Machinery Development - A difficult birth?

John Colemanin Machinery & Mechanics

John Coleman, Managing Director of Advanced Turf Technology and inventor of the TMSystem™, outlines how to develop a new product and bring it to market - the Turfcare market

The diversity of skills that are required to produce a golf course to a decent standard today is extensive. When one considers that the modern day Head Greenkeeper is expected to be familiar with plant agronomy, soil science, drainage, irrigation, equipment management, procurement and maintenance, I.T., Health & Safety, Human Resources and landscape and construction, it is no surprise that, to be proficient in all of them, can be a challenge. Greenkeepers can, therefore, be forgiven for having only a cursory knowledge of the workings of some aspects of our industry that are indirectly connected to them.

One segment of the turf industry that is frequently misunderstood is the Turf Maintenance Equipment sector. Greens Chairmen and Greenkeepers are often heard bemoaning the exorbitant cost of equipment, especially when compared to the automotive industry. This comparison is a misnomer and is unfair on the machinery manufacturers. The following tries to give some notion as to what is involved in getting a piece of machinery to market and the benefits that can be obtained by purchasing through a reputable dealer.

Design is costly, this is an irrefutable fact. To take even a modest idea and turn it into a saleable product can cost hundreds of thousands of pounds. Why does design cost so much? Well, there are many processes involved in taking an idea all the way through to producing a finished product. The stages are:

Initial Concept - The initial concept is, of course, an idea. The idea could be for a brand new product that does not already exist; or a piece of equipment that offers benefits over something that already exists; or it can offer the same functionality as an existing product, but be priced more competitively; or be the same as something already in the market place, but room exists for it. In all cases, there must be some strong notion that the idea is commercially viable.

Research, strategy and feasibility - Once the concept is agreed, research begins into the feasibility of the idea. This part of the product development can be a lengthy process. Research needs to be carried out to obtain feedback from within the industry. Legals have to be checked, in particular any existing patents or design rights that could be breached as a result of the new design. One needs to ascertain whether any of the ideas for the new product are patentable and make provisions for the same.

A ball-park estimate of the build cost has to be compiled and compared to what the current equivalents are in the existing market.

- Plan and cost the required resources (designers/specialised equipment/software etc.)

- Estimate the length of the time the design is likely to take (and double it!)

- Estimate what the design is likely to cost (and triple it!)

- Generate a cashflow model and explore financing options, if required

- Collate all of the aforementioned data and come up with a workable plan

- If selling through a third party (dealers/wholesalers etc.), then these bodies also need to be communicated with.

In addition, a S.W.O.T. analysis is generally performed - Strengths, Weaknesses, Opportunities and Threats to the business that might be as a result of the newly proposed adventure. If there are no obvious barriers here, then the potential market needs to be explored in more detail to double check that the concept fills the preferred niche and that the base cost is around the correct ball park.

This might involve a third party research company and can be a costly exercise. You can spend large sums of money here, just to find out that the idea isn't a runner. If, however, the market research is positive, then there still needs to be some further due diligence undertaken before beginning the design process in earnest. There needs to be a cost exercise outlining the expected expenditure from first draft through to base design, prototyping, in field testing, pre-production and production proper. It is also important, at this stage, to agree with the various parties involved in the sales channel what the maximum retail price of the product can be. Cashflow projections need to be written based on assumed sales projections. If all that adds up, then the outline design can start.

Someone will need to generate the design brief, outlining the minimum requirements and the base parameters that the product must fulfil. From there, the design is begun in CAD format. This can take months of work depending on the complexity of the design and the stricture of the base parameters.

During the design phase, it may become apparent that some of those designs will require to be protected by patents. Each individual patent application will cost circa £40-50k and there is no guarantee that the application will be successful.

So, the design itself will probably cost in the region of hundreds of thousands of pounds, depending on the complexity of the particular product, even before anything is sold.

Detailed Design Development - Assuming all the research and strategy analysis has come back positive with funding agreed etc., then the design can start.

Implementation - Implementation of the project, in its most basic sense, is the action that must follow the above in order to get the product built. This encompasses everything from employing all of the staff, allocation of space, setting out deliverables and milestones etc., etc. A well planned and implemented project from the outset will give the best possible chance of success. A "winged" approach can still work, but it relies on luck and usually ends up costing much more.

