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AMI4900: Engineering Design

Unit 1: Commercial Overview

Section 4: Marketing and user requirements

Contents

• 1.4.1 Marketing and user requirements
• 1.4.2 User Requirements or Product Specification
• 1.4.3 An approach to determining development costs

1.4.1 Marketing and user requirements

1.4.1 Introduction

This unit provides an overview of the marketing function in an SME and describes the interaction between the product development department and the marketing department in your company, known for the purposes of this unit as EEL. A more in depth study of this area will be found in Module ami4088_im (Industrial Management) which is an optional module to be studied.

For the purposes of Engineering Design the Marketing and Sales function is needed to provide information about the identification of a new product, the revision of an existing support for a new innovative product. This will used as part of a management process to determine the viability of the product concerned. The market analysis that will be carried out to:

• Provide an indication of the market size in the national, European and world markets. It should predict how the market should develop for the product in terms of the number of units required for delivery and the time scale over which this will happen. If the sales price of the product can be established by determining the cost customers can support then an income stream can be predicted. The selling price will is dependant upon competition from other suppliers in the same field or if a novel product what the expected costs would be acceptable to customers.

• Provide calculated figures can be used to carry out an economic assessment of the project. The other information that should be compiled for this assessment is the User Requirements, development time, development costs in terms of staff effort, subcontract effort, training of staff for new systems and/or techniques, management time, equipment costs, fabrication costs and a development plan.

An economic assessment of the impact of the introduction of new technology or product on the business of the company should contain current sales, projected sales and cost benefits (Return on Investment (ROI)), components and/or manufacturing. Increase in sales and turnover expressed in percentages and a payback period. It should also contain a description of the market, an analysis of the competitive position in the market and describe how the proposed work would strengthen the company’s position in relation to its competitors.

The economic assessment will form part of a proposal for a new product that can be presented to the management team internally or external should additional funding in terms of new financing from venture capital or for a government funding scheme. It is important to show that the ROI and payback are significant to justify the investment in the development of the new product.

A system for preparing a proposal with a costing are shown at the end of the section.

The effect of this interaction on the managers of both departments is examined, with emphasis on the manager of R&D.

Some companies have separate marketing and sales departments, but many SMEs combine both activities in one department. The reason for this is partly historical- up to about 20 years ago many UK companies traditionally only had sales departments- marketing only came to be regarded as important as competition intensified and markets became global.

There are many standard texts on marketing and sales and it is not our intention to reproduce the contents of these in this unit, but we shall refer to such texts as appropriate. Information is available from UK Business Links.

For example you can create a down load pdf file on a particular topic are, say Marketing and download it for your own use. This is a useful source of information.

Contents of sub section 1.4.1

• 1.4.1.1 The Marketing Function
• 1.4.1.2 Market Segmentation
• 1.4.1.3 Profiling
• 1.4.1.4 Competition
• 1.4.1.5 The Relationship between Marketing and R&D
• 1.4.1.6 Some Standard marketing Concepts
• 1.4.1.7 The 4 P's
• 1.4.1.8 The Unique Selling Point
• 1.4.1.9 The Ansov Matrix
• 1.4.1.10 Medium & Long Term Market Trends
• 1.4.1.11 Sales
• 1.4.1.12 Management Issues
• 1.4.1.13 Summary
• 1.4.1.14 Suggested Reading
• 1.4.1.15 Self Assessment Solutions

1.4.1.1 The Marketing Function

Marketing is concerned with ensuring your company produces products that satisfy the needs of customers, at a price they can afford. We shall see that a good way of identifying customer needs is to identify customer problems and come up with solutions for them that your company can provide.

A major marketing problem is identifying potential customers and reaching them in an effective and efficient manner.

We should always remember that marketing is about people, their needs and problems and what they can afford. Even when we are selling in a business to business situation, it is people who make the choice of which product or service to purchase.

Whenever a product is purchased, whether for private use or in a company, something like the following process nearly always occurs:-

• If the product is cheap and we want it we will probably purchase it without much thought. The price of the product is said to be within our disposable income, that part of our income left over after we have made essential purchases and paid essential bills.
• If the product is more expensive we will be more careful- we will probably discuss the purchase with friends and/or relatives before buying the product. An example of such a purchase in a domestic situation is the purchase of a new video recorder.

