My partner, Mike Deeds, has a new post on our company blog:
You can’t escape the fact that it takes money to create a low cost product. It is estimated that the first version of the iPhone had COGS (cost-of-goods-sold) of around $200. That is very impressive given all of the included features. However, it is also estimated that Apple spent around $150M over 30 months to design the iPhone. In addition to that direct investment, Apple was also able to entice their component vendors to spend huge amounts of money to design custom ICs for the device.
Our clients typically do not have that kind of money to invest in a new product. (Although please give us a call if you do!) And even if they did, it often doesn’t make business sense to invest a lot of money in upfront engineering in order to reduce COGS, unless you have high volumes. So it’s more typical that we are performing a balancing act between the budget available for engineering, and meeting the target COGS that is necessary for a successful product.
Here are some guidelines that we use to keep development costs low and still create cost-competitive products...
Read the rest of this post on Cardinal Peak's blog.