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Advances are history
by Need2Know » Tue Dec 07, 2010 10:55 am
- Need2Know
- White Belt
- Posts: 3
- Joined: Tue Dec 07, 2010 5:42 am
I'm interested in any responses concerning the matter explained here. My apologies if this is seen as editorializing, but given the years of involvement and the sacrifices I've made to be in this business, there's much needed to be said.
I have been in many facets of consumer product development, involved in industrial design, corporate R&D/design staff management, and an owner-operator of a design-consulting business. Inventing, development, and placing new consumer products has been my career and passion. But the advent of 'big business' has deeply impacted ALL business. I wish the changes were more on the positive side.
My business partner and myself have a combined fifty years in R&D and new product development. We jive! My partner is an experienced former Fortune 500 exec and we each know the in's and out's of this very high-spec-business of new product placement. My personal goals have always been clear. Introduce new products that both improve the lives of others...and can 'afford' me the ability to live a modest life (so I can offer-up more products.) There will always be opportunities, but there exists a new business model that is making those opportunities harder to realize. One good friend said to me, "...why don't you just hang-out at the casino...you're like a professional gambler!" I couldn't debate him.
The economy is suffering yet businesses must continue. They know they need to upgrade and refresh their lines with new products. But the question is, will these products be generated in domestically...or will it be "cheaper" to go elsewhere?
This line inventors walk has always been narrow, but it's just been made thinner. Thanks to the BIG BOX stores, who've written new rules, their suppliers are at their mercy. No need to name names, but it's obvious which of these BIG retailers has changed the game. The rules include: THE BUYER rules and from now on, "mandatory" offshore manufacturing. If it's made here, they won't buy it. We need these stores, they know it, but their power dictates a new standard that has effected the inventing community. This has tipped the scales entirely in their favor and has reduced the one thing that is the essence of inventing: RISK. This is part of the new reality and it's not pretty, even if and when we can realize a profit.
..................
My partner and I are fortunate in this economy. We have landed a new product with a company. We're in phase-3 contract discussions and it's down to the final round. The CFO continues to apply his favorite word ["no".] This is his job.
Under the guise of eliminate all RISK, the business of bringing spec-products to companies has been effected by a significant factor. Absolutely [no more] advance monies. And absolutely [no more] option monies. If you're perhaps a major profit-maker for some corp, you probably have an edge. But chances are you too have felt the pinch?
This company has reviewed the financials and after digesting them, agrees with the projection numbers which were included in our power-point. They debated us, then looked closer, then acquiesced. We now have a position to work from, or so we thought. Commonly, an advance was based on an acceptable percentage of those numbers, but now an advance is construed as RISK.
The profit potential is considerable, but depending on whether they market the product properly and invest in branding, everything remains speculative. This is where one rolls with the punches. But this is more like being hit with a "round house!"
It's imperative that the inventor understand things from the company's POV. They are investing their future in your product! From their position, they see the hurt factor dwarfing any hope of future profit, but what remains interesting is how the rolls are reversed. When an inventor must reduce his/her costs, the company loses all understanding [of how RISK effects everyone.]
Many companies refuse to even look at a concept unless it's patented. Patents are expensive, time consuming, and often have no teeth. Having been through the patent process several times, it's expensive, and is only a ticket to court. Patents are necessary, but as Asian countries are enlisted as manufacturers of US goods, look at what occurs. China cares little about proprietary products, names, or rights. As one Asian friend (a purchasing agent) told me, "...as soon as a new US product idea hits China, the whole country will know about it...in just days!"
As I see it, RISK has been passed down as far as it can go...and it's greatly effected the business of placing invented products. Patent protection can begin with a provisional, but as one patent attorney advised us, "just go for the utility patent, skip the provisional".
Companies are no longer willing to offer advance monies (or options.) Eliminate all RISK, spend as little as possible. Not to get to philosophical, this 4-letter word has greatly killed what were formerly opportunities for manufacturing in the US...and as I see it, this effort to eliminate RISK began on Wall Street under the "accountant-driven" business model. If Henry Ford were just beginning his efforts today, under this model, he'd be dead in the water.
