Bill Dormer explains his approach to bringing engineered products to market and the pitfalls awaiting you:-
You have a requirement for a product to fulfil a specific function, but you cannot find anything suitable on the market. One of your options is to look to a specialist to work for you in providing an engineered solution.
Perhaps your company specialises in providing engineered solutions – typically with a portfolio of existing product designs, a specialisation in a particular technology and a strong existing customer base.
But you want to grow your sales and margins and this is where I will help you achieve your targets. I have extensive experience in successfully managing engineered products to market – an iterative journey from initial client meeting through product development to production.
This is typically the process through which you will go:
The initial inquiry will often come in to your Company by e-mail. Firstly there will be a need to conduct an internal technical review, often followed by a return to the client with a set of specific questions to which answers will be needed before assessing whether or not your Company can apply its technology in providing a solution. It may be at this stage that you decline to take the inquiry further. This could be for any number of reasons, not only technical but price, volume, return on engineering hours, commercial.
You have the technology. You may already have a suitable product. It should be a simple matter to prepare the quotation, sending it to the client together with your data sheet and a follow up from internal sales. It is also important to know your competitors’ price points, delivery lead times and your chances of winning.
Many businesses have a portfolio of products up on their website with a clever search facility which enables inquirers to get to this stage and perhaps get a price and delivery without any dialogue. In my experience, inquiries for products required to fulfil a specific function are rarely satisfied in this way.
Even if you have the technology and a product which can be modified to meet the client’s requirements, your technical sales desk will have to configure the necessary modifications to enable you to quote. It is crucial to maintain a dialogue with the client and exchange information about the suitability of your modified product solution. There will be few competitors willing to undertake this so-called ‘applications engineering’ so your position of competitive advantage is greatly improved if you spend the time on the detail. It is also important at this stage to take a call on charging for your engineering hours, including an internal cost for the modified product and a quote for production lead-time.
The more complex the requirement the more complicated the process in providing an engineered solution and it is here that you have the opportunity to add the greatest value for your client. Very few of your competitors will have the capability to provide complex solutions and so if you have the skills and knowledge in place, your position of competitive advantage is high. Project management becomes increasingly important the more products you are engineering. All clients have specific time-lines and so successfully managing a portfolio of complex client work will give you a very distinct competitive advantage. Internally colleagues across functions in your business will be involved in the decision to proceed and keeping them on board at all stages is also crucial to the success of the project. Meet regularly with the client – building trust and understanding is the bedrock to a strong business relationship.
Bringing engineered products to market is a complicated process fulfilling complex requirements. Yet if managed correctly it offers your business a strong competitive position with high customer retention. It is an iterative process requiring many stages and processes:
- an exacting specification to be agreed with your client
- a detailed program of engineering work to be undertaken
- changes to the specification to be agreed with your client
- continual internal liaison with your manufacturing team, supply chain and your QA department
There are other considerations – there may be a need to bolster your development department and consider contracting out specialist services such as for fulfilling a rigorous prototype test schedule. There are occasions when contracting-in expertise in managing risk, hazard evaluation and in adopting quality accreditations will prove invaluable.
Expect to welcome your client or their representatives at any stage and make your team available to visit your client; meeting frequency will be a contractual obligation. Both you and your client may want or need to hit contractual milestones, which if properly negotiated and managed will help cash flow.
Be prepared to go back around the loop if some part of the process goes off track – for example, if testing shows up a need for further product development. Be sure to manage costs and have an agreed contractual mechanism in place with your client to ‘avoid being a busy fool’.
My advice at all stages is patience, perseverance and tenacity.
Bringing engineered products to market can be a ‘long game’. Getting a qualified prototype to your client is a major hurdle. Depending upon your client relationship and how astute you have been in your contractual negotiations you may still be up against a competitor, but you may not know it. You can now be faced with a wait while your client undertakes their own programme of testing and in my experience this can take months or even years.
Businesses must be financially sound through growing a healthy pipeline of mixed order types to generate the positive cash flows required to sustain the ‘long game’, which itself must be an objective of your business plan. Ideally a client engineered product development programme is client funded, but strategically you may choose to treat a new product development programme as R&D expenditure, where you may go on to sell the same or similar products to more than one client.
Your sales team will need to keep on top of a wide portfolio of prospects and be ready to be the first to respond to each client’s next set of requirements. What if something happens during their programme of testing? To retain your competitive position you need to be the first to respond and respond with a solution to keep your client on track. A key goal is to secure their low rate initial production (LRIP) contract, with a view to their committing to a long-term supply agreement. It is possible to remain in a competitive situation well into the process – you cannot afford to be complacent.
It is likely that the project will include a significant long-term supply contract to bid for and secure and a flow down of the client’s customer’s terms and conditions to negotiate. It is advisable to contract the services of a professional law firm specialising in the contract law of the country set out in the tender documents. My advice is to neither be put off by onerous clauses, nor accept them without taking professional legal advice; most clients will respect you pushing back, especially if you offer some alternative clause which offers you and them some or equivalent protection.
By this final stage, you will have gone through a massive investment in time and resources and you do not want to lose the business now through a lack of understanding of your client’s tender assessment methodology, particularly if your client is in the public sector and their process is open to scrutiny. Specification, price, delivery lead-time and quality certification may for example carry lower weightings in their marking of your tender than other criteria such as risk mitigation factors, whole life costs (including disposal) and environmental impact. The difference between a winning tender and a losing tender is often how well you respond to the requirements of your client’s contract.
Please ask for my help. I would be happy to talk through your specific requirements.