Challenges Associated with New Product Development in a Start-up Environment


New product development is one of the most challenging processes in an organisation. The process involves a lot of market research to identify market gaps and customer interests, needs, and expectations. It is also resource-intensive and has to be aligned with the strategic directions of the organisation. Most importantly, new product development can be used as strategic marketing and competitive tool. As such, an organisation cannot afford to make mistakes or take chances. Therefore, the process involves much deliberate effort in making appropriate decisions and taking correct causes of action. An organisation needs objective leadership, coherent policies, seamless structure, appropriate organisational culture, and committed staff to develop a competitive new product. The process of new product development has its fair share of challenges. These challenges are even more severe in a new business or a new market environment. Scholars have identified several challenges for new product development in a start-up setting. In this paper, the challenges identified include; product economics, time pressure, competition, sales, marketing, market dynamics, reliable and sustainable suppliers, and planning for post product development.

The first challenge is product economics. Product economics involves decisions and actions that lead to designing and developing a product that can meet market needs and sell the product at a profit. There is much work required upfront to establish a credible product case that achieves product economics. For a product to achieve product economics, it must be produced to appeal to the customers so that customers can be interested in it and be affordable to buy it. This means that the organisation must understand the market gaps and specific customer needs. A serious market analysis is essential to correctly identify market needs and translate the needs into product features. For a product to be rightly priced, the organisation must accurately identify cost areas, properly assign costs, and set a reasonable profit margin on the product. During new product development, the common cost areas are materials, labour, and overheads (Rassouli, 2013). It is general knowledge that the more “new” the product is in the market, the more risks and uncertainties are linked to forecasting profits. An effective product development system must have proper forecasting and screening mechanisms to select the best chances that provide the best opportunities for economic success (Cooper, 2016). However, this is a challenge owing to uncertainties and risks associated with new product development.


Time pressure is another challenge linked to new product development. With globalization and advancements in technology, the market has become so dynamic, with product features changing so fast alongside customers’ needs and expectations. For a product to win the market, it must be produced within a tight and reasonable schedule. The global market is competitive, that an organisation must grab and run with an opportunity. Any delay is the actualization of a product idea is an opportunity for the competitor. This has led to rapid production technologies such as rapid prototyping processes to enable organisations to beat time when introducing new products. The challenge for start-ups is that they may not access or afford advanced modern technology. This may make it difficult to produce a new product that can adequately compete in the market. Established global organisations have learned the art of time-based competition. The idea here is to be the first to launch the most suitable and reasonably priced product and keep the product relevant as market factors change (Cooper, 2016). This means that the organisations make keep the product ever new through continuous improvement

Companies also face competition challenges during the product development stages because of globalization, which has translated to diverse and extensive marketplace. The global market is accessible from everywhere in the world. As such, start-ups experience stiff competition from established organisations, including international firms. With globalization, the market has become more diverse and dynamic. An organisation may be developing a new product only to realize that the product is already in existence in other parts of the world. Similarly, a new product idea may be stolen from an organisation during development and be implemented by the other organisation before the inventor organisation. The biggest challenge for most organisations here is developing a product that best suits the market needs and expectations ahead of the competition and does it in a way that is not open to instant imitation or replication (Odoyo, Wanza, & Mumbua 2014).

The fourth challenge experienced by start-ups in the development of new products is the sales and marketing challenge. For a new product to succeed in a market, the organisation must be able to achieve differentiated sales and complying with all relevant marketing and sales requirements for its product. Introducing a new product in the market requires effective marketing. One of the most prominent challenges start-ups experience in introducing new products in the market is the inability to access or afford existing distribution channels, especially where the existing distribution channels are either used or owned by established competitors. To overcome this challenge, a start-up organisation either has to develop its own distribution channels or develop new products to fit in the existing channels (Inaganti, 2010).

free essay typer



Introducing a new product in the market requires a clear road map on how the product should be introduced and sustained in the market. The strategies to have the product perform in the market consider all possible market reception outcomes to sustain the product, whatever the response. Most start-ups may not have a clear long term direction that may guide the organisation in having the product perform in the market into the foreseeable future. This is partly because the organisations may not have been in the market long enough to understand the market dynamics. Secondly, the organisations may not have the adequate capacity to formulate and execute long term marketing strategies.