For expensive products we are much more careful - for example if we want to purchase a new car, we are likely to check out several models and discuss the pros and cons of each with members of the family, friends and hopefully someone with a good knowledge of cars.

For really expensive purchases, such as the purchase of a new house, the situation is even more acute, we consult relatives, friends who have bought their own house, people with knowledge of houses such as builders, if we have contact with such people, and professional people like surveyors and solicitors.

The group of people that help us make up our mind about a purchase is called the decision making unit (DMU), in marketing terminology.

When a "company" makes a purchase, much the same process goes on, but even more so because the company probably employs several people with different skill sets and experience, who can provide advice and opinions. For expensive and/or critical purchases the company may also employ external expert advice, such as consultants and solicitors, etc.

The decision making unit in a company is a key group of people that decide which product to buy and when to buy it.

Typically the DMU in a company consists of the following type of people:-

• The decision maker- the person who actually makes the final decision to buy and when to buy.
• Influencers- people who have expert knowledge and experience that may influence the DMU significantly.
• Advisors- often technical people who have knowledge of the type product to be purchase.
• Purchasing personnel- they actually make the purchase and knowledge of suppliers may make their opinions sought after.
• Financial personnel- they tend to act as constrainers and are always important.

If we are selling our products to a company in a business to business transaction, and we have direct contact with your customers, we should try and identify the DMU at the personal level in each of your customers.

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1.4.1.2 Market Segmentation

The global market is vast- if we are to sell your products effectively we must try and break the market down into manageable segments we can afford to reach. This process is called market segmentation and is illustrated in Figure 1.4.1.1.

We note from figure 1.4.1.1 that we may segment the market geographically by country, then by region, even by post code if wish to attain that level of detail. In addition we may also segment the market by company type, company size etc. It is important to realise that we segment the market from your company's point of view- not some generalised idea of what the "market" is.

It is possible to segment the market very efficiently by accessing on-line data bases, such as Kompass, or by purchasing lists of potential customers from organisations called list houses. Data may be downloadable, be available on CDROM, or supplied in a file format suitable for direct mail purposes etc.

A possible market segmentation for EEL, is shown in Table 1.

Note that we have assumed several parameters are used to segment the global market for EEL. They are explained briefly below:-

Country

The country we wish to trade in is of major interest- normally companies trade in the country they started up in and expand to wider markets when they grow, but this is not necessarily the case. Extending marketing operations into another country can be a risky business and should not be undertaken lightly, key things that should be considered are culture, language, national regulations, legal requirements, the cost of distribution etc. However, extending your marketing operations to include another country may increase your income significantly.

Region

Many companies start small and trade locally at regional level, so it's natural for them to segment the market according to region. However, as companies grow, they may wish to extend the market to include other regions. The cost of distribution, the cost of sales people traveling further distances, installation and commissioning etc. should be considered. Another important parameter is regional affluence, if you are selling expensive products the Southeast of England may be a good regional market to move into.

Company Type

Company type is a very important segmentation parameter- for example EEL develops and produces micro-electronic based products- consequently we want to be able to identify companies that will be interested in purchasing them. Companies are classified according to a Standard Industrial Code (SIC) and most list houses use this type of classification to produce lists of companies. Kompass uses its own classification codes, which allow refined and detailed classifications. your marketing department has a list of the SICs we use when trying to identify prospective customers (prospects in marketing terms). For further information on SICs see:

http://www.statistics.gov.uk/methods_quality/sic/default.asp

http://www.statistics.gov.uk/statbase/Product.asp?vlnk=14012

For a full SIC code list see UK_SIC_Vol2(2003).pdf:

http://www.statistics.gov.uk/methods_quality/sic/downloads/UK_SIC_Vol2(2003).pdf

Another source of information about industry performance is PRODCOM. The Office for National Statistics compiles a survey on PRODucts of the European COMmunity (PRODCOM), a harmonized system across the European Community for the collection and publication of product statistics. It is compiled from United Kingdom manufacturers on both an annual and quarterly basis and covers approximately 25,000 businesses annually and 4,500 quarterly. Data are available on the value and volume of UK manufacturers' product sales, merchanted goods, work done, sales of waste products and residues, and all other income. Also total turnover for the industry. See PRODCOM_information.pdf:

http://www.statistics.gov.uk/downloads/theme_commerce/PRODCOM_information.pdf

http://www.statistics.gov.uk/StatBase/Product.asp?vlnk=9660&Pos=1&ColRank=1&Rank=256

The EU also has a classification system known as NACE codes.