Product Testing - Product testing is either undertaken "in field" or "at source". At source testing is the first type of analysis and is normally a bench test of the individual different elements of the product. As the product is then assembled, the interaction of all of the various sub-assemblies are then tested together. Once this is complete, the product can move on to "in field" testing. In field testing takes three different forms - Alpha, Beta and Pilot testing.

Alpha testing is to confirm that the product works, but without any audience. If patents are yet to be applied for, then this must be undertaken without public viewing. Revealing the product to the public domain before any patents are applied for will prevent patentability due to "prior art".

Many good devices have been deemed non-patentable due to prior art. Beta testing is when the product is tested by a few of the intended market users and feedback is given. Finally, pilot testing is akin to pre-production testing. At this stage, you should be pretty comfortable that everything is working as it should be.

Production analysis - Production analysis is very important, both from a cost perspective and also to ensure that projected future demand can be met. The type of production method needs to be decided here. Quotations and samples from sub-contractors need to be sought. Production analysis is a job in its own right and failure to give this aspect of the product development the necessary time can result in frustration for all concerned - manufacturer, wholesaler, dealer and customer.

Once the product is sales ready, then it needs to get to market…

Route to market - The route to market in the turf industry is not straightforward. It is controlled by three large companies; Toro, John Deere and Jacobsen. Between them, they have a large range of product that fulfils most of the regular requirements of the turf industry. This oligarchy has such a strong hold on the industry that it can be very difficult for smaller companies to bring new innovative products to market. Gone are the days when if you "built the better mousetrap the world would beat a path to your door".

Without a decent route to market, any enterprise will fail. There exists three basic options for selling within our industry, they are: Direct to the customer, through the main Toro, John Deere and Jacobsen dealers as an allied product, or via a wholesaler who would normally sell a few other non-main line products. Or a mixture of all of the aforementioned.

Direct selling - Sales and marketing is very different from design and manufacture and, therefore, should be viewed as an entirely separate element of a business. Being proficient in one does not mean you will be competent in the other. Direct selling has the advantage that a company is in control of all aspects of the sales process, but has the disadvantage of the company requiring a whole separate division of the business to run, which can pull resource and finances away from the core element of the business. It's up to the individual business to decide what is best for them.

Indirect selling through mainline dealers - Historically, this was a preferred route for many of the turf care allied products. When the golfing economy was buoyant, the main three oligarchs were more receptive to allowing their dealers to sell allied products. Nowadays, with the industry struggling a bit more, the dealers are under intense pressure from the manufacturers to sell their particular mainline brand, and this can be at the expense of allied equipment sales.

Selling via a wholesaler - A wholesaler operates in a similar fashion to a mainline dealer, other than they will tend to spread their focus through several product lines. By distributing several products, the wholesaler's cost base is reduced.

A simple example is when demonstrating a product to a potential customer. The cost here will generally be in personnel time and transportation. The wholesaler might as well take several products to the same demonstration and, therefore, increase the exposure and chance of a sale when compared to a single offering.

Regardless of the method chosen to sell the product, there will still be a cost element in achieving the route to market. If selling through various parties, then the cost from manufacture through to the customer will use something along the lines of the following formula:

- Widget cost of manufacture: £50.00

- Manufacturer sells at 50% GM: £100.00

- Wholesaler Retails at x 2 manufacturer's sale price: £200.00

- Dealer receives 25% discount on retail £150.00

So, from the above, we can deduce the Manufacturer earns £50.00; Wholesaler earns £50.00 and the Dealer earns £50.00

The above formula is not sacrosanct and can change dependent on volumes sold, potential for upselling future items as a result of the initial sale (spare parts etc.) and the value of the product. In any distribution network, it is important that no one link in the network is earning too little or too much. If that happens, the sales network tends to collapse and it is to the advantage of no one.

Our industry is tough on maintenance equipment. The harsh environment, coupled with long hours of use and rough terrain, means that even the best manufactured products will require maintenance. Good product support is, therefore, extremely useful and this is where the Wholesaler and the Dealer come in to their own. It is naïve to think that the manufacturer can design, manufacture, sell and properly support their product.

John Coleman

Article Tags:
Machinery & mechanics