A New Process for Products?

Scott Francis
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Yesterday’s post on the Cosmonaut has me thinking about how new products are developed and released into the wild.  We focus so much on startups and processes in the software and virtual world, but Kickstarter has exposed a new process for physical products:
  1. Come up with an idea for a product that you think people will want, but you don’t see satisfactorily provided to the market.  (ideas are often for art projects or music albums, not just consumer products like this)
  2. Build a prototype and put together a pitch video to sell the idea
  3. Do the research to figure out how big a production run you need to do to make the object “affordable” (whatever that means for what you are pitching).
  4. Put your kickstarter project page together, including a fundraising goal that supports your minimum requirements.
  5. Wait to see how many people and $ show up to support your project.
  6. When (if) project funds, get started building the product (or producing the benefits the contributors are entitled to).
  7. Ship it.  If it sells well, consider selling more of the product online, knowing that you now have won over an early adopter fan base.
It favors small production runs, prepaid by motivated customers.  The magic is that you don’t put capital at risk until buyers have paid (up front!) for the product.  It is a great way to get pre-commits from a motivated community. And to my way of thinking, this is just a new (and better) process for finding demand when you don’t have the capital to “build it and hope they come.” If we relate this to the Lean Startup, or specifically to Steve Blank’s incarnation the Lean Launchpad – one of the key tenets is to “get out there and talk to customers”.  Moreover, to find paying customers.  Not just customers who say they will buy it, but customers who will literally write checks to you. And when they do this – in great dollar amounts or numbers of customers – then you move into production. Kickstarter gives the product team a chance to do this with physical goods in a way that was nearly impossible 10 years ago.  It also allows an innovative team to address niche demand in a way that they previously couldn’t.  In the same way that eBay allowed people to find markets for niche products, so does kickstarter – in one case auctioning used goods, in the other case contributions toward products that don’t yet exist! This moves physical products into the realm of a process that looks like:
  1. Design
  2. Sell
  3. Build
Which is much more capital efficient than
  1. Design
  2. Build
  3. Sell
As it allows for less waste (building products that no one wants- akin to getting the requirements wrong in software and BPM projects).  And it allows for some feedback loop between design and selling, before moving into the build phase. It feels like something that could be truly transformative for small business product development.  I have several friends in the business of producing physical objects for sale (furniture, productivity tools, gadgets), and I’m telling all of them they have to try this process and see if it works for their business, and reduces the risk for them. As a buyer, the other thing that is really fascinating is the exposure to the process, or craft, behind the production of these objects.  The videos and written updates about the procedures are quite educational.  As a process guy, I see it all through the lens of repeatable process with, typically, an irreplaceable human component.  Gratifying craftsmanship.  
  • Scott, the process of design-sell-build is a good idea, but it will only work for a small product. As soon as it is something bigger it won’t. The biggest issue will be that it is not possible to get a large number of customers to commit and then wait. Neither did the grand innovators work this way. Most of their ideas were kind of improvements on existing products that didn’t require a kind of radical change of mind either. Most fats catching on ideas do spend a substantial amount on marketing as well.

    Example: I have written a number of novels and everyone who reads them says they are great, but without spending the money on advertizing that won’t do anything. Plus, just throwing the idea out is not yet everything. Additionally, like with a movie, even when you have a great script, so much depends on the chemistry of creation. The same thing is true for any product. It is not the process, but it is the people and the entrepreneur must be able to find and build a team of people that will be able to turn the idea into reality.

    So while you mention the craftsmanship part as an element of process, I recommend to focus on people and don’t waste your time on process. It is utterly irrelevant to the outcome when we talk about creativity.

    • Max, it goes without saying that it is for small product launches.  (at least, when physical goods are in the picture).  Apple will not need to use this kickstarter process for their next product ;)

      But, for those with ideas, but not capital – this is a great mechanism to bridge the gap.  Of course it works particularly well for niche products and markets – but it may also work well for demand that we perceive as niche- but discover it isn’t. 

      The book analogy is interesting – but if you go the ebook route there’s no cost of goods sold.  You can’t show someone the cover of a book and have them decide they want to pre-buy.  But you can show someone a watch. Or a stylus.  Or a iPhone doc.  Or a tripod.  Physical goods that can be demonstrated in a video, for example.

      The process is interesting because it lowers the barriers to marketing that you just mentioned.  Fewer dollars required to get that niche demand solidified. Social media from earlier adopters can help you build from niche to small market.  The scope of your market isn’t your town or locale, but “kickstarter” + its social media reach. 

      These same people and crafts can exist without kickstarter, and yet they can’t unlock the value of their own products and designs easily – the company they work for may not be in that business or may not be interested in investing in a niche idea.  Or they may not have the access to capital they need for even a small 100 unit run – even small retailers will want some volume to put on a store shelf. 

      As for movies and books – the key difference is that you can produce these items with little incremental (variable) cost.  Movies and books can be distributed electronically.  It doesn’t mean that there will be demand, it just means that you don’t have to spend money first, to find out if there is demand (you used to have to do this, which is why finding a publisher was so important).  Can’t really do that with a physical stylus or a watch.  Producing physical product *in advance of demand* is expensive.  Kickstarter and other sites like it reduce the up-front capital costs. 

      The process is interesting precisely because it gets non-creative elements out of the way (finding a financial backer, fundraising, inventory management) until AFTER you have a hit on your hands, rather than before you have a hit…

      scott

  • case in point: twine. asked for $35,000 to be the minimum for a production run, raised over $400,000…
    http://www.businessinsider.com/twine-kickstarter-2011-12

  • Interesting article on http://www.kickstarter.com – recently they’ve had some sizeable fund-raising.  It looks to me like pre-buying is here to stay.  

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