Monday, December 03, 2012

Comments on "Cool, or Simple and Cheap..." by Whitesides

George Whitesides recently had an excellent editorial published (free access with registration) in the journal Lab on a Chip. The write-up is clearly aimed at academics, as it discusses a number of the non-technical issues associated with product development, issues that are often not well understood by academics looking to capitalize ideas and discoveries from their labs. He has a couple of really good zingers, such as
"The ratio of money spent to invent something, to make the invention into a prototype product, to develop the prototype to the point where it can be manufactured, and to manufacture and sell it at a large scale is, very qualitatively, 1 : 10 : 100 : 1000. We university folks—the inventors at the beginning of the path leading to products—are cheap dates."
To me there are a couple of competing ideas in this idea. First, the invention are indeed cheap, but at the same time very essential, as without the "Eureka!" invention stage, there are no follow up stages. The problem is that this stage is often overvalued and even society as a whole is somewhat to blame. We have built quite a legend around the image of the "lone inventor", the one creative person toiling along in the lab, creating a device so wonderful that "the world will beat a path to his door".

But secondly, what is not realized by most in society is the large investments noted above. More importantly, there is increasing risk aversion that comes with each step. As more and more capital is required to reach the next step, the money is invested by increasingly conservative investors. Making ethanol from the hybrid plant genius speciesific, var. wonderfulae seems like a great idea when oil futures are $100/barrel, but your billion dollar investment is a bust when the futures drop to $80. Are you really go to risk it? You might be better off starting small (meaning it won't be as cheap to make), and selling it to rich Hollywood people who can afford it. This would be a smaller investment but people are more willing to take a bigger risk on a small investment than the other way around.

George also wrote:
"You don’t really know you have solved the problem for someone until they like your solution so much they’re willing to pay you to use it. Writing a check is a very meaningful human interaction."
I love that beautiful phrase which is correct, but it only reaches half of the truth. Getting someone to pay you is essential, but you really don't have a successful business until they pay you twice. It is very easy to get a lot of hype and publicity and excitement at a product launch and have fantastic initial sales, but it isn't until someone has bought the product, used it and then buys it again that you can claim success. You may have fooled them once for the initial sale, but you can't fool them a second time.

Lastly, I strongly disagree with this idea:
"The manufacturers of a putative product...are usually agnostic about its paternity: problem ‘‘pull’’ or technology ‘‘push’’ are equally satisfactory."
"Pull" products are always easier to develop and sell because there is consumer demand - a market or potential market exists. "Push" products are far more challenging because the market doesn't exist and it is difficult to quantify its size. And that means that it is difficult to know if the payback for an investment will ever exist.

Take Post-It notes for instance. This was clear a technology "push". No one knew that they wanted them other then maybe in some very small, clearly limited applications. Who knew the market would be so big? No one. No one at all.

That is because "push" products are often revolutionary. "Pull" products are answering a documented demand, which means that both you and your competitors are working on solutions so the market will already be fractured. But a successful "push" product will blindside everyone - competitors and consumers alike, and that is a great spot to be. It can takes years for competitors to catch up, if ever (try and find Post-It notes made by a competitor of 3M). Just know that the "push" path is risky, really risky. There are plenty of "push" products that have failed because there really was no market for what was being pushed. And as I said above, a risky path is not one that has easy access to large investments. The end result is that all of this make the "push" approach even that much more challenging. So to say that manufacturers are agnostic on "push" vs. "pull"? No, no, no.

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