After working with companies that develop their own products for manufacturing here in China, I started to notice a lot of similarities. Every project is different, its challenges are sometimes unique, but the main decision points tend to be the same.
(My main focus here is new companies that develop electrical and/or mechanical products based on their own design.)
Here are 12 questions you will likely ask yourself. And the pros and cons of each.
1. Are we trying to bite off more than we can chew?
Most people who have an idea for new products tend to plan for too many features and too much complexity. They want to get version 1.0 ‘just right’. They want to solve the problem completely. No room for competitors, no excuse for buyers. A really strong product will win. Go for ‘very good’, not just ‘good’.
However, this means higher investment, a longer development time, and greater risks at all levels (technical feasibility, design acceptance by the market, financial viability…). Your odds of success are not high.
You may have to scale the features down in order to have a greater chance of actually bringing something to market… and also to bring it faster to market.
Remember, the iPhone couldn’t even do ‘copy & paste’ when it came out. And yet it was an enormous success, and it allowed the company to come up with better versions that did have that feature (and many, many more).
2. Who should do the aesthetic design?
Involving a designer is usually one of the first things to do. You will need to prepare a concept brief, which forces you to clarify what the product should look like and what its main functions should be.
Your options are usually as follows, from cheapest to most expensive:
- Use your family or friends — that cousin who has a great artistic sense, and that friend who can draw in CAD
- Someone in your network who could do this on nights & weekends
- An industrial designer on a freelancer website (e.g. Upwork)
- A design house – particularly if you need several distinct competencies and viewpoints
(Note: always remember to ask them to acknowledge in writing that your company owns all IP rights, from the start. Otherwise, this may come back to bite you.)
At the same time, you will need to research the technologies involved, similar use cases, etc., to the point where you are a quasi expert. As a founder, you should probably not delegate this.
3. How to validate market demand?
You have a theory of what type of people/companies will be interested in your new product. You will need to validate that theory. Otherwise, all the time and money invested will be wasted.
There are several levels of validation, including these two:
- Building a landing page that describes the ‘pain’ (i.e. dissatisfaction) they are experiencing, and count how many keep reading and click on the button to see your ‘solution’ (at which point you can simply offer them to be on a mailing list and to be notified when the ‘solution’ is unveiled) — this is a great way to confirm the ‘pain’ and to hone the messaging.
- Showing the product design, or physical mockups, (if possible with a price tag) and collecting feedback.
- Doing the same with retail chain buyers and collecting feedback.
At the same time, you will get a feel for how easy to reach your target market. Maybe they are very busy and don’t read your emails, maybe they don’t belong to a clear demographic that you can target on Facebook… this will help improve your go-to-market strategy. And maybe you will need to start again, with another target in mind.
4. Should we develop our own product from scratch?
You might be tempted to work with an ODM supplier. On the plus side, they are already familiar with the materials & technologies, and adjusting their existing product might take just a couple of months.
It also comes with serious downsides. You won’t own the product’s IP rights. You will be forced to use them as a manufacturer, whatever their performance, with limited customer privileges. They might take your free research & inspiration gift, and cut you out (with the objective of selling it themselves to their other customers). I wrote about the downsides & risks of ODMs here.
There is sometimes a middle ground. For example, the advanced camera module (not the whole product) can be purchased from an ODM, and the entire product can be assembled somewhere else.
5. Who should do the product engineering work?
You also have a lot of options here:
- You can hire your own team, starting with a lead engineer who will have a view of the whole, will make the tough calls, and will manage this side of your project. This makes the most sense with the technologies that are user-facing (mobile app, firmware…).
- You can assemble freelance engineers; however, the more complex the project, the more you will need a technical lead to ensure cohesion.
- You can start engaging a manufacturer that has the specific expertise you need, and that accepts to devote some engineering time to your project.
In practice, many of our clients have followed 2 or 3 of the above paths simultaneously, with relatively good results.
(By the way, the fabrication of the parts that make up a prototype, and the reliability/performance testing of that prototype, can relatively easily be outsourced in most situations. Don’t try to do everything in-house. What makes the difference is the brains working on the project.)
6. How much to spend to protect our IP in the early stages?
If you do things ‘by the book’, the list of expenses can be lengthy:
- Lawyer fees to draft a non-disclosure (and also non-use and non-circumvention) agreement, then a development agreement, and then a manufacturing agreement
- Trademark registration for your brand name in the countries where you intend to sell – including in China (‘first to register’ system)
- Design and/or utility patent registration for your product in the countries where you intend to sell, if that’s applicable (and you might need to consult with an IP lawyer to know that)
All this amounts to tens of thousands of dollars.
Do not lay a lot of cash out on these topics if you have not validated that your concept will fly in the marketplace. On the other hand, you need a basic amount of protection. Talk to people who have gone through this.
