Friday, May 30, 2008

Designing products in the economic doldrums

By Keith Regan

The recent economic malaise has affected more sectors than the well-reported housing and credit markets. As the calendar turned from 2007 to 2008, the region’s product development firms found their clients increasingly hesitant to commit resources to developing and rolling out new products on an aggressive time frame.

“In the first quarter in particular, we were seeing a bit of hesitancy and delay, as if everybody was waiting to see when the other shoe was going to drop, whether the economy was going to spiral down quickly,” said Doug Sapp, managing director and director of business development at Boston-based Catapult Thinking LLC, which consults with companies on product platforms and strategies. Catapult’s clients include Burlington-based iRobot Corp., New Balance Athletic Shoe Inc. of Boston, Staples Inc. of Framingham and Minneapolis medical device market giant Medtronic Inc.

That hesitancy is already changing, however, with companies showing more interest in their core product lines, seeking ways to develop new markets with existing products and doing the legwork that will enable faster and more effective product launches when conditions warrant, Sapp added. That approach also helps preserve precious capital when research and development budgets may be under pressure.
“Moving into a new channel or tweaking an existing product doesn’t require investing a million dollars in tooling to get a new product to the marketplace only to find there’s no receptivity because no one is there,” said Sapp.

While some companies may be more likely to outsource product development work in down times to avoid the expense of beefing up in-house capabilities, the region’s product design and development firms say they are not immune to the ups and downs in the economy. Uncertainty, especially early in 2008, prompted many customers to put product development efforts into a holding pattern, though more recently things have begun to pick up, with those customers seeking to maximize their R&D dollars.

Tim Bowe, the CEO of Burlington-based product development consulting firm Foliage Software Systems Inc., whose client roster includes medical device, aerospace and semiconductor companies, said his firm also saw a slow first quarter, with particular weakness in the capital equipment niche, which includes the semiconductor manufacturing industry.

“The trade-off that gets made at the executive level is between capital spending and fixed costs, and capital spending is the first to get cut,” Bowe said.

Still, research and development spending has largely held up, as companies recognize the need to invest in order to stay competitive, Bowe said. “What happens is, people look at different aspects of where that money is going and how it can be maximized. We’ve spent a lot of time over the past year and a half helping companies look at how they test and verify products, for instance.”

Even the varying health of economies around the world can affect what product firms are asked to do. For instance, many companies with exposure in both Europe and the United States are eager to find ways to move more work into the United States due to the weak dollar, Bowe said. Firms are now starting to deal with the reality of a slower market. “In a down market there is more flexibility in (a) product launch window.”

Mike Mooney, a partner at Catapult, said slower times also ratchet up the pressure to get things right. “The products in the pipeline become even more critical,” he said. “You have higher expectations and can’t have misfires.”

That may shift more money to validation research, for instance, and may also mean that over time an in-house design team gets smaller and works to generate early stage ideas that are then carried through the process with the help of an outside firm. “Maybe you have a smaller team to keep those seeds of innovation planted but look outside to do the more of the work of moving those ideas forward,” Mooney said.
According to Brian Matt, the CEO of Boston-based product design firm Altitude Inc., businesses need high-level help with their product development and branding, which the industry is only now starting to evolve to provide.

“A lot of guys are experiencing the weakness in the economy,” said Matt, who is also a board member of the national Association of Professional Design Firms and has heard similar feedback from around the United States “The best firms are positioned to help companies when the economy is down and they need (help) or when things are going great and they just need to produce more product.”

His firm tries to retain its relevance by seeking to design products by looking beyond pure design considerations to take business strategy, branding, competition and corporate culture into account. Altitude has worked with Boston Scientific Corp., 3Com Corp., Sun Microsystems Inc. and Polaroid Corp.

“You can design the greatest thing in the world but if you don’t create a degree of relevance, if no one wants it, it’s not going to work,” Matt said.

 

Keith Regan is a freelance writer in Grafton.