NACE Codes (Version 4 Rev. 1 1993)

This table was created by the European Union in 1970 and further developed in the following years. The last version 4 is from 1990. There exist also an extension called NACE-BEL (inofficial English version), which is compatible to the "official" NACE Code but contains much more codes. See nacecodes_en.pdf:

http://europa.eu.int/comm/environment/emas/pdf/general/nacecodes_en.pdf

Number of Employees

The number of people a company employs gives a good idea of its purchasing power and the type of products they will purchase. It's unlikely that a company employing 20 people will be able to afford to purchase simulation software costing £1.0M. The number of employees a company employs is sometimes referred to as the company size: for example, a large company may produce high volume, low cost products and may need high end production test equipment.

Annual Turnover

The annual turnover of a company is the amount of income it generates in a year. The annual turnover is a good indicator of its purchasing power. If your products cost a significant proportion of a company's turnover, they will think very carefully before they purchase it, even if they can afford it.

Turnover/Head

The turnover per head gives a rough indication of how successful a company is, in a given market sector. In manufacturing the turnover/head can be quite low- maybe £30,000/person or less. So if we come across a manufacturing company with an annual turnover/head of £60,000/person, it indicates they are probably trading successfully, probably growing and probably need some new equipment. Remember turnover/head is only a rough indicator of company's financial position.

Market segmentation can be quite a sophisticated operation; we have only introduced the principles of market segmentation above.

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1.4.1.3 Profiling

Being able to identify companies as prospective customers is not enough- we really need to have some knowledge of the people who will purchase and use your products. In a business to business situation, we may be able to identify the DMU in existing customers and even named decision makers in prospects. We can think of the segmentation parameters listed in Table 1 as a brief company profile of the type of companies EEL sees its self doing business with.

We may extend the idea of profiling to people, to aid us in determining the features your products will have: that is we will try and produce product specifications that solve the problems of people that will use your products and of course, purchase them. Note that profiling is used extensively by such organisations as the police and companies that sell through catalogues- and catalogue selling includes some very successful companies that supply components to the electronics industry. EEL uses profiling for companies, distributors and retailers as well as end users.

Profiling Product End Users

Knowledge of the end user of your products is very important, in particular when it comes to specifying new products. We should be aware of the type of person that will use your product, their qualifications, the skill sets we expect them to possess etc. In particular we should be aware of end user problems- so we can produce products that solve them.

A simplified example of a product end user profile is given in Table 2.

Profiling can be extended to include other members of the DMU in prospective customers, distributors or retailers if your products are sold to the general public.

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1.4.1.4 Competition

Companies that are in direct competition with your company are very important- we should know about them at company level and at product level. A major function of your marketing department is to identify your direct competitors and obtain detailed information about their products, which must include product price, product features, performance figures etc.

The techniques we have described for market segmentation and profiling can be used directly to identify competitors. Note that once competitor companies have been identified many of them will supply data sheets and prices etc, simply by asking for them. Alternatively, visiting a competitors web site can be very rewarding.

We should know the market leader, who is second in the market, etc and make a realistic appraisal of where we are in the market place.

A major function of the marketing department in EEL is to produce information on your direct competitors that is easy to understand, is structured and is readily available to people in other departments in your company.

Consider the situation where we are contemplating developing a new product that is to compete with a competitor product- it would help your development staff enormously if we had an example of the product, the instruction manual for the product and the selling price of the product.

Note that we have used the term direct competition- we should also consider indirect competition. For example consider a small taxi firm- its direct competitors would be other taxi firms operating in the same area as itself. Examples of indirect competitors are bus companies and train companies. Note that we may become suppliers to some of your indirect competitors- for example taking people to the railway station by taxi.