Another addition to the changing business of invention: [the] contract.
CFO's are pushing for "flexible royalties
After investing 9-months birthing a new product...and investing time, money, attorney's fees, etc., any return I see won't occur for another fifteen months. And as another indicator of reducing further RISK, the company is unwilling to budge away from another insurance policy. They want there to be reduced royalties if and when the product begins to fail. Under this proviso, one would then anticipate the opposite, which [if and when the product does much better than forecasted the royalty rate should go up.] Not a chance.
This is the Wall Street model, as it floats quickly down hill.
RISK is yours, not ours.
I'm interested in what other pro-inventors are experiencing in this economy, with the Wall Street model, and I'm wide open to suggestions.
N2K
I have been in many facets of consumer product development, involved in industrial design, corporate R&D/design staff management, and an owner-operator of a design-consulting business. Inventing, development, and placing new consumer products has been my career and passion. But the advent of 'big business' has deeply impacted ALL business. I wish the changes were more on the positive side.
My business partner and myself have a combined fifty years in R&D and new product development. We jive! My partner is an experienced former Fortune 500 exec and we each know the in's and out's of this very high-spec-business of new product placement. My personal goals have always been clear. Introduce new products that both improve the lives of others...and can 'afford' me the ability to live a modest life (so I can offer-up more products.) There will always be opportunities, but there exists a new business model that is making those opportunities harder to realize. One good friend said to me, "...why don't you just hang-out at the casino...you're like a professional gambler!" I couldn't debate him.
The economy is suffering yet businesses must continue. They know they need to upgrade and refresh their lines with new products. But the question is, will these products be generated in domestically...or will it be "cheaper" to go elsewhere?
This line inventors walk has always been narrow, but it's just been made thinner. Thanks to the BIG BOX stores, who've written new rules, their suppliers are at their mercy. No need to name names, but it's obvious which of these BIG retailers has changed the game. The rules include: THE BUYER rules and from now on, "mandatory" offshore manufacturing. If it's made here, they won't buy it. We need these stores, they know it, but their power dictates a new standard that has effected the inventing community. This has tipped the scales entirely in their favor and has reduced the one thing that is the essence of inventing: RISK. This is part of the new reality and it's not pretty, even if and when we can realize a profit.
..................
My partner and I are fortunate in this economy. We have landed a new product with a company. We're in phase-3 contract discussions and it's down to the final round. The CFO continues to apply his favorite word ["no".] This is his job.
Under the guise of eliminate all RISK, the business of bringing spec-products to companies has been effected by a significant factor. Absolutely [no more] advance monies. And absolutely [no more] option monies. If you're perhaps a major profit-maker for some corp, you probably have an edge. But chances are you too have felt the pinch?
This company has reviewed the financials and after digesting them, agrees with the projection numbers which were included in our power-point. They debated us, then looked closer, then acquiesced. We now have a position to work from, or so we thought. Commonly, an advance was based on an acceptable percentage of those numbers, but now an advance is construed as RISK.
The profit potential is considerable, but depending on whether they market the product properly and invest in branding, everything remains speculative. This is where one rolls with the punches. But this is more like being hit with a "round house!"
It's imperative that the inventor understand things from the company's POV. They are investing their future in your product! From their position, they see the hurt factor dwarfing any hope of future profit, but what remains interesting is how the rolls are reversed. When an inventor must reduce his/her costs, the company loses all understanding [of how RISK effects everyone.]
Many companies refuse to even look at a concept unless it's patented. Patents are expensive, time consuming, and often have no teeth. Having been through the patent process several times, it's expensive, and is only a ticket to court. Patents are necessary, but as Asian countries are enlisted as manufacturers of US goods, look at what occurs. China cares little about proprietary products, names, or rights. As one Asian friend (a purchasing agent) told me, "...as soon as a new US product idea hits China, the whole country will know about it...in just days!"
