New Product Development

2. Reducing the Risks

Identify major risks early on, so you can decide if the overall risk is worth the potential reward.

2.1 Analyse all the market risks.

For example, a tour operator considering developing a new package holiday based on whale watching in Madagascar should:

• Establish the likely volume of sales, and the marketing and sales cost of achieving each sale. (See Your sales strategy.)
• Check how stable the currency is, and consider hedging the currency risk.

2.2 Analyse the technical risks.

• For example, the Madagascar tour operator would need to consider the reliability of the airlines, hotels and boat operators involved, and logistics generally.

2.3 It is extremely helpful to have a working prototype to test out. But this need not be an expensive process.

• For mechanical devices you may need both a 'works-like model' and a 'looks-like model'. If you are improving on an existing product, you may only need to model the new features.
• Start with a simple prototype such as a drawing. Good feedback at this stage can save time and money.

2.4 Avoid being the pioneer, who has to learn everything the hard way. Look for evidence of what others have achieved before you.

• For example, the tour operator could see how comparable whale-watching holidays in Canada are packaged and marketed, and could investigate which hotels in Madagascar other operators use.

2.5 Work out how to reduce each risk to an acceptable level.

• For example, can your new design be patented or protected in some other way? (See Intellectual property.)