An important aspect of competitor analysis is that it must be treated as an ongoing exercise- your competitors will continue to bring out new products, technological advances may introduce new indirect competitors and market conditions may change.

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1.4.1.5 The Relationship between Marketing and R&D

The relationship between marketing and product development is crucial. If your company is to develop products that solve the problems of end users and sell them at a price they can afford we should identify end user problems and give your products features that solve them.

The following areas are of particular importance:-

The Product Market Selling Price

The product market selling price is the price that the "market" is willing to pay for it. If we are considering developing a product similar to one that is on the market, the price of the competitor product will give us some idea of the market selling price. Another way of estimating the market selling price is to relate the price of the product to the of cost of the problem the product is solving. For example, a product that saves energy would reduce the cost of energy to your customers- if the saving in energy costs over a relatively short period is more that the price of your product, we have a good selling point. We shall say much more about product pricing in a later unit.

The Product Instruction Manual

The standard of instruction manuals, especially for technological based products, is usually very poor. One reason for this is that they are often produced at the last minute; when the product is due for release. It should be possible to produce the product instruction manual, in draft form, very early in the product development cycle. If it is produced by marketing and technical people working closely together, it could provide an excellent vehicle for clarifying which product features are required and how the end user is expected to interact with the product.

The User Requirements or Product Specification

The product specification for a new product is vitally important. The formulation of the product specification cannot be left to marketing alone, because they are likely to include features and performance levels that are not possible, or are not realisable within the constraints imposed by the market selling price. If R&D produce the product specification in isolation they are likely to include features and performance levels based on technical merit and produce product to user interfaces that are not user friendly.

See later section for User requirements.

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1.4.1.6 Some Standard Marketing Concepts

In this section we shall briefly discuss some standard marketing concepts, which are explained fully in most standard marketing texts.

1.4.1.7 The 4 P's

The 4 Ps are:-

• Product
• Price
• Promotion
• Place

The 4P's summarise the important aspects marketing. Clearly the product we are offering and its price are of central importance and we have discussed them both in earlier sections. Promotion is also clearly important- if people don't know about your products and the benefits they provide, they will not purchase them. Place is important for consumer based products in particular, companies that sell directly to the public are very interested in "place".

Many marketing books are based on large companies that can afford expensive promotion campaigns and have access to a wide range of outlets. For an SME operating in a business to business environment, product and price are clearly important, but promotion may mean exhibiting your products or advertising them in trade journals. Place may mean selling your products through recognised distributors.

Marketing concepts should always be adapted to your company, if they are to be useful.

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1.4.1.8 The Unique Selling Point (USP)

If a product has an important, unique feature, that no other products has, it is referred to in marketing terms as a unique selling point. It is important to realise that the potential customers decides what is unique and if it will be useful to them. Just claiming to have unique selling point is not sufficient.

Consider a young engineer that has just graduated, writing his CV- what would be his/her USP when compared with all the other people who have just graduated?

If your company does have a product with a useful USP it is a very powerful marketing tool. However, be sure to protect it because as soon as the competition become aware of it will soon lose its unique status.

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1.4.1.9 The Ansov Matrix

The Ansov matrix is a simple marketing device that illustrates the problems associated with developing new products and moving into new markets. The Ansov matrix is shown in Figure 1.4.1.2.

Figure 1.4.1.2

The Ansov matrix

Cell 1, in Figure 2, represents the status quo, your company is selling existing products into existing markets. This is supposed to be a low risk situation.

Cell 2, represents the situation where we develop new products for sale in your existing market- there is a fairly high risk associated with this activity: many new products fail to sell.

Cell 3, represents the case where we attempt to sell your existing products in new markets. If the new market is almost identical to your existing market, for example an new region within the UK, the risk will be small. However, if we wish to penetrate the American market say, the risk would be considerably higher.

Cell 4, represents the most risky situation, where we develop new products for sale in markets that are new to us. This is of course possible but must be undertaken with a great deal of care and planning.

