Chapter 7

Analyzing
Product/Service
Risks and Benefits
 Overview

• The nature of product/process

development

• Entrepreneurial product/service
development

• The product development cycle

• Intellectual property development

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 Changing Times,
Changing Strategies
• Need to develop new products in a
dynamic, even chaotic,
international environment

• Need to develop faster

• Need to keep costs down

• Need to be able to compete against giants

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Action Step #1: Put Customer Knowledge
at the Core of Everything You Do

• Talk to the customer…

– Concept stage
– Design stage
– Prototype
– Production
– Market introduction

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 Benefits of Customer Input

• Talking to the customer results in...

– Giving them exactly what they want and need
– Avoiding redesign that lengthens process and
increases costs
– Building lifelong customer relationships
– Achieving a competitive advantage in
the marketplace

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 Action Step #2:
Design Right the First Time
• Use cross-functional
communication

• Prototype early TIP

Product Design is 8%
• Seek fast failures
of the budget but 80% of the
product cost. Design right
the first time!

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 Benefits of Step #2

• Designing right the first time results in...

– Tremendous cost savings from not having
to redesign
– Faster time-to-market
• More likely to meet customer needs
• Substantial gains at the bottom line
• Better design & performance, which means value
for the customer

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 Action Step #3:
Focus on Core Competencies
• Focus your efforts and resources on what
you do best—become the best

• Choose strategic alliances to gain the

advantage of others’ core competencies

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 Benefits of Focusing

• You become the expert in

your competency

• You can devote all resources to your

competency, which means less upfront
capital to start

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 Action Step #4:
Think Virtual
• Form an alliance of
companies with
different core
competencies TIP
(outsourcing) Make sure your partners
have a vested interest
• Keep overhead costs
in what you’re doing
to a minimum
• Buy off-the-shelf parts

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 Benefits of Being Virtual

• Being virtual allows you to...

– Share resources and spread the risk
– Increase your ability to innovate
– Reduce time to market
– Sell solutions
– Develop open systems with
plug-in components

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 Action Step #5:
Prepare Financially Before You Start
• Have plenty of your
own resources

• Check out
government sources
TIP
Remember that prototypes
cost at least 10-20
• Tap friends and family times more than the
final product

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 Benefits of Preparing Financially

• You won’t rely on outside capital, which is

difficult to raise at this stage
• You’ll be able to focus on product
development without financial worries
• You’ll have more flexibility
• You will get through product
development faster
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 The Product Development Cycle

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 Intellectual Property Development

• Protect what
you develop

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 The Intellectual Property Pyramid

Patents

Trademarks

Copyrights

Trade Secrets

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 Which Invention
Has the Most Patents?

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 Finding the Better Mousetrap

• “Build a better mousetrap

and the world will beat a
path to your door.”
—R.W. Emerson
• Original patent in 1903
• 40 patents every year
• 9 categories
• Only 24 of 4,400 patents
have made money

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 What Is Patentable?

• Must fit into one of five categories

– Product/apparatus
– Machine
– Process
– Composition of matter
– New use for one of the above

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 Business Method Patents

• Fundamentally different ways of doing

business is the claim
– Priceline.com and Amazon “one-click”

• Signature Financial Group—patent upheld

– Computer-based business model

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 Patentability:
Only Inventors May Apply
• Must have utility

• No prior art

• Nonobvious

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 What Rights Are Granted

• Right to exclude others from

– Making
– Selling
– Distributing
– Importing
– Right to seek relief—injunction

• For 20 years from the date of application on a

utility patent and 14 years on a design patent

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 Types of Patents

• Utility
– Protects the functionality
– 20 years from date of application

• Design
– Any new, original ornamental design
– 14 years from date of application

• Plant
– Uniquely different from anything in nature
– 20 years from date of application
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 Patent Process

• Disclosure Document
– Two years to file for formal patent
• Patent Application
• Patent Applied for Status
• Receive a Notice of Allowance
• Patent Pending Status
• Patent Issued
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 Provisional Patent

• Allows inventors to show inventions to

manufacturers without fear
• Doesn’t replace patent filing
• $75 filing fee and declaration that you are
a small inventor qualifying for reduced fee
• Equivalent to a disclosure but more
legal force
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 Trademarks/Service Marks

• A trademark is a word, name, symbol or

device (or some combination of these
things) that when used in connection with
a product or service, serves to identify the
source of the product or service

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 Trademarks/Service Marks (cont.)

• Brands: symbol, word, slogan, sound,

scent, or design
• Check validity with knock-out search, then
against state and federal registers
• If in use, file use application
• If not, file intent-to-use application
• Submit three specimens showing
commercial use
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 Trade Secrets

• Recipes, ingredients,
source codes,
discounts, mfg. costs
• Know-how that is
not patentable
• No specific rights
from PTO
• Use employment
contract
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 Nondisclosure Agreements

• Provide for consideration

• Define what is confidential
• Identify how the other party will use
the information
• Designate what is to be done with
materials exchanged

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 Copyrights

• Original works of authors,

composers,
screenwriters, and
programmers

• Work must be fixed

& tangible

• Copyright 2002 [name]

• Register

• Good for 70 years

plus life
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 Take-Aways

• List what students took away from the

discussion in real time

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