As I see it, RISK has been passed down as far as it can go...and it's greatly effected the business of placing invented products. Patent protection can begin with a provisional, but as one patent attorney advised us, "just go for the utility patent, skip the provisional".
Companies are no longer willing to offer advance monies (or options.) Eliminate all RISK, spend as little as possible. Not to get to philosophical, this 4-letter word has greatly killed what were formerly opportunities for manufacturing in the US...and as I see it, this effort to eliminate RISK began on Wall Street under the "accountant-driven" business model. If Henry Ford were just beginning his efforts today, under this model, he'd be dead in the water.
Another addition to the changing business of invention: [the] contract.
CFO's are pushing for "flexible royalties
After investing 9-months birthing a new product...and investing time, money, attorney's fees, etc., any return I see won't occur for another fifteen months. And as another indicator of reducing further RISK, the company is unwilling to budge away from another insurance policy. They want there to be reduced royalties if and when the product begins to fail. Under this proviso, one would then anticipate the opposite, which [if and when the product does much better than forecasted the royalty rate should go up.] Not a chance.
This is the Wall Street model, as it floats quickly down hill.
RISK is yours, not ours.
I'm interested in what other pro-inventors are experiencing in this economy, with the Wall Street model, and I'm wide open to suggestions.
N2K
Re: Advances are history
by Roger Brown » Wed Dec 08, 2010 7:56 am
-
Roger Brown - Black Belt
- Posts: 1208
- Joined: Mon Oct 30, 2006 2:53 pm
- Location: USA
Need2know, great post and very on target. I take a very different approach that you may find interesting. Here is an article I wrote for the Inventor's Digest magazine http://www.inventorsdigest.com/?p=5042 explaining my method of getting products licensed spending less than $100 on each. I look frorard to your comments.
Come visit my sites at http://www.RogerBrown.net
or http://www.looking2license.com
I have gotten 9 products licensed spending less than $100 on each, you can too.
or http://www.looking2license.com
I have gotten 9 products licensed spending less than $100 on each, you can too.
Re: Advances are history
by Need2Know » Wed Dec 08, 2010 10:56 am
- Need2Know
- White Belt
- Posts: 3
- Joined: Tue Dec 07, 2010 5:42 am
Well Roger, it's possible we've seen each other at previous Toy Fair(s), as my roots are in toy and game development. After many years and major changes in the trade, my time is now more used to develop products with a 'wider' market. I began working in toys in '76, when it was the tail-end of family-run companies (and licensing was just beginning to take-over!) I remained dedicated to toy and game development both inside and outside for +/- 30 years. I'm sure we could share stories!
The "children's entertainment" industry has been looked-down-upon by industrial designers and those in the "real world" product development realm. I've been to IDSA meetings...I heard the comments. But always I begged to differ. We didn't have 2+ years to develop a new product and de-bug. Conceptualizing, designing, developing, then marketing toys...on a "yearly turnover" is extremely demanding. It's a hyper-fast industry where many inventors just couldn't keep-up. I still have the wounds.
With the advent of product marketing new products, if you're an inventor who does not comprehend 'the marketing world', then you better team with someone who does! It's too your benefit.
Way too many inventors I've met are convinced that they can do it all. Some can, most cannot. But the WWW has changed everything! No more need to go to a major city with one of five patent record libraries...so you can patent search. Google it.
Knowing whether or not there is a market for your idea is really step-1. Don't even prototype until you know it's worth it! The idea may be great, but if there's no market for it (or it's too expensive to produce) then avoid step-2. Move on to your next idea.
I looked at your site, Roger. Very impressive! You are as it is said, a true 'creatician' (not a crustacean!) We both seem to bring similar benefits to our endeavors, which is varied career paths. Good stuff.
Allow me to add some "inventoids".