7. Is crowdfunding the right thing for us to do?
An Indiegogo or Kickstarter campaign, if it is successful, allows you to confirm product-market fit, to have clear validation from the market, and it also brings a cash advance that can finance (part of) tooling and production.
It is not all positive, though. You might be copied by unscrupulous Chinese companies that might get to market faster than you, so you should probably not do this more than 3 months before getting into mass production. And executing a good campaign is expensive (count 20,000 USD or more).
This is a complex topic that I covered before — see the pros & cons of crowdfunding.
8. Should we apply for an accelerator program?
Accelerator programs are typically provided by a venture capital firm. If you are accepted, they usually provide some funding, they help you raise money, they ensure you get solid mentorship, and they often give you access to a wide network of resources. (In the best cases, those resources can get all the engineering & prototyping work done.)
As always, there is no free lunch. You are locking yourself in the “get acquired or IPO in 7 years or you are a failure” VC model, with fast dilution and loss of control. Make sure you really have a rocket ship ready to take off, or all their fuel might cause an explosion…
9. Should manufacturing be done in China?
If you want to develop your new product fast, if it includes electronic parts and is relatively complex, and if you want the ability to scale production up fast, you are probably thinking of China.
And, if your main market is the USA, you know there is a risk of higher and higher barriers to entry for made-in-China products. (As I am writing this, countries like Australia and Canada seem to be on the same path.)
Actually, this question should come up before any detailed design work is done. If you make your prototypes with a Chinese microcontroller and later you decide you want to rely on Chinese parts as little as possible, you are in for a painful redesign.
10. How much control do we want to have over our supply chain?
If you have already worked with manufacturers in the past, you know that many (most?) issues come from the component suppliers. And there are basically two ways to manage them.
- You can rely on your direct supplier (typically, the assembly factory that ships the finished products). Let them choose who they work with, and hold them responsible. If you have some experience doing this, you also know that you will be kept in the dark about component sources, related issues, etc. In the long term, that level of reliance can be painful.
- You can search and qualify the critical part suppliers and force the direct supplier to buy from them. If something wrong happens there, you can send your own representative and know first hand what happened. You can decide on the next step. And, conversely, if the direct supplier is causing many issues, you can start fresh with a new assembler while using the same components. You are the master of your destiny.
We shot a webinar on this topic before, in case you want to go deeper into it.
11. Are we aiming at large quantities?
If you develop an entirely new product, it necessarily comes with a lot of uncertainties regarding production. Many companies found themselves in “production hell” with long delays, a factory complaining about high costs (scrap, rework…), and a high product rejection rate.
How to avoid that? There is a solution, but it involves a lot of process engineering work, which adds time and money to the development cycle.
Every company that has launched new products and made them in large quantities has adopted some form of New Product Introduction process. It is the APQP for car parts, the EVT>DVT>PVT steps for consumer electronics, etc.
You will need to decide what makes sense for your project. Be aware of what the major risks are, and target those. It takes experience and good judgment.
12. Are we raising sufficient amounts of money?
You will need money to go through product development and to fund the first production batch. And also to market/sell the product. You might need a LOT of money. It is hard to predict with any degree of certainty.
In a rosy scenario, key influencers love your product and share it with their audience without asking for a fee, you pre-sell a lot on Kickstarter, that success grabs the interest of a distributor that will give you special terms against some type of exclusivity, and two investors call your number every day. No cash problem. You are in the lucky 0.5%.
In a dark scenario, everything is hard and sticky, unexpected expenses and delays keep coming up, you make a key mistake that leaves you with a lot of slow-moving inventory, and you struggle to find a repeatable marketing/sales model. That’s actually much more common than the rosy scenario I described above.
Remember, Elon Musk invested 100 million USD in SpaceX. He made one key mistake in the initial planning (thinking that small rockets would be economically viable) and it could well have killed his whole venture. He went through some tough years, but he had sufficient funds to pivot his model. What about you?
*****
If you have embarked upon your first new product development project, you will probably have to make most (if not all) these decisions.
They can present tough tradeoffs. Some companies did A and were successful, others did B and were successful. Get good advice and think, rather than imitate somebody. Try, see what works, and do more of that. Flexibility is key.
If you have faced other tough tradeoffs, please share them in the comments below. Thanks!
Interested in designing or developing a new product to be manufactured in China? You will also like Sofeast’s Importer’s Guide to New Product Manufacturing in China!
This guide has been written specifically for entrepreneurs, hardware startups, and SMEs and gives you advance warning about the 3 most common pitfalls that can catch you out, and the best practices that the ‘large companies’ follow that YOU can adopt for a successful project.
It includes:
- The 3 deadly mistakes that will hurt your ability to manufacture a new product in China effectively
- Assessing if you’re China-ready
- How to define an informed strategy and a realistic plan
- How to structure your supply chain on a solid foundation
- How to set the right expectations from the start
- How to get the design and engineering right
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