You’ll recognise the scenario. A new potential client phones and it becomes quickly apparent that they are not from an established company. They have a product idea that they want to develop and somehow they’ve found or been steered to you. The first issue for a design consultant is how to win new potential clients in the initial phone call.
People embarking on their first entrepreneurial venture in product development can be very time consuming. You need to be realistic about the time you should devote to them.
Your attitude to this is likely to relate to the relative age and development of your own business, your client list and the quantity of projects you have on hand.
Inventors and new start-ups can bring interesting, profitable projects to a design business but equally they often require a great deal of extra work and responsibility and are more prone to expose a studio to financial risk from unpaid fees. When talking to the prospective client for the first time it’s useful to establish:
• The type and complexity of the product they are planning.
• Their reasons for embarking on the product.
• The size and nature of the entrepreneurial group involved.
• Their role in the group.
• Their employment experience and the skills of the group.
In a discussion such as this you can determine the extent of knowledge and planning that has got them this far and whether their aims are likely to be realistic.
Sometimes this discussion goes wrong and you find yourself attending a briefing meeting in a rented run-down flat, sitting across a kitchen table from someone who clearly doesn’t have the money to be embarking on product development.
If you’re not comfortable with the information that the client is providing and you determine that it doesn’t suit your business the professional thing to do is to refer them on to other contacts in the industry who are likely to be more suited to their needs.
This might include the various government business assistance programs, organisations such as the various state inventors groups, other design consultancies that may suit the work and other business advisers who relate to the project proposed.
Dealing politely with potential clients at all levels of the business spectrum serves to enhance both the reputation of your own business and the reputation of the profession.
The first meeting, your place or mine?
Once you’ve decided to meet them for further discussions it’s worth considering where the meeting should take place. From the consultant’s perspective if you’ve decided that there is some merit in the project and you’ve established that there are no manufacturing or development facilities to view then the meeting should be at your premises.
If however there are aspects of the project or infrastructure of the start-up business that need to be assessed on site then hold the meeting there. Getting a look at the client’s business premises can give you valuable clues about the viability of the project.
It’s at this point, the first meeting, where you must make a decision on your professional responsibilities to the client. If the client has a clear command of the project they’re embarking on and is succinctly defining the extent of your role then you are in a position to treat them as a ‘normal’ client and confine your advice to the issues required.
However if it’s apparent that their knowledge and understanding of the project they are proposing is poor you will need to decide both your continued role with the client and the nature of advice that you should offer them before accepting the project. There is a temptation, especially when first starting out or when work is tight, to take a project regardless of the circumstances.
However experience suggests that you are better off spending some effort helping the client to make a better informed decision than dealing with the client dissatisfaction and project problems downstream. Or indeed wasting time writing project briefs or trying to collect on unpaid fees.
The facts of entrepreneurial life
So what advice should you give to a first time entrepreneur? In manufacturing there is a truism that says you only change one aspect of the manufacturing mix at a time if you want a reasonable chance of new product success.
The three parameters are manufacturing method, product knowledge and distribution method. One of the reasons to query an inventor’s background is to determine whether their experience covers any of these essentials or whether they are starting with a completely clean sheet, ie maximum risk.
The first time entrepreneur needs to understand the risks they are taking. Another industry truism says that nine out of ten new products fail. What is not often said is that this statistic relates to ‘new’ products introduced by established manufacturers.
These ‘new’ products are often simply a new pack size or the brand being applied to another food line. In other words, even for companies trying very simple extensions to their existing experience there is a high chance of failure.
Failure covers a lot of territory. In the ‘nine in ten’ case above it is often about customer indifference to the product. However in the case of start-ups the failure often occurs long before the product has been put to the consumer test and in many cases simply relates to insufficient funds to complete manufacture and penetrate the market.
Government business improvement agencies have spent a great deal of effort in the last twenty years attempting to educate small business on the value of business plans. It’s worth introducing this concept to your entrepreneur to establish their level of planning. In any case an easy to communicate message at the meeting table is that of staged risk.
Evaluating the risk
By drawing a quick time-line of the product development and introduction process you can illustrate to your client the relative amounts of money they will need to reach each milestone. For example $3000 for an initial concept, $3000 for initial intellectual property (IP) protection, $10,000 for a proof of concept model, $20,000 for design to manufacturing stage, $100,000 for tooling, $25,000 for initial sales stock and so on.