You could get the impression that the way forward for your company is to stay operating in cell 1, supplying existing products to your existing market. This may work in the short term but it will almost certainly fail in the medium to long term as competitors develop new products and global market forces, such as technological innovations, make your products obsolete and also possibly your markets.

It is sensible to assess the risks and benefits to your company of continuing to supply your existing products to your existing markets, of developing new products and moving into new markets.

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1.4.1.10 Medium & Long Term Market Trends

Marketing is a dynamic exercise, market conditions can change rapidly, stock market fluctuations occur within hours, political instability in regions around the world is common place, even extreme weather conditions may affect your short term income and sales.

However, medium and long term market trends should be monitored by your marketing department and senior management, to try and ensure your company will survive and prosper in the future.

Government departments, such as the Department of Trade and Industry (DTI), produce market surveys that can yield important information about market trends on both a national and international scale. Pending legislation that may affect your company, your customers or your suppliers, should also be monitored.

Technological change can be both a threat and an opportunity- in severe cases whole markets can disappear as a result of the introduction of a new technology.

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1.4.1.11 Sales

The function of the sales section of Marketing & Sales in EEL is defined as follows:-

• To secure new orders from existing customers on a regular basis
• To obtain new customers on a regular basis
• To interact with key distributors
• To secure new orders for develop and produce contracts
• To provide technical and product help for customers (Help Desk)
• To obtain feedback from customers (DMU)
• To obtain feedback from your product end users

Sales is at the "sharp end", having direct contact with customers and often end users. If things go wrong sales are usually the first to know. Late deliveries, faulty products, poorly written instruction manuals- all of these bounce back to sales. Another important aspect of sales personnel is that they are constantly monitored and judged on their ability to sell. This is done on a monthly basis and also over longer durations, every six months for example. In some companies sales people are paid on commission, so if their sales drop so does their income. Sales people at EEL are not paid on commission, because senior management feels it places too much stress on them and could lead to bad sales practices.

Sales people are often denigrated by other people in an organisations, but in EEL their worth is realised by all and they are respected throughout the company. They realise that a fall in sales this month means a reduction in output next month, which in turn means a drop in income the month after that.

We shall look at some aspects of the sales function that require direct interaction with R&D: the help desk and customer feedback.

The Help Desk

EEL employs several sales personnel, called sales application engineers, that have a technical background and all of them are expected to provide telephone help on a rotor basis. This ensures that several people can provide technical and product help. It is a requirement of the sales section that the help desk is attended to at all times.

While a new product is under development there is strong interaction between design engineers and sales application engineers, especially in preparing the product instruction manual. Prior to the release of a new product the sales application engineers are familiarised with the new product, so that they can provide help to customers. This familiarisation is principally the responsibility of R&D.

Costumer Feedback

Obtaining customer feedback is an important aspect of the sales function- feedback concerning late deliveries and faulty products is given to The Quality Department and Production as well as R&D. However, information concerning customer problems in using your products is fed back to R&D. In addition, they gather information about customer problems in general, which can be vitally important when we develop new products or enhance existing ones. Sales personnel provide crucial information about end users in particular, that allows us to develop realistic end user profiles.

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1.4.1.12 Management Issues

The relationship between marketing and R&D is extremely important and the managers of both departments must work together closely.

The manager of R&D should ensure that new specification formulation, instruction manual preparation and the training of sales applications engineers are carried out efficiently and to the required standards. In particular, when new personnel are appointed managers must ensure they go through an effective induction program.

Personnel in both departments are expected to have good working relationships and because the areas of interaction are clearly defined both managers and managed know what is expected of them, which assists them and the people they manage.

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1.4.1.13 Summary of Marketing & Sales

In this unit we have tried to provide a brief outline of the marketing and sales function in an SME operating in the microelectronics sector. We have paid particular attention to the interaction between Marketing and R&D and identified some key areas of interaction associated with the development of new products. These are the production of new product specifications, the production of instruction manuals and the familiarisation of sales applications engineers with new products.

We have also looked briefly at some marketing concepts and suggested that these should be adapted to the needs of your company.