Inventors take note. Do understand the type of company you're approaching with your idea. It's beneficial to your time or wasting it. Based on 'what type' of product you plan to market, objectively, is their room for another? Is your company of choice progressive or just reasonably "comfortable". Are they in RISK avoidance mode? This economy has greatly placed companies in this position. If your product is deserving, will the company promote it, or simply let buyers find it on their company web site? Promotional monies are sizable ($500K to $3M.) Know your market (first) then know whether the company is vested enough in their trade to spend such promotional dollars? Get general information about your market then narrow things down to the key players worthy of approach. Learn whether these key players partake in 'outside submission's'. Some will not, for a reason. There are companies that have been burned by law suits levied by inventors. Some justified, some not. A sued company will often cease all inventor relations and only work through reputable rep-firms. Most large toy business took such a course. When finding a worthy company, learn their 'brands' and what items they've recently marketed and how successful were they? If you're anticipating a return via royalties, this research can keep you from revealing your concept to those who will do little with it, knock it off, or shelve it.
(Note: inventor contracts MUST include an anti-shelving clause which is intended to keep the submission from reaching the competition. If royalties are based on sales, this clause will protect the inventor.)
On this note, apply the same research insight into considering "rep firms", those who will represent your product to the trade. Those businesses that will split a percentage (30-50%!) Look past the smoke many will blow and the razzle-dazzle web sites. Ask these firms: "what have you done lately and with what companies?" If you're really suspect, contact the companies they have worked with and, with respect, learn whether there is good standing. These firms represent you...with your product, not them with your product. Too many have this turned around. Your product will only look as good as the salesman [to the companies.] Many of these rep-firms have a less-than-stellar image to the big corps and are simply exploring their own opportunities via working with uninformed inventors. Homework!
Understand the power of "branding".
A new surgical tool has very different and limited market compared to a new vanity product, such as say, I-pod-WiFi [digital] sunglasses. When an inventor wants to earn a profit, this has a better chance of happening [if] the company that you approach applies the three MMD factors: [they] 'market', [they] 'manufacture', and [they] 'distribute'.
This is significant stuff. Go to their web site, look at what they do. The first thing I look for on these sites, is ABOUT US. Who are they, what's their philosophy? Are they hungry and open to expanding their brands?
If a company is an LLC or and ISP, will GREATLY effect business decisions. An LLC is usually an owner-operated small company. A CEO, CFO, marketing (usually a marketing person,) and a company with a very small, VERY BUSY staff. It's most often accepted that LLC's do NOT have marketing budgets. This can hurt a good idea. A company web site is NOT going to sell your product with significant volumes. If your product can be put on QVC, it's a great beginning. Advertising works, but only if the company affords itself this option and seeks venues that create "buzz". You want "buzz". If no promotional monies are going to be spent to support and sell your product, don't expect returns. The CEO of an LLC has the final word. His 'CFO' will do as instructed...and this can be dicey on negotiations. Distributing a product is essential...and once on the shelves you want the consumer to know about your product. If it is 'assumed' that a 2" X 5" printed package photo is going to sell your product among 3000 other packaged products around it....don't order-up that new BMW. Keep the Vega.
A publicly held company (ISP) has a different set of business standards. They're bigger and staffed. The CEO answers to others, including stock holders, a BOD, and keeping the company in the black. This matters. This arrangement usually means that there's a bigger mouth to feed and promotional monies are necessary to move more products and supply dividends. This is the "MMD" an inventor wants if they're offering a consumer product. Promoting helps the company via raising "gross sales". Royalties are based on those gross sales and more sales means everyone is earning. Also learn when the "buying" period is for your product. What appears on the shelves in November was shipped in September, but purchased many months prior. The inventor hopes for sell through in December, not inventory.
Bigger is not always better, but this must be studied prior to approaching a company. The mega-companies, regardless of how cool your product is, regardless of how it fits their product line-up, will have no interest in it unless it makes over $50M the first year. Think about that, but be objective. Don't look at your idea as the inventor, but consider how the buyer would? Buyers like it when their suppliers spend on their own advertising. That leads to the "B" word.
