Product development — sounds self-explanatory, doesn't it?

But what exactly is a 'product'?

I would now like to get to the bottom of this fundamental question and take a closer look at the special characteristics of products.

I've worked on vehicle development my entire professional life, so I'm very good at how a vehicle product development process works and the environment in which it takes place.

But there are other products, some of which are fundamentally different in nature and are therefore consequently developed with different approaches in a different environment. This became clear to me during an exchange of experiences with colleagues from companies in other industries.

As always, one can learn from another. That's why I want to share my insights and thoughts in this article and encourage you to reflect on them.

I hope you'll find it inspiring and have fun classifying your products.

Have you ever thought about what a product is?

How it is defined?

Since I will be discussing the characteristics of the product development process and product development projects again and again in the following articles, we should first agree on our understanding of the term “product”.

What is a Product?

In the literature, the product is often seen in connection with production and the company's goal. As an example, I refer here to the definition from the Gabler Wirtschaftslexikon:

Result of the production and objective of an undertaking or also means of satisfying needs.

(Source: https://wirtschaftslexikon.gabler.de/definition/produkt-42902/version-266242 Revision of product from 19.02.2018 - 14:37)

However, I believe it is more appropriate to define the product not from the company's perspective but from the user's point of view.

With this in mind, I have developed the following definition:

A product is an item or a device that fulfills a desire or solves a problem.

In my opinion, a product must always serve a purpose, without a purpose it is useless and without use it is worthless.

The intensity of the desire or the severity of the problem that the product addresses directly influences the customer’s valuation of the product.

Or, as Martin Daum used to say:

A great product is characterized by the fact that the customer happily separates himself from his money.

Martin Daum, former CEO of Daimler Truck AG

Thus, the product serves as the foundation for any company's financial success.

Finally, you've got a connection to the business and, when appropriate, to the product's manufacturing.

Product or Service?

Some distinguish between products and services, suggesting an inherent difference between tangible hardware products and intangible services.

This can be explained if you define the product as the result of production.

After all, a service is performed rather than produced, meaning it does not undergo a traditional production process.

In my opinion, however, this distinction does not make sense.

A product must be understood and implemented as a holistic solution. It is a complete package that brings value and satisfaction to the customer, whether it is tangible, intangible, or both.

If you notice this separation in your business, ensure that the hardware and service departments don’t operate in silos at the customer’s expense.

I will go into this later in the article.

Now that I've defined the term "product," let's look at different types of products.

Single Item

A single product is characterized by the fact that only a single copy of it is developed, manufactured, and delivered to a customer.

This type of product can come in a wide variety of forms.

* As a building,

* as a special machine,

* as a production plant,

* etc.

As a rule, these products are based on modular elements or sometimes even series products, which are then heavily modified.

Think, for example, of an armored vehicle. Here, a series vehicle (car, van, or truck) is redeveloped into a bullet-proof special vehicle equipped with special equipment.

A key feature of single products is that a development project is not started until an interested customer has been found. So sales are at the very beginning here.

If a customer shows interest, the offer phase begins.

The company collaborates with the customer to develop the product requirements.

In this process, project approval takes place both when the customer places the order and when the company formally accepts it.

Challenges for the developer

The challenge for the developer in the case of a single product is validating the product before delivery.

Due to the product's complexity and cost, all forms of destructive testing are prohibited. As a result, testing and performance measurement must be conducted using theoretical validation methods and model-based validations.

Risk management plays a crucial role and must be applied consistently as a method.

Impact on the organization

For companies that produce single products, project management of development projects is at the core of their business.

This seems to result in top managers having gained extensive project management experience during their professional development or having managed large projects themselves.

Consequently, project management is strongly developed here and is highly prioritized in day-to-day business.

Series Product

In a serial product, there is a strong temporal separation between the development of the product and its sales/production.

A typical example that everyone is likely familiar with is vehicles.

The decision to develop a product is made by management.

Sales begin after the product has been developed and validated. It is then manufactured and delivered in large quantities in a repeatable production process.

The individual units may well be one-offs, assembled by combining pre-developed modules. The main difference to the individual product is the decoupling of product development and customer order.

Challenges for the developer

Understanding the customer requirements that need to be met is a challenge for the serial product developer.

There are many potential customers with very different wants and needs. However, these customers are not known at the time of development and therefore cannot be consulted. This complicates the specification, the definition of product characteristics, and the selection of validation methods.

Through detailed market analysis and a product architecture based on that analysis, a product portfolio has to be found that will meet all major customer requirements in the future.

A second challenge for developers is balancing the dual workload of initial development and ongoing series support.

Since a new product is being developed while quality issues in the current product need to be resolved, urgent customer requirements integrated, and costs optimized, developers are essentially juggling two tasks at once. This strains resources, makes it difficult to focus, and adds volatility to the task portfolio.

Impact on the organization

In companies that develop, manufacture, and sell series products, revenue is primarily generated through production and sales.

