Instant Companies
By Bill Bittner, President, BWH Consulting
The Business 2.0 guide to The New Instant Companies describes how a product idea can be taken from conception through production and into promotion in three quick steps.
Step One: Design the Product.
By using the latest PC based design tools and then loading the design into Web-based manufacturing design tools, creators are able to go from thought to production designs in 60 days or even less. This allows fresh ideas to enter the market place up to the last minute.
Step Two: Find a producer.
Chinese companies anxious to manufacturer products have their capabilities well documented on the Internet. Often the manufacturer will have its own English-speaking liaison to facilitate the process. A five percent fee will get you an independent representative to locate a manufacturer.
Step Three: Promote the product.
The Internet is full of Web sites and blogs that will serve as entry points to various consumer demographics. The article describes increases in Web traffic (it doesn’t indicate sales) from infinite (0 to 400 hits per day) to 500 percent (20 to 10,000 hits per day) as the result of getting a product mentioned. In some cases, this also leads to presentations in more traditional advertising, such as magazines or TV.
This new paradigm for manufactured goods impacts retailers two ways.
The obvious is in sales lost to the Internet. If people buy online, they don’t need to visit the store.
The other aspect is increased risk associated with new products. If the product is easily produced and quickly available, how much market testing is necessary by the manufacturer? If a manufacturer does decide to use the retail channel, how can retailers be both accommodating and profitable?
Moderator’s Comment: Are retailers prepared for the new world of manufacturing described in the Business 2.0 article? What more do they need to
do and what is the likelihood they will be able to make the adjustments necessary to keep up?
I believe retailers, more than ever, must work to improve their speed to market and their recovery techniques for when the unexpected occurs. At the front
end, slotting fees and other deterrents to entry must be reduced. There are legitimate reasons for some of these barriers because there are costs associated with adding a new
product and not every one of them will be a hit. This must be weighed against missing an opportunity because the manufacturer decided to go directly to the consumer.
If we reduce the fees on the front end, maybe we can increase the fees on the back end for the failures. By encouraging manufacturers to participate more
in the markdown of excess merchandise, we keep the doors open to new products but share the burden of risk with the manufacturer. Performance contracts that set aside some of
the up front revenues to finance potential liquidation may be a way to create a shared consequence. –
Bill Bittner – Moderator
Unfortunately, the world of product development is really not as simple as the article outlines. If anyone out there reliably gets complex product from idea to pre-production in 60 days, will you please send me your resume? Please?
I work with small companies to reduce the time to market for new ideas. From initial steps to final approval, in a complex product environment, getting below 6 months is a major accomplishment. In apparel, 3 months is the norm, and moving faster is very possible. But apparel and home textiles do not appear to be the substance of the article.
Toys, home electronics, giftware, and other products requiring design and tooling simply take longer.
The other aspect of the article that is troubling is the ignorance of cost. Yes, there are wonderful software programs that enable design to engineering in a much faster time frame. Not only are they expensive, but finding trained personnel to operate them is even more expensive. We are not yet in that wonderful world. As to Chinese manufacturers easily found on the Web….right. Go ahead. Put the future of your company in the hands of someone you’ve never met. Not going to happen.
Fluff articles like this irritate me.
The article makes the giant leap of faith, that a guy with an idea can design it, properly spec the materials, create packaging, develop a brand, and access the proper retail channel to get significant sales. Given a half a year, I might be able design a line of shoes and get the manufacturing sourced. Don’t worry Nike, in six more months I’ll be bankrupt. There is a significant difference between getting a product to market and creating a successful product.
Toy manufacturers take a year to develop a toy because they are working to minimize the risk of failure. They are doing focus groups, product testing and design refinements. Of the ten products that they develop, how many go to market? After all of their work, how many of those fail? Telling their readers to jump into manufacturing with their product ideas is like a financial magazine recommending lottery tickets.
