So, in my last post, I talked about how good it would be to have a service that does basic research and validation of ideas. Now I want to take that a step further: I’m imagining a service that can start with an idea and give you a company, complete with a product line, manufacturing, customer service, advertising, and distribution. It takes the liquid mess of ideas, prototypes, distribution deals, customer insights and customer service houses and gels it into a easily transferable entity. For fun, let’s call this proposed service Idea Coagulation.
As in the Idea Validation service, the heart of this idea is in outsourcing. Here’s how it would work, step-by-step:
- An ideator submits an idea to the service. Let’s use, as an example, a toaster that sings opera. When your toast is done, it belts out an aria from La Boheme
- Idea Validation is a subset of this service. It kicks in here, and working with the ideator, starts doing market and user surveys in proposed target markets around the globe
- Idea Validation finds that people love this idea in Japan, but they’d prefer the toaster to sing songs from Man of La Mancha. They talk this over with the ideator and hash out a concept everyone’s happy with and wants to prototype
- The ideator can use the initial market data to start looking for preliminary funding, but I imagine this process to be cheap enough that a single, relatively well-off person could bootstrap it well into the distribution phase, especially if clever payment terms are worked out (more on this later)
- Idea Coagulators sets up a company in the target market area. This will be in the ideator’s name, but with someone from Idea Coagulators as acting CEO, or maybe VP. The customer should be active here in selecting a board and figuring out the company structure, but Idea Coagulators will act as an interpreter between the ideator and whatever legal formalities the target country has for setting up a company.
- Pulling from a global network of contractors, Idea Coagulators finds someone in the target market area–Japan, in this case, to build a prototype. Ideally, this contract designer will be working under a larger contract manufacturing organization that has the capacity to scale as the product becomes fleshed out.
- The ideator can check out the prototype and go back and forth with the contractor until it’s at a revision everyone’s happy with. The contract manufacturer should start shopping the design around and getting quotes on small-to-mid scale part sourcing, assembly, packaging, shipping and customer service. With any luck, the contract manufacturer can at least do the packaging and shipping in-house. Customer service is easy enough to outsource, especially with someone at Idea Coagulators acting as a liason between the ideator and outsourced customer service center. The contract manufacturer should also know a number of product assemblers that could do the job, although Idea Coagulators might have some proven firms that they suggest, as well.
- Unless it’s a very simple product, it’s a good idea here to roll out a couple hundred beta units, both to test the manufacturing line and the product itself. Idea Coagulators can find beta users, but it’s probably best for the ideator to get feedback on the betas directly. It might be possible to use a service like Get Satisfaction to pull in beta feedback, if the ideator doesn’t want to do as much hands-on work to get feedback.
- The ideator at this point should decide how the initial product roll-out will work, if it’ll be small-scale and partially bootstrapped, or if they’ll find a backer, plunk down for a large order and roll the thing out in scale. Either the customer or someone working for the Idea Coagulator should be working out distribution deals for a couple months down the line when the product will be coming out of the factory.
- This is probably the most complicated step of the development process–working out production contracts with all the players. It depends on what the ideator’s operating cash is, and how long they can go between when they place an order and when they sell the product. It’s pretty reasonable to expect one to two months between when you place an order with the contract manufacturer and when it ships out to a distributor, so if you can wrangle standard net/30 (pay within 30 days of placing the order) payment terms, the ideator only has to have about a month of operating cash on hand
- The product starts rolling out and selling. At this point, most of the company framework has been erected, and Idea Coagulators can start stepping out and handing it off to the ideator. All the ideator has to do is decide how to scale the rollout, and as they grow, renew and maybe tweak (they can use Idea Coagulator’s help here) the contracts with the contract manufacturer and assembler
That may not be the way every product comes out, but it gives you an idea of how the outsourcing would work, and the role Idea Coagulators would play. Ideally, all the ideator would have to do is wrangle the cash (and potentially, as it gets more established, Idea Coagulators could work for part royalties and part cash). The ideator, of course, can be more involved in the process, but where this concept really shines is in a “describe the idea and hand it off” kind of situation.
There are, of course, already contracting/consulting firms that do this kind of product development. I worked with one of them in the States. What I envision Idea Coagulators doing differently is to take advantage of the global arbitrage in design and manufacturing. It’s astoundingly easy to spend $100k in the states with a product development group just to get up to the brink of manufacturing, and that is simply absurd when you compare it to the prices elsewhere in the world. There are countless cheap design firms and manufacturing houses around the world, especially in India and China, and you can get a design done and a manufacturing line built up for easily a fifth the amount you’d spend with a company in the states. Yes, it’s a little weird working with people from a different culture halfway around the world, and Idea Coagulator’s big value-add is to smooth out that weirdness, just because they’re already experienced with this kind of work and they know the game.
At the end of the day, what Idea Cogulators would offer is the most direct, efficient route from idea to market. It’s not a route for the perfectionist–by outsourcing pretty much an entire company, the ideator has to trust Idea Coagulators to make a reasonably good product, since it’ll be relatively hard to make changes once the company is already set up and running. But it will work, and it’ll be an easy, well-defined way for someone who constantly comes up with ideas to get those ideas out to the world, especially when compared to the grinding, 3-to-5 year process of building up a startup from scratch.
Finally, imagine what would happen if Idea Coagulators was financially secure enough to act as a venture capital firm. For a VC, it’s a perfect setup–all someone does is show you some potential IP, and then you have a proven, well-controlled process to build up the concept and turn it into a company. It’s a granted that you put in your own CEO and pretty much get to call the shots in the process. It obviates the power struggle between a VC and a company’s founders by changing the independent inventor/money holder dynamic, which is very open-ended and often adversarial, to a customer/service provider dynamic, which is much more defined, and everybody knows, more or less, what to expect. Of course, there are nuances and obstacles, but this could be a complete game changer, leaving the big-money VCs struggling to match the cheaper, more nimble methods of idea development that Idea Coagulators can provide.
I’m very excited on this concept, and I expect to be writing much more on it. This is certainly an unpolished thought, due in no small part to several consecutive sleepless nights in India and a midnight flight across the world tonight, but hey–every revolution’s got to start somewhere.