here is what it can and can’t do, now go sell it. An example of a very successful company that operates this way is NEB (personal correspondence).

In a marketing driven company, the marketing department has the leading role in deciding new products, when they need to launch, and how they need to function to sell. Marketing tells R&D: Here is what customers want a product for and here are the criteria it must perform to so I can sell it. Now go create it. The majority of large companies operate this way (sometimes they are referred to as a “marketing machine”.)

Already, as scientists, you can see which type of company you’d rather be in. The ideal scenario is when R&D and marketing can work together to create products that the market needs and wants. Where each side has input and both sides are excited for what is coming up next.  This only works if the marketing people have a science background, in my opinion. As an R&D scientist, you need marketing’s guidance to build a product that will be successful and the marketing person needs the R&D scientist to be excited about their product and want to promote it along side of them.

So given that there are differences in the ways companies will come up with product ideas and bring them to market, the flow of the product development process can be different, but the elements are almost always there.

I would break product development into five main stages. These stages are 1) Feasibility, 2) R&D development, 3) Market analysis, 4) Manufacturing, and 5) Launch. These steps are not independent- they are all overlapping with each other and each group must be doing their part to make sure the product will be a success. If anyone drops their ball, that’s when you have problems and mistakes with your products.

Let’s go over each of these stages one at a time. Today I am going to cover Stage 1 only:

Stage 1: Feasibility:

Feasibility starts when someone has an idea for a product. It could be that customers keep asking for a way to do something better, or it could be from marketing if they are out talking to customers, or it could be the R&D scientist has done research, read the literature, and talked to people and thinks they have an idea that is worth pursuing.  Feasibility is the stage where the R&D scientist determines if the idea has any possibility of working in the first place. Can it be done? Can it be done at reasonable cost? Does someone else own intellectual property (IP) associated with the idea that we need to license? Do I have a new patentable idea?

The scientist does the preliminary work to determine that they indeed have a cool new idea that’s never been done before (or makes an existing product better) and it can be done and how long will it take.

Marketing has a function in feasibility too. They need to answer questions like: Do people really want this thing, idea, or method? Just because you the R&D scientist think it’s cool, doesn’t mean other people will. Or, maybe there are only 10 people in the whole country who need help with this technique or want to use it. Are 10 scientists enough of a market to justify spending hundreds of thousands of dollars in man hours and research supplies to develop the product? Are those 10 people the opinion leaders of the field and if they adopt it, will half the planet follow suit?

You can see where we are going with this. If you develop a product without having this information, you very well may end up making something that just sits on the shelf. You have to know how many people will want it and how many would consider switching to you from a competitor first. Otherwise you are wasting your time.

So now you might be asking yourself, well how do I get this information? We get it several ways. One way is to purchase a survey from one of several companies that do life science reports. These surveys cost $3000-$5000 though. And you can’t ask for a refund if the report doesn’t meet your needs. So often what we do is survey our own customers instead. Have you ever received a survey from Survey Monkey asking for feedback on a technique or competitor products? That company is trying to figure out how to make a product people want and to gauge how many people would actually buy it.

A lot of the decision making around the market size, and how much of the pie can we get, is all a big guessing game. We make assumptions based on what we know about our competitors and what the pain points are for the current methods and if we can overcome them, how many would buy.

But, this point, “how many will buy” this is critical to the discussion of product development. Because we need to have some idea about this before we know how much time and resources we should devote to making it happen.

The main focus ALWAYS is the ROI: Return on Investment.  Will we return our investment and how many years will it take?

Feasibility is the best time to kill a project because the least amount of time has been invested. If the senior executives do not believe the pie is big enough, or that the company cannot get a big enough slice fast enough, or that the ROI will take too long? Project cancelled. It is up to marketing and R&D to team up, uncover this information and then convince the executives that it is worth moving forward.

That’s why I believe a team approach with marketing and R&D is best. R&D and marketing together have to sell it, not only to you, the scientist, but to vice presidents and CEO’s.

A good R&D/marketing team combination is unstoppable.

That’s feasibility. Basically prove your concept is doable, prove there are people who would buy it, and then off you go to the real work of turning that idea into reality.

 

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Genomic Repairman
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I'm assuming that a lot of great ideas for product come to die in the feasibility stage?


Suzy
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Yes. For example, perhaps you figured out the ultimate way to transfect mammalian cells and get high level expression of any gene product, but it requires the addition of a novel protein that you would need to express in high quantity in bacteria, but the bacteria just shove it in inclusion bodies and there is no way to get soluble protein. How much time and money would you invest in a technique for a market that is already saturated?

Or you figure out how to clone DNA in five minutes with 100% success into any plasmid, but it requires platinum in the buffer and at $1000 a ligation, you just can't seem to convince people it is worth it.

I had a product idea killed because I couldn't convince the executives that it would make enough money because it wasn't a something I wanted to sell direct. It was an idea to draw traffic to the website and create goodwill. Even though I am sure that it would bring more sales and the ROI would be there, there was no way for me to prove it with numbers.

I also cancelled a project because, while we thought it would be good for our portfolio, when we surveyed our customers, no one seemed interested. Everyone agreed that the technique was useful and valuable, but no one was actually doing it.

So it is an important stage to help determine which are the best ideas to fund. It's great to have way more ideas that you can actually do so that only the best move forward.

By the way- it doesn't always mean that we never do it. Usually, for me, things linger in my mind and I wait for the chance to re-introduce it again. Maybe something new is discovered that makes the undoable idea now doable and affordable.

Also- one last point. Really big companies, like Life Tech and GE, they can afford to have their scientists work on something very high risk and very expensive for a long time and not have a product come out. They can afford to have an investment in the millions of dollars and are hoping for a product to come out that is going to be in the 10's to 100's of millions of dollars on the return. In a small company, it is not possible. So while an idea may not be doable for one company, it may be find for another to pursue.

 


Alchemystress
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Very informative. I always had an interest in biotech and development but no idea how it happens. It makes sense and is logical, cost effenciency is important. There are so many things to consider. Its more thn the science. Interesting food for thought.


Suzy
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Yes, the company would go bankrupt if every idea was allowed to proceed without any idea about the costs to produce and the market.

R&D is very expensive. If it takes you 9 months to develop something that fits all the specifications you set, we're talking well over $200,000 investment in time and overhead. Add in supplies and you're probably at $250-300K depending on what it is. If you sell your product for $200 (let's say is an enzyme kit with 50 reactions in it), and $200 is a 75% margin (let's say it cost you $50 to make it), so you make $150 on every product sold.

You need to sell 2000 kits before you break even. This is just to recoup what was spent.

Can you sell 2000 kits in a year? That's 166 kits a month. That's a lot of product considering most new products take time to ramp up. So it may be more than a year before the new product actually makes money for the company. The first 1-2 years may be simply be paying back what was spent.

 


Alchemystress
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Holy Hell that’s a lot of variables to consider. Makes sense but wow I never even thought about that and how to regain cost, how long does it take. Is it worth? I suppose sometimes I have taken kits for granted and this is an eye-opener. The big biotech jobs are earned for sure.

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