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1.4.1.15 Self Assessment Question

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1.4.2 Product Specification leading to a User Requirement

A Product Specification should clearly define what is required for the development of a new product. It should consist of:

• A User requirements specification and this is written first. It encapsulate the discussions with the customers as defined previously. It should define in simple language the purpose for which the product is to be developed. The user should express themselves simply to specify the purpose of the product.
• A Systems specification that clearly defines what the designers can achieve in response to the user requirements.

A User Requirements Specification written in a clear and unambiguous manner will state:

• The user’s perspective.
• What the product should do.
• What the product should not do.

A System Specification follows the Requirements Specification and will:

• Refer directly to the Requirements Specification.
• Be organic - it will grow as the product is partitioned.
• Develop to become the main documentation of the project.

Realistic costing's and time schedules need to be developed to form part of the product documentation to enable informed decisions to be made as to the viability of the new product with regard to its performance, capabilities, costs and whether it has a market place.

Estimating Time scales is difficult to do. There is no 100% way to do it and you need to develop a strategy for doing this. It is essential that you keep records of all product developments. Relying on memories is dangerous so you need to have hard information. This information should include the initial estimates and the actual recorded times/costs. This will enable you to refine the model to achieve a more consistent process. It is therefore necessary to allow honesty in the staff working on the development so that problems or misconceptions can be recognised in previous developments and used to improve the current modeling process. Problems may arise from many standpoints and not the ones that were initially thought to be significant.

It is important to create a schedule for the product development. In the initial stages you should use project management and scheduling tools. In the first instance you may be able to show a simplified schedule using gantt charts. These are good for presentational purposes to give overall impressions of the development timetables. Project management tools such as Microsoft Project can produce both the detailed time estimation for product development as well the top level gantt charts. The ami4040_pmme, Project Management for Microelectronics, takes the use of project management tools to a much greater depth and is recommended for your study.

The purpose of using these project management and scheduling tools is:

• To see if the time scales meet the goals?
• If they don’t:
  • Modify the user requirements.
  • Use additional resources

The product development will encounter delays due to:

• Change in in the product user requirements.
• Over-optimistic time scales.
• Under-achieving team members.
• Team members leaving.
• Changing technology.

Technology solutions are becoming more flexible and easier to change and can meet new or modified requirements. Whilst this would seem to be a positive attribute the change will have to be carefully considered to ensure that all the ramifications of the proposed change are fully understood. It is necessary to consider the proposed changes in great detail. Then think, think, and think again as to what will happen to the system performance.

The process developed above is in effect a 'Top Down' approach to product development. It is essential that the product requirements are developed independent of technologies because they may well affect the definition of the problem. There is a danger with designers, engineers and academics to descend to quickly into the technology because that is where they are most comfortable. This can lead to poor definition of the problems to be tackled and misunderstanding between the customer and the developers leading inevitably to failure of the project or significant overruns both in time and cost.

As seen earlier in reports from the Standish Group uncontrolled change is the second largest cause of project failure. It has been shown by them that a minimal approach to user requirements and system specifications leads to a much higher success rate. Remove all unnecessary requirements and features

There is a great deal of literature about clear specification production, for example see http://www.clearspecs.com/. This will be covered in greater detail in Unit 5, Product Specification Formulation.

User Requirements are one of the most important documents in the life cycle of a product. Considerable time should be given to it's preparation.

At EEL, product specifications are produced principally by marketing and R&D working in close collaboration as part of the proposal for a new product development. It is realised that the product specification will be modified as the development progresses and several elements of the specification will be marked TBD- to be decided- such as product packaging and transportation details. Product specifications are highly structured at EEL and are a major source of information for project planning and costing.

Product specifications specify the product: they do not provide detailed specifications, such as the specification of a complex component such as an ASIC. Such detailed specifications are derived from the product specification as the product is being developed. Specifying components in the product specification is a dangerous practice, for example it may be more appropriate to use a microprocessor instead of an ASIC. If an ASIC has been specified it may lead R&D down the ASIC route, without them considering a software solution. This applies particularly to newly qualified engineers.

It is important to remember that the product specification specifies the product- it does not suggest solutions.