Market dynamics also present itself as a critical factor in introducing and sustaining a product in the market (Stewart, Stewart, Kruft, & Nelson, 2013). The market environment, such as market, economic, social, political, legal, and other factors, is so unpredictable that a start-up may take some time to fully understand them and be able to respond to them adequately. Some economic and social factors may be so dynamic and may require very swift action in terms of response. For a new product, how customers perceive the product amidst these dynamics will largely depend on the organisations’ response. The unexpected political occurrence may be experienced just when the product is introduced in the market. Similarly, a change in the legal requirements may be enacted just as the organisation introduces a market product. Immediate response to such challenges may be challenging for a start-up (Azanedo, Garcia-Garcia, Stone, & Rahimifard, 2020).

Production of a new product means sourcing raw materials from new suppliers. The biggest challenge for start-ups is identifying reliable and sustainable suppliers that can supply the organisation at reasonable costs (Azanedo, Garcia-Garcia, Stone, & Rahimifard, 2020). A start-up may not have the capacity to achieve economies of scale. This may make it difficult for organisations to achieve a cost advantage associated with large scale buying. This means that the organisation may source for its inputs at higher prices, making its products more expensive than competitors. A new product, perceived as expensive, may not do well in the market (Barak, Becker, & Pessoa, 2018).

Development of a new product requires that an organisation puts into place action plans for post product development. An organisation may need to convince the market of the viability of the product. The organisation should communicate the product’s measurable features (Stewart, Stewart, Kruft, & Nelson, 2013). There is a need to refine the product to maintain relevance in the market. This requires refinement of the product to incorporate new features to make the product more users friendly and competitive in the market (Azanedo, Garcia-Garcia, Stone, & Rahimifard, 2020). For start-ups, it may be difficult to access the required capacity to refine the products. Besides, post-launch performance requires sustainable customer relations. Customer relations are formed and maintained by handling customers and addressing customer issues as and when they arise. Being responsive to customers enables organisations to remain in the market and helps in the identification of product areas that may need to be addressed. Product development, therefore, needs to be lined with marketing functions (Odoyo, Wanza, & Mumbua, 2014).

New product development requires huge amounts of funds to be allocated for market research and product engineering, and later product idea implementation. High levels of finance are also necessary for inputs, such as raw materials (Cooper, 2016). Start-up organisations may not have a strong financial position to successfully execute processes and activities associated with developing a new product (Stewart, Stewart, Kruft, & Nelson, 2013). Similarly, start-ups may not have adequate collateral to access debt financing in financial institutions (Azanedo, Garcia-Garcia, Stone, & Rahimifard, 2020).


The reviewed literature shows that new product development is an involving and very elaborate process. Equally, new product development requires research to identify customer needs and expectations. An organisation needs to have access to modern technology and adequate capacity to develop a new product. Post-development, an organisation needs to have a network of marketing and distribution. It may be difficult for a start-up to access the required human and technical capacity needed to initiate and actualize a new product.


Azanedo, L., Garcia-Garcia, G., Stone, J., & Rahimifard, S. (2020). An Overview of Current Challenges in New FoodProduct Development. Sustainability, 1-4.

Barak, M., Becker, J., & Pessoa, M. (2018). Supporting Product Development at Tech Start-ups with Lean Product Development: Challenges and Opportunities. International Design Conference-Design 2018, 691-702.

Cooper, R. G. (2016). Agile–Stage-Gate Hybrids: The Next Stage for Product Development Blending Agile and Stage-Gate methods can provide flexibility, speed, and improved communication in new-product development. Research-Technology Management, 59(1), 21-29.

Inaganti, S. (2010). Product Development Challenges and Approach for IT Services Companies. Trends.

Odoyo, F., Wanza, L., & Mumbua, D. (2014). Challenges of Marketing of New Products. International Journal of Business and Social Science, 5(8), 184-192.

Rassouli, H. (2013). New Product Development: Challenges and Implications. Hershey: IGI Global.

Stewart, W. C., Stewart, J. A., Kruft, B., & Nelson, L. A. (2013). Challenges facing ophthalmic start-up companies in developing new devices or medicines. Acta ophthalmologica, 91(1), e81-e83.