1 New Product Development Presented by Precast Consulting Services Agenda 4 What’s Precast Consulting ? 4 New Product Development –New product development 7-Step Process –Example product lines –Checklist for success 4 Summary Left click to advance - Right click for controls The back arrow will return you to the website Left click to advance - Right click for controls The back arrow will return you to the website

2 New Product Development Margin Improvement The starting point – What’s your sales margin? Analysis: compute sales margin by product line - Sales and cost of production by product line - Allocate fixed costs to product lines - Get involved to keep the effort focused and efficient Results - Product lines losing money need immediate attention - High margin product lines need emphasis - Product lines with margins 0-5% need to be replaced

3 New Product Development Margin Improvement Commodity Pricing – Low Margin 4 Products undifferentiated - interchangeable 4 Standard specifications 4 Technology is mature 4 Buyers market – excess capacity 4 Low cost producer sets the price 4 Product sales margin less than 5% Many products fit this description 4 Quality and ethical challenges 4 They remain the financial backbone of many producers

4 New Product Development Margin Improvement Commodity Pricing – What’s the answer? 1. New production technology – Margin improvements are typically short lived

5 New Product Development Margin Improvement Commodity Pricing – What’s the answer? 1. New production technology 2. Differentiate your products & services – improve margin –Focus on markets - Be market driven rather than product driven –Create value - Provide solutions, not products –Segment customers - Better focus on market needs –New services - Focus on selected markets & customers

6 New Product Development Margin Improvement Commodity Pricing What’s the answer 1. New production technology 2. Differentiate your products & services 3. Develop new products - improve margin –Focused product - Displace another building system –Focused service- Solve a specific problem or reduce costs –Market strength- Successful new products build on what you are already doing Replace your least profitable commodity business New Product Development is today’s topic

7 New Product Development Margin Improvement Commodity pricing – What's the answer 1. New production technology – stay current 2. Differentiate your products & services – from commodities 3. Develop new products - improve margin Every commodity was once a new product with high margin competing with and displacing another building system Precast manholes once were a new product competing with brick

8 New Product LinesAction Plan Precast Competitive Advantages 4 Owners - Strength (5000+ PSI) –Plant Quality –Durability –Fire resistance –Project specific (appearance, maintenance, etc) 4 Architects & Specifiers - Design & engineering services –Engineering envelope – design objectives –Job cost savings –Speed of construction 4 Contractors - Turn key contract – risk reduction –All weather construction –Shortage of masons –Reduction of trades on the job 4 Precast relative advantages differ from market to market  The greatest advantages are against other building systems

9 New Product LinesAction Plan Bill Ray’s Principles 1. High margin new products compete with other building systems, not other precast. 2. Successful new products build upon what you are doing now. 3. Find your new products with your partner architects & specifiers 4. It takes time. New products take two years to develop.

10 New Product LinesToday’s Agenda A 7-Step Action Plan 1. Find the product 2. Evaluate the product 3. Design the product 4. Pricing guidelines 5. Patent protection 6. It takes time 7. It takes commitment

11 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast  1. Find the product. Survey your jobs. Survey your architects. Survey your customers. Ask questions: big and small

12 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast  1. Find the product. Survey your jobs. Survey your architects Structural Producers. Survey your customers Look for new products... And you will find you have been walking right by them without noticing. Precast Producers

13 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast 1. Find the product. Survey your jobs. Survey your architects. Survey your customers 2. Evaluate potential products Perform a structured features & benefits evaluation Benefits to the owner Benefits to the architect Benefits to the contractor

14 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast 1. Find the product. Survey your jobs. Survey your architects. Survey your customers 2. Evaluate potential products. Structured Features & benefits evaluation. Identify specifiers required to reach target markets Architects Engineering firms Code authorities

15 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast 1. Find the product. Survey your jobs. Survey your architects. Survey your customers 2. Evaluate potential products. Structured Features & benefits evaluation. Specifiers required to reach target markets. Identify market size by product Ask specifiers Dodge Reports Market Research Firms

16 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast 1. Find the product 2. Evaluate potential products 3. Design the product. Come to the specifier with a specific product. Drawings. Specific price point

17 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast 1. Find the product 2. Evaluate the product 3. Design the product. Come to the specifier with a specific product. Drawings or illustrations. Specific price point Be competitive with full cost of competitive product Price the features Show the included benefits Charge what the market will bear

18 New Product LinesAction Plan S uccessful new products compete with other building systems, not other precast  4. Pricing guidelinesDon’t use formula pricing . Product enhancements - premium pricing . Product innovations - partner without introductory pricing. New products - initial pricing should never be at breakeven 5. Patent Protection Protect unique designs & materials. Examples: Special designs & connx details. Pat. Pending Protection during the application - about 2 years. Protection Draw the patents broadly to cover variations

19 New Product Lines Stairtower Example Successful new products build upon what you are doing now WTC was much worse because of failed stairtower walls Refuge Egress Changes in code typically originate in disasters BOCA is evaluating proposals for more robust stairtowers Considerable local interest Structural Producers : Think about stair towers

20 New Product Lines Lightpole Base Example Precast Producers, think about this light pole base: Product Advantages to the customer. Rapid construction – reduced project scheduling risks. Product quality – bolt hole & elec connx. Appearance – Steel form finish vs. Sonotube. Cost - Reduced GC overhead & supervision costs Market Advantages to the producer. Competes with other building systems – good margin. Product line extension from current – known req.. Builds relationships with existing specifiers – customers

21 New Product LinesAction Plan Product development must be a way of life 6. It takes time There are many excuses for inaction. Persistence is the most important trait. Go for a small early success. It takes two years 7. It’s ongoingNew products turn into commodities. Specifiers write specifications, margins are reduce. New product development must be a way of life. You need to have one or two new products in each stage of development

22 New Product Lines Checklist for failure þ1. Did not commit to a sustained effort þ2. What I wanted to produce was not what the customer wanted þ3. Did not learn to do business with the new customer type þ4. The new product competes with other precast at low margin þ5. Unsolved production problems

23 New Product Lines Checklist for success þ1. Find the product þ2. Evaluate the product þ3. Design the product þ4. Price it correctly þ5. Patent protection may help þ6. It takes time þ7. It’s ongoing þ8. It’s up to you

24 New Product LinesAction Plan 4 Find the product 4 Evaluate the product 4 Design the product 4 Pricing guidelines 4 Patent protection 4 It takes time, its ongoing 4 What can Precast Consulting do? –Facilitate the process –What’s worked elsewhere –Market studies –Product requirements - cost studies –Contact info:

25 New Product Development Presented by Precast Consulting Services Who’s Precast Consulting We are a general management consulting firm Focused only on the precast industry Finance –Acquisitions / dispositions –Financial benchmark analysis Sales & marketing –New product development –Margin improvement –Profitable sales growth Operations –Work group productivity improvement –Project management –Quality programs – rework reduction –Manufacturing improvements Contact information web site