[Branding] a product has very significant power! In some respects, branding is better than a "patent".
If your product is outselling others and it's not patented, then enjoy the profits. When a "prospecting" for new ideas, a company needs to be shown that the submission has brand potential. In order to do that, learn how to build a brand look into your product. This then can help you get the nod and then become the best protection available...because the product is produced, distributed, and "buzz" is happening. Get people talking about it. Promotion works. When this works, the product becomes a leader. Note: you don't use "tissue", you go for a "Kleenex!" This is branding. Anyone attempting a 'knock-off' a branded product will be stymied before they start. This is like closing the financial door behind you and no one can get in (but you!) When the inventor's product has a 2-3 year lead in the market place, even the Chinese know they'll never catch-up. Branding works, only if you work it. But the inventor must NOT avoid doing a patent search! This step is primary. By all means protect your product, but negotiate patent ownership in YOUR name, not the company's. This is common. Where the company can easily afford say the $25K patent protection, it also writes-off this cost. The inventor holds the rights to his/her product, but this must be negotiated up front. This process is available and gets everything happening faster and everyone benefits. But negotiation is an entirely different skill set than prototyping. Do a patent search at the very least.
I'll be glad to add things along the way and if it's helpful. There is so much misunderstanding concerning the business of placing new products, but most of what is important is simple common sense (if only it were common-?)
N2K
The "children's entertainment" industry has been looked-down-upon by industrial designers and those in the "real world" product development realm. I've been to IDSA meetings...I heard the comments. But always I begged to differ. We didn't have 2+ years to develop a new product and de-bug. Conceptualizing, designing, developing, then marketing toys...on a "yearly turnover" is extremely demanding. It's a hyper-fast industry where many inventors just couldn't keep-up. I still have the wounds.
With the advent of product marketing new products, if you're an inventor who does not comprehend 'the marketing world', then you better team with someone who does! It's too your benefit.
Way too many inventors I've met are convinced that they can do it all. Some can, most cannot. But the WWW has changed everything! No more need to go to a major city with one of five patent record libraries...so you can patent search. Google it.
Knowing whether or not there is a market for your idea is really step-1. Don't even prototype until you know it's worth it! The idea may be great, but if there's no market for it (or it's too expensive to produce) then avoid step-2. Move on to your next idea.
I looked at your site, Roger. Very impressive! You are as it is said, a true 'creatician' (not a crustacean!) We both seem to bring similar benefits to our endeavors, which is varied career paths. Good stuff.
Allow me to add some "inventoids".
Inventors take note. Do understand the type of company you're approaching with your idea. It's beneficial to your time or wasting it. Based on 'what type' of product you plan to market, objectively, is their room for another? Is your company of choice progressive or just reasonably "comfortable". Are they in RISK avoidance mode? This economy has greatly placed companies in this position. If your product is deserving, will the company promote it, or simply let buyers find it on their company web site? Promotional monies are sizable ($500K to $3M.) Know your market (first) then know whether the company is vested enough in their trade to spend such promotional dollars? Get general information about your market then narrow things down to the key players worthy of approach. Learn whether these key players partake in 'outside submission's'. Some will not, for a reason. There are companies that have been burned by law suits levied by inventors. Some justified, some not. A sued company will often cease all inventor relations and only work through reputable rep-firms. Most large toy business took such a course. When finding a worthy company, learn their 'brands' and what items they've recently marketed and how successful were they? If you're anticipating a return via royalties, this research can keep you from revealing your concept to those who will do little with it, knock it off, or shelve it.
(Note: inventor contracts MUST include an anti-shelving clause which is intended to keep the submission from reaching the competition. If royalties are based on sales, this clause will protect the inventor.)
On this note, apply the same research insight into considering "rep firms", those who will represent your product to the trade. Those businesses that will split a percentage (30-50%!) Look past the smoke many will blow and the razzle-dazzle web sites. Ask these firms: "what have you done lately and with what companies?" If you're really suspect, contact the companies they have worked with and, with respect, learn whether there is good standing. These firms represent you...with your product, not them with your product. Too many have this turned around. Your product will only look as good as the salesman [to the companies.] Many of these rep-firms have a less-than-stellar image to the big corps and are simply exploring their own opportunities via working with uninformed inventors. Homework!