As a result, top management naturally focuses its attention on these areas.

However, the methods and processes in product development and day-to-day operations differ significantly.

While product development follows a project-based, long-term approach, daily operations rely on short-term, standardized, and highly synchronized processes.

Balancing these two worlds is a challenge. It is crucial to ensure that the urgency of daily business does not hinder or negatively impact long-term product development.

Mass Product

A mass product is designed once and then manufactured and sold almost unchanged over a long period of time.

Beverage cans, Euro pallets, or bricks are to serve as examples.

Since there is minimal development involved, I will mention this type of product here for the sake of completeness but will not elaborate further.

Software Product

Software products are characterized by the fact that there is no production or manufacturing.

Although it only exists in conjunction with hardware (a computer or control unit), it is not necessarily tied to it in its development.

Once developed, the product can be delivered in unlimited quantities and without delay.

As software is information processing, there are no physical durability problems. This significantly shortens the product development time, as the time-consuming proof of durability is not necessary.

Challenges for the developer

Typically, physical product variants are expensive because the manufacturing tool, logistics, and complexity of production set a natural financial limit on the number of economical product variants.

In the case of software, these costs are not to be found at all or to a much lesser extent.

This leads to an endless hunger for variants, functions, and features.

Complexity in development is the limit, but this limit is very difficult to identify.

This complexity in development, combined with the high speed due to the absence of hardware procurement times, creates significant pressure on function validation. A large number of functions with a high degree of combinatory variation must be tested in a very short time.

Impact on the organization

The focus of the business here is on the two core processes of product development and sales.

Product development therefore plays a key role in the economic performance of the company. In conjunction with the short cycle, it is at the heart of day-to-day business.

Mechatronic Product

Today, hardly any physical product can exist without software.

Mechatronik Products combines physical products and software.

With the help of software, product functionality is significantly enhanced, and costs are reduced when physical product systems are replaced by software.

On the hardware side, mechatronic products can include both individual products and series products. The combination with a mass product is rather rare.

While historically this type of product was characterized by a high level of integration of hardware and software, the current trend is towards "software-defined products".

These are products in which hardware and software are largely decoupled, and thus different development cycles are possible.

The software can be further developed on a stand-alone basis, independent of the hardware.

Challenges for the developer

The major challenge for developers lies in combining the extremely different speeds of hardware and software development.

The hardware can only be operated and therefore validated in combination with the software. Therefore, the software must be validated before the hardware can be validated. This means that the total development time is longer than developing the software and hardware independently.

This is of course absolutely undesirable, which is why we have to try to move both timelines into one another. Managing this is a major challenge.

Taking a closer look at this challenge is probably worth several articles.

Impact on the organization

The company must function as both a software company and a hardware company simultaneously.

This presents an organizational challenge.

Hardware-oriented and software-oriented companies operate with fundamentally different structures and processes, yet here, they must be integrated into a single cohesive organization.

If the physical part of the product is a series product, then there are actually 3 different processes that need to be integrated.

One can imagine that due to this fact, it is extremely difficult to find a suitable organization, a consistent control system, and an integrated process model.

Service

In connection with software, services are increasingly becoming the focus of the customer's attention.

Software is no longer just sold to the customer, but the software is used by the company itself and the solution is sold to the customer.

If only pure software is involved, this is referred to as Software as a Service (SaaS).

I think everyone is familiar with examples of software products that are hosted "in the cloud" and used by customers without owning them, instead paying a fee for the results.

Physical and mechatronic products offer the opportunity to bundle additional services with the product, which are offered to the customer in exchange for regular payments.

One example is the service contract, which includes the maintenance and repair of vehicles or equipment.

If data from the operation of the product is included in the service, a very high customer benefit can be represented, which of course should ideally be converted into a profitable business.

If the mechatronic product itself is integrated into the service, we refer to it as "Product as a Service."

In this model, the customer no longer buys the product but only the service it provides.

Challenges for the developer

In this constellation, which is very lucrative due to its potentially high profitability, the service must be developed at the same time as the hardware and software.

However, the development of services follows its own processes.

The challenge for the developer is therefore to integrate all aspects, ideally so that the maximum customer benefit is created. This has to be higher than in the classic model, where the customer is responsible for the operation himself.

In the development of both the physical product and the software, the needs of the service must be considered to ensure that the service operates with maximum efficiency.

Impact on the organization

In this business model, the organization must be a master in all three business disciplines.

* Development, production of hardware

* Software development

* Development and distribution of a service

Obviously, selecting the optimal organizational structure, implementing the necessary processes, and managing such a large organization involves a high level of complexity.

Sharpen your view – focus on your product

I hope this overview gives you enough food for thought to re-evaluate your own product and critically reflect on the challenges associated with it. I am looking forward to an inspiring exchange with you.

I will provide more detailed articles on project management topics, transformation, and change in the future. Please subscribe if you are interested to ensure you do not miss any updates.

Let's talk about your product and your experiences with challenges for developers and the organization in the chat.

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