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| PRODUCT CONNECTION |
The Saga of FizzBin Tech Part 5 To be successful in any product development effort, the team must do four things right: Develop the right product for the right market at the right time and for the right price. A start-up generally only has one shot to get all of these things right or they are likely to be out of business. As illustrated in “The Saga of FizzBin Tech”, FBT had four bites at the apple and missed on one or another of these critical factors in each of their product iterations. Below we will explore where they went wrong and what they could have done to avoid making these mistakes. Right Product The right product is, quite simply, one with the performance and features the market needs to solve whatever problem it is addressing. This may, or may not, be a technical problem. It could be cost. It could be schedule. It could be a lot of different things. Success for the start-up depends on correctly determining what it is that the market needs then designing a product that meets that need. In the Hindenburg product, FBT thought that the market wanted what they were best at: delivering the most fizzbins per watt. In fact, the market wanted as many fizzbins as it could get but only if the oobleck level was not degraded. FBT failed to understand this important parameter and thus failed to produce the right product. Right Market The right market is one that is large enough and growing rapidly enough to support the start-up’s financial objectives. The revenue that a start-up can generate is its market penetration times the market size. If the market isn’t large enough, even 100% penetration will not be sufficient, as FBT found out. The market growth rate is usually less critical initially as the typical new product can grow by capturing market share from its competitors. However, once the product’s market share gets large, or in the case when the product is actually creating a new market, the company’s growth will be constrained by the growth of the market. In the DoD, FBT found a market niche they could dominate with their technology. Unfortunately, they didn’t consider carefully enough the size of that niche before spending time and money developing the FUBaR device. In the end, the opportunity was so small that the product had no chance of successfully delivering a reasonable return on the investment. Right Price The product must be able to be manufactured at a cost that is low enough to allow it to be sold profitably at a price the market will accept. If this is not possible, then quite obviously the company will not make money and can’t survive, much less grow. The team must always keep the target manufacturing cost in mind during the design process so that the choices it makes are consistent with meeting that target. In the SunBin development FBT once again focused on getting the technology right at the expense of one of the other critical factors—in this case cost. The material structure it chose was too expensive and there was no attempt to reduce the cost of the rest of the design to meet the market driven price target. The net result was that FBT had no choice but to go through a cost reduction effort before the SunBin could even go to market. Right Time A start-up is always in a race, whether it knows it or not. Certain assumptions are made about market conditions, market price, the competition’s position, etc. Over time, things change and the assumptions become less and less realistic. The situation can change (slowly or abruptly) to the point that the right product, right market and/or right price targets originally set for the product under development are no longer valid. If that happens, the targets must change, which means costs increase and schedules slip. If the targets change too much, there might not be enough time and/or money to ever meet the new objectives. This is precisely what happened to FBT when oil prices collapsed and, along with them, the market price for the SunBin. An Alternative Scenario What could FBT have done differently to avoid its ultimate unhappy fate? Simply put, they could have followed a well thought out product development strategy focused on the factors described above. Consider this brief alternative history for FBT. With its initial funding in the bank, FBT starts by considering all of the possible products/markets to which they might apply their TiTaNiC technology. These include telecommunications, military and solar energy. A cursory evaluation of the right product, right market, right price, and right time parameters quickly reveals that the military market is not the best initial one to address (because if its size) and that opportunity is dismissed. For the other two, key risk factors are examined and strategies are developed to quickly evaluate if the risks can be eliminated or at least mitigated. For the Hindenburg, this effort uncovers the issue of maintaining good oobleck performance while still improving the fizzbins/watt figure. For the SunBin, cost is the obvious major risk. Some quick and dirty experiments demonstrate that it will be difficult, if not impossible, to get the fizzbins up without driving the ooblecks down. However, a cost reduction strategy for the SunBin looks very feasible particularly if the product can transition into high-volume production before it begins to see serious price erosion. Thus, the SunBin appears to be the product that has the best chance of success. With the product specifications well defined and the cost targets firmly in mind, the development team sets about designing the low-cost SunBin right from the start avoiding the cost and time that would have been required had they proceeded serially through the products (as was actually the case). As a result, the product is released for production while FBT still has some of its original series A money in the bank. More importantly, the SunBin is in high-volume manufacturing long before Jed Clampett makes his unexpected discovery. FBT has successfully created the right product for the right market at the right price and in the right time and, as a result, is a great success for its investors, founders and employees. The moral of the story With the right approach to product development, you too can have a happy ending. |