Life Cycle of a New Product

We've been selling these similar products for years and years, and so for us, starting a product may be a bud off a tree. For example, when you're in front of a browser you have information pulled to you. But let's say you're not in front of a browser. You might just say, "Every Monday morning send me an e-mail with this information in it." In that case we're pushing information to you. What happens there is that perhaps at night we're going through all the data and generating all the information and sending it out in e-mails. Recently, we had an idea that not everyone wants the information pushed out in e-mails; some people want to take this information and put it into an archive. For example, I want to know what my cash flow report was in February 2001. It's not available now; the data is gone from the database, so you have to go to an archive. If the archive is up on the Internet for you, you can very easily pull it out of a database and look at it on your browser. So, we said, while we're doing the preparation of people's e-mails, one of the options, instead of putting it into an e-mail, would be putting it into a database for archive purposes. That's a new product idea - it's a bud of an existing product, but it's a new product idea. So we'll research what customers want in that area. We'll ask them what they do in terms of archiving. They'll tell us, "I don't only want to archive what you produce; I have a lot of other things. I may want to archive other things like my Web site." What if you want to look at what a still-existing Web site looked like three years ago? You'd archive it. Now we'll archive it for you. So customers will come along and say they want archived reports that we produce, reports that other people produce, Web sites, and so on - and they tell us that. So there's a certain information gathering stage about what would be the useful features of a product. That comes from customers telling us and our own analysis and observation.

The second phase would be to build a prototype product, then go back and show it to a few customers and talk to them about it. When we have something that's working, then the issue comes in about how to price it. We look at the competition, we look at what's available, we look at the value of it, and we come up with a pricing schedule. Then we go out and we introduce it with a rollout.

From there its profitability depends on sales. It becomes profitable if you sell enough. If you guessed right and enough people want it, then that bud on the tree becomes a profitable entity itself. Now, if this were the only thing I produced, then I would have to depend on the sales of that archiving product. A larger company like ours can say that maybe that product is not profitable on its own, but people buy our entire information solution because they like the fact that we can also do archiving. We're looking for products that have large-scale usefulness for customers, and this is one more area of usefulness. It might not even be profitable, but it contributes to the profitability. We know we have a good product, and anything we add to it may be incremental. You have to differentiate between the smaller companies that survive on that niche, versus those who are in the broader area.