A Product Specifications can be structured as follows:-

1. A specification title page, which includes the product version number and date
2. A brief introduction to the specification, which includes an explanation of how the specification is structured (about half a page).
3. A product functionality section, that states the functions in simple, non-technical language- diagrams are encouraged
4. A product operational section, that explains how the product operates with particular emphasis on how end users interact with the product.
5. A product performance section, that defines such things as product accuracy, response time etc.
6. A product environmental section that specifies the environment the product will be used in. This includes product transportation, storage environments, environmental impact and details of end of life cycle management.
7. A section that specifies any regulatory requirements such as EMC, LVD and product disposal.
8. A mechanical section that specifies important mechanical details, such as constraining dimensions.
   

When EEL prepared its first structured specification it was very time consuming, but they also produced a product specification template that ensured that future specifications would be easier to produce. Also the use of structured specifications based on a template ensures a high level of consistency when specifying products. An example of a fragment of a structured specification produced by EEL may be seen in Unit 5, Product Specification Formulation.

1.4.3 An approach to determining development costs

To prepare a business plan or product development plan we have seen some examples of structures in the material above showing what they should contain and how they can be constructed. From previous experience in European Community (EC) Funded programme's it was necessary to develop business plans for proposals that had to include specific information on proposed projects.

These proposals were then subjected to an evaluation process so the proposals had to be clear, concise, expressed in simple terms so as to be easily understood. The financial case had to be strong, e.g. the ROI and payback had to be good as was the possibility of reusing the technology capability developed in other projects run by the SMEs. Templates for developing the proposals and costing structures were developed. Using the templates, shown below, a good approval record was achieved. These proposals were made by Small to Medium sized Enterprises (SMEs).

It was apparent that many companies did not understand the rigours of the proposals and it was found that if they did not have assistance in the proposal preparation then it was unlikely to succeed. Is became apparent that many SMEs did not have a structured and ordered process for establishing new product proposals. Indeed many companies did not have knowledge of programme management and scheduling tools. This has changed but electronic management techniques are still not fully utilised by many SMEs.

Template for Product Development

A development of a product contains a description of the work and should be as concise as possible, organised according to the following headings:

• Title of the project (1 line).
• Duration in months (1 line).
• Objective and summary of the project including company, number of employees and electronic engineers, product to be improved, its functionality and application, improvement its technology, functionality and application and the expected economic impact (Return on Investment and payback period) ( max. 15 lines).
• Technical specification of existing product and the improved product with diagrams as appropriate, its functionality and application. (max. 1 page).
• A User or Functional specification of component and the total system to be designed and its application (max. 1 page).
• Choice and justification for each of the following with comparison of not chosen options: methodologies, technologies and test methods, hardware and software and subcontracted experts. Justification of the subcontractor choice should be related to the work to be outsourced (max. 2 pages).
• Current experience of the company and contractors, if any, describing the technologies they have worked with and to what extent, and identification of the technology in which the company has little or no knowledge. (max. 1 page).
• Knowledge transfer, content and modality and increment expected in capabilities of the company after the project (max. 1 page per organisation).
• Economic assessment of the impact of introduction of the new technology on the business of the company. This assessment should contain current sales, projected sales and cost benefits (ROI) (components and/or manufacturing). Increase in sales and turnover expressed in percentages and payback period (which will form part of the public information if the AE is funded). It should also contain a description of the market, an analysis of the competitive position in the market and describe how the proposed work would strengthen the company's position in relation to its competitors (max. 2 pages).
• The potential for replication of the results of project within the organisation should be described together with the external replication potential if applicable.
• Phased work plan (including milestones) for the project. This plan should contain tasks for each stage of design, fabrication and testing. It should describe the partitioning of the work between the company and any subcontractors (together with the costs) based on the experience of the Company. Reasoned costing, duration (in days), and key milestones and deliverables for each task to be carried out should be given. A risk assessment and critical path should be included. A time line chart should be added (max. 2 pages).

This document would form part of a development project proposal. It is intended to focus the eyes of the originating customer and supplying developer to ensure that both parties reach the same set of definitions for the project and that they all have a complete understanding of the project objectives.

This template can be accessed by clicking on the this link - Work Plan 1.doc

An Excel spread sheet for establishing cost by clicking on this link - Development costings.xls

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