Understand the power of "branding".
A new surgical tool has very different and limited market compared to a new vanity product, such as say, I-pod-WiFi [digital] sunglasses. When an inventor wants to earn a profit, this has a better chance of happening [if] the company that you approach applies the three MMD factors: [they] 'market', [they] 'manufacture', and [they] 'distribute'.
This is significant stuff. Go to their web site, look at what they do. The first thing I look for on these sites, is ABOUT US. Who are they, what's their philosophy? Are they hungry and open to expanding their brands?
If a company is an LLC or and ISP, will GREATLY effect business decisions. An LLC is usually an owner-operated small company. A CEO, CFO, marketing (usually a marketing person,) and a company with a very small, VERY BUSY staff. It's most often accepted that LLC's do NOT have marketing budgets. This can hurt a good idea. A company web site is NOT going to sell your product with significant volumes. If your product can be put on QVC, it's a great beginning. Advertising works, but only if the company affords itself this option and seeks venues that create "buzz". You want "buzz". If no promotional monies are going to be spent to support and sell your product, don't expect returns. The CEO of an LLC has the final word. His 'CFO' will do as instructed...and this can be dicey on negotiations. Distributing a product is essential...and once on the shelves you want the consumer to know about your product. If it is 'assumed' that a 2" X 5" printed package photo is going to sell your product among 3000 other packaged products around it....don't order-up that new BMW. Keep the Vega.
A publicly held company (ISP) has a different set of business standards. They're bigger and staffed. The CEO answers to others, including stock holders, a BOD, and keeping the company in the black. This matters. This arrangement usually means that there's a bigger mouth to feed and promotional monies are necessary to move more products and supply dividends. This is the "MMD" an inventor wants if they're offering a consumer product. Promoting helps the company via raising "gross sales". Royalties are based on those gross sales and more sales means everyone is earning. Also learn when the "buying" period is for your product. What appears on the shelves in November was shipped in September, but purchased many months prior. The inventor hopes for sell through in December, not inventory.
Bigger is not always better, but this must be studied prior to approaching a company. The mega-companies, regardless of how cool your product is, regardless of how it fits their product line-up, will have no interest in it unless it makes over $50M the first year. Think about that, but be objective. Don't look at your idea as the inventor, but consider how the buyer would? Buyers like it when their suppliers spend on their own advertising. That leads to the "B" word.
[Branding] a product has very significant power! In some respects, branding is better than a "patent".
If your product is outselling others and it's not patented, then enjoy the profits. When a "prospecting" for new ideas, a company needs to be shown that the submission has brand potential. In order to do that, learn how to build a brand look into your product. This then can help you get the nod and then become the best protection available...because the product is produced, distributed, and "buzz" is happening. Get people talking about it. Promotion works. When this works, the product becomes a leader. Note: you don't use "tissue", you go for a "Kleenex!" This is branding. Anyone attempting a 'knock-off' a branded product will be stymied before they start. This is like closing the financial door behind you and no one can get in (but you!) When the inventor's product has a 2-3 year lead in the market place, even the Chinese know they'll never catch-up. Branding works, only if you work it. But the inventor must NOT avoid doing a patent search! This step is primary. By all means protect your product, but negotiate patent ownership in YOUR name, not the company's. This is common. Where the company can easily afford say the $25K patent protection, it also writes-off this cost. The inventor holds the rights to his/her product, but this must be negotiated up front. This process is available and gets everything happening faster and everyone benefits. But negotiation is an entirely different skill set than prototyping. Do a patent search at the very least.
I'll be glad to add things along the way and if it's helpful. There is so much misunderstanding concerning the business of placing new products, but most of what is important is simple common sense (if only it were common-?)
N2K
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