Each step along the line represents a risk that the client should take rationally. What feedback do they need at each stage to suggest that the next step should begin?
How much money can they afford to loose and remain solvent. This should be taken very seriously. After twenty years in consulting design I’ve seen many divorces and bankrupt families as a result of entrepreneurship.
What are some of the ways that your client can manage the risks? The first is to select an entrepreneurial method that suits their skills and finances. Limiting exposure by only doing initial concept development and basic IP protection is a first step.
The designer prepares a presentation of the product concept that provides a professional sales piece for the idea. The client takes sufficient IP protection to demonstrate ownership of the product.
And then the client puts personal effort into attempting to sell or license the idea to an established manufacturer. This is rarely easy, but it is worth noting that experienced serial entrepreneurs and established businesses often use this method.
The product is either sold outright, licensed or orders are taken that will cover the development and tooling of the product. If not they move on to the next idea.
Another method is to spread the risk amongst a group of co-investors to limit the individual’s exposure. 10% of something is always better than 100% of nothing. This often means that the invention can advance further down the development time-line without significant risk to individual investors.
The down-side is that the availability of money to move rapidly to stages such as tooling often means that the group fails to adequately question or assess the feedback that they’ve been receiving to that stage or they delay the commencement of sales effort.
Once manufactured product has been achieved it is worthless without an appropriate sales and distribution mechanism, which may well consume as much money as has already been spent, dragging the group into financial difficulties they had not anticipated.
And it is also worthless if the public simply don’t want the product or a major buyer, when finally approached, wants different features or a lower price point.
Entrepreneurs need an understanding of the role of IP protection in their plans. Most inventors have an obsession with patents regardless of the merits or originality of their idea, and their ability to afford the complete process or to protect their IP, once it’s been lodged. Designers should always refer clients to a patent attorney or IP lawyer for a legal overview of this area.
But designers can discuss the strategic aspect of IP protection and the various primary mechanisms available such as patents, trademarks, design registration and copyright. Perhaps some of the useful points to touch on are the use of provisional patents in establishing dated proof of ownership of an invention and as an item of protection and value when negotiating the sale of an invention.
For inventors planning full production of their product they should also be introduced to the fact that patents potentially flag their intentions to competitors long before they are ready to launch. And that the claims made in their patent may all be overturned or proved to be the property of others if challenged in court.
Some entrepreneurs choose to concentrate on being first to market and ahead of the pack in subsequent product development rather than relying on IP protection.
Learning the ropes
Designers should consider whether the best advice to an entrepreneur is not to proceed. You may quickly realise that the product idea being presented is not novel or has substantial market competition from established players. Additionally the entrepreneur may have no experience at selling.
It is often easy to demonstrate to inventors that the same investment might initially be more wisely spent getting experience distributing an existing product or products. When they’ve developed a clearer understanding of the market area that they’re intending to innovate in they can then embark on self-generated product with a greater chance of success.
It should also be considered that, for many entrepreneurs, if they spent the energy and money on their existing area of employment they would be much more likely to make a return.
They’ve come to the right place
I know that some of you may think it’s not the designers’ role to talk entrepreneurs out of their ideas and most are lured on by the success stories anyway or have already made promises and projections to a raft of investors and don’t want the advice.
So to finalise the discussion with the client you should make an assessment of whether the skills required of the project fall within your professional competence. Clearly this does not just mean skills that you possess personally, it also includes skills and services from others in your team and network that you incorporate in your projects.
Be wary of tackling projects where most of the project risk is in specialisations that you don’t control. The income from your component of the project may not be worth the exposure to risk. Entrepreneurial ventures that are failing are more likely to spawn legal proceedings than work done for experienced, established manufacturers.
All that aside industrial designers are well placed to successfully guide an entrepreneur through the process of product commercialisation. They can integrate both the objective and subjective skills required to position a product as an attractive and desirable offering.
They generally understand the marketing process that must follow the product’s development and can often provide ideas and services to assist in the promotion. The presentation skills they possess increase the chances of the client selling the idea if that is their goal because even at this conceptual stage the designer is likely to include detail that gives confidence in the viability of the project.