I also have to say that I am somewhat disturbed by the implication that you can only get goods produced in China. If we are talking about creating a business quickly, why not deal with US sources? While it is true that China has cheap labor, what is the total cost for a new product? When you consider logistics, order quantities, communication issues, material sourcing, and the added cost of any unexpected quality issues, I’d prefer to start up at a US facility, and potentially transition to China as volume grows.
The most successful companies do their homework and manage their processes. Assuming that you can take shortcuts and win because you are first to market, is a very risky strategy.
“Ah, but a man’s reach should exceed his grasp,” as Robert Browning might have characterized this matter, “Or what’s a heaven for?” Well, a heaven can be considerable publicity and a paid article in a popular magazine, even of its thoroughbred horse-of-an-idea never leaps forward from the starting gate.
Dreams, like schemes, oft are more profitable in their presentation than in their implementation.
I completely agree with Don’s take on the article. As a consultant to suppliers, it irritated the heck out of me. The part about conducting a Google search by entering your product and “China” in order to open up a world of manufacturing opportunities was actually hilarious. The article also left out one other little step, once your “hype machine” is in full gear, what do you do when no one wants to buy it anyway and/or you’re incapable of taking in an order and shipping it?
If I could keep myself in the style to which I’ve become accustomed, I’d spend my days inventing products. There’s nothing like a cool clever gadget.
Having said that, my mind went immediately to the book business – arguably the most bizarre and self-destructive industry in the world. A new book is published every 30 seconds. Most have a shelf-life (if they get to a shelf at all) of about three weeks.
IF (and it’s a big ‘if’) an author can get a book on a retail shelf, it had better fly out the door or it will be returned. Typically books are returned the day before the store has to actually pay the invoice. And, even if the book is selling reasonably well, it is still returned only to be re-ordered the next day to start the game all over again. This is why ‘returns’ are killing publishers and distributors. My hunch is that most retailers would embrace this self-destruct model and thus kill their own goose.
I mention this in the hope of dissuading product people of looking at the retail book industry as a model. What the creators of new products need to do is ‘design to manufacture’ rather than ‘manufacture to design.’ If manufacturers can get close to the ‘print on demand’ concept and employ the immediacy and fluidity of the internet for marketing and sales, there is a very exciting and profitable business waiting to be unleashed.
Down boys, down. Yes, I agree we do have to consider the source here, but just because the Business 2.0 author doesn’t know what he’s talking about, doesn’t make him wrong. Taking exaggeration and over-simplification into account, new design and manufacturing processes coupled with internet-speed PR and marketing are undoubtedly affecting speed- and ease-to-market. And that’s going to undoubtedly exacerbate the new product proliferation problem for retailers. If you’re at the receiving end of this pipeline, you may have to start exerting some backwards pressure.
As a working journalist and Walter Mitty-style entrepreneur/dreamer for the past 35 years (shudder), I’d just say that if the author of the Business 2.0 article had the system down so well, and it really worked that way, he would be doing something other than writing articles for magazines.
Let’s face it: Business 2.0 has been chock full of “get rich quick” schemes since its inception. This one is just as naive as the thousands that have preceded it.
Too few manufacturers will take the trouble to bypass the retailer and go directly to the consumers. Their specialty is manufacturing. They have enough problems with that. Retailers have other things to worry about.
The process may not be as advertised, but that doesn’t mean there isn’t an opportunity for retailers to differentiate through a process that brings innovative products to customers more quickly. Even if those innovative products took many months rather than weeks to go from concept to reality, they’re still new to your shoppers.
An easy way to test the appetite of shoppers for new products is to offer them exclusively online at first. This model is a very cost effective way to use your online store to test the potential of new products. Offering new products online first also makes your online store a destination site. It’s where the latest, greatest can be found.
The products that become wildly popular online can then be moved into your stores to the delight of even more shoppers. Letting shoppers use their wallet to vote on the new products you carry is good for shoppers and good for your business.