Diversification: A Possible Dream for Small Business
by Myrna Rodriguez-Co
“Only very large companies can afford to develop new products .”
What a shame that far too often, small businessmen are likely to believe they cannot afford the time, effort and expense of new product development.
Yet there have been small businesses who have actually launched new products –in half the time and effort than a big firm does. This is not surprising. In many small firms, the entrepreneur or his managers have a more direct line to customers, buyers, and suppliers. There is quick decision making, as a series of meetings are not required to clear and approve new ideas.
While most small companies cannot do sophisticated usage and attitude studies, controlled and simulated field and test marketing which are tools of the trade of their larger counterparts, they can conduct low-cost qualitative research merely by talking to buyers about product satisfaction and new product needs. This is biased, qualitative research without need for interview controls.
As it is typically closer to its customers, a small firm may take prototypes of a new product to a few but key wholesale customers for initial evaluation and comments. Depending on the verdict of this select panel of evaluators, a new product may be born or aborted.
Refinements in product, packaging, and pricing may be made with each production run, with initial test-marketing done in one or two local marketing areas.
Developing new products from old ones may also be done through value analysis. This can be simply a scrutiny of an existing product with an improvement mindset. How to make it cheaper, better, faster? What happens if it is made smaller, larger, of different, color, shape, and design?
Customers can also dictate new products and product designs. This is especially true in the handicraft industry, where buyers send sketches of designs they want to order. These become the basis for prototyping.
Small businessmen may also seek expert assistance from government agencies, like the Product Design and Development Center of the Philippines (PDDCP), at nominal fees.
Product development experiences
Small enterprises of little faith may borrow confidence from many of their kind who have, so to speak, gone against the grain.
Chito Madroño, maker of the Eureka brand of educational toys, confirms he does not have to go into expensive research to study his market. All he does is to talk with wholesalers, retailers and end users. This way, he gets a direct line into their preferences, satisfaction level, and most especially, their other needs. This may be informal, he says, but may actually be more reliable than statistical research.
When they travel, Chito and his wife, Aida, also make it a point, to look around for products in the foreign markets that they can develop locally. Through painstaking prototyping, they make sure that their version of the product is much cheaper but no less world-class quality. This is how they developed Word Factory as their answer to Big Boggle, Crossword as their take on Scrabble, and Leaps and Slips as their counterpart to Snakes and Ladders.
Sometimes, their calculation of the market pulse gets off course, as when Leaps and Slips virtually slipped in the market for being too pricey. When this happens, Chito runs a value analysis on the product, which has often led to its re-engineering. At present, he is working on a prototype of Leaps and Slips that uses cheaper but still quality material.
Value analysis has also led to an evolution of Eureka chess sets. Today, they have chess sets of chip board and vinyl instead of the conventional wooden board. The one of vinyl is rollable and comes in a cylindrical pouch of nylon canvas. The one of chip board is foldable. All Eureka chess sets have been manufactured to tournament specification.
Loreta Rafisura, managing director of Cagayan de Oro-based Salay Handmade Paper Products, Inc. encourages her people – mostly home-based workers – to be creative. When anyone develops a new product design, he or she gets a royalty for every time the design is replicated in production.
This was how one of SHAPII’s new products was designed and developed. A worker struck upon the idea of mounting fossilized leaves between laminated sheets to make unique and attractive fans. The idea turned out to be inspired: the fans have since hit it big in local and foreign markets, Loreta says.
Nonetheless, Loreta has lately set up a product development unit which gets guidance from consultants from the PDDC and the Deparmentt of Trade and Industry. A consultant from the Association for Fair Trade, Inc. (AFTI) also visits and gives product development ideas.
Many SHAPII customers e-mail drawings of products they want. “We follow these closely, and then e-mail back the images and send the prototype to them. Then we settle all the details before finalizing the order.” Such tedious process has nonetheless led to market acceptability.
Ramon Castillo, a Metro Manila-based manufacturer of electronic equipment and gadgets, also made good use of computer technology to achieve agility in innovation. He did product development by surfing the Net for customer specifications; he also searched online for information on integrated circuits. After developing the products, he launched a Net-based marketing campaign.
As these examples show, small dynamic companies need not be a contradiction. Small is nimble -- which leads to faster innovation.
