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Branding For Repeat Business or “Sock Problems”

sock_freestock Fundamental to the success of any product are vendor relationships and within those, the perceptions of value and satisfaction. A product entering a market, and engaging with prospective customers, faces the evaluation process all customers naturally employ. The retail consumer experience is a good illustrative example.

Considering any purchase in our daily lives, we always weigh the cost of acquisition against the value we receive, or expect to receive, from it. This happens in three phases:

  1. The consideration phase. Would I be happy with this? Is it worth this price? What if I were unhappy, could I return it? Do I trust this vendor/manufacturer? This is a visualization process that we all go through, and it is the first step in any potential sales transaction.
  2. Once we’ve bought the product there’s an evaluation period. Am I happy with this? Did I get ripped off? Was this an incredible deal? Am I so excited/disappointed that I want to tell others? Am I going to take it back or try to get more?
  3. Finally we have a reflection period as the product approaches the end of its utility. The item may now be less a part of our lives — maybe it is something that needs replacement, or perhaps we don’t need it anymore. Was the product useful? Did I get my money’s worth? Would I buy the same one again? What are today’s alternatives to solve the same problem/need/desire?

Through this cycle of consideration-evaluation-reflection we make broad judgements about brand quality, customer satisfaction and repeat-patronage, and weigh specific evidence useful in future buying decisions

Then there are socks.

Other than those who live in a mild climate and spend their days sockless, sporting sandals or feeling the sand between their toes, the rest of us are resigned to having something on our feet to keep those appendages comfortable. Socks bring warmth against our cold winter floors. They soften the impact of our hard-working shoes.

But a big problem results from the buying and ownership relationships we have with our socks. Unlike most products, the vast majority of socks are not branded, nor identified in any way. Sure, there are a few exceptions. A few sports socks or designer models do weave a brand name into the ankle — perhaps an Adidas, Kodiak, Nike swoosh or CK initials. But looking at my sock drawer (or basket actually) that makes up fewer than 5% of my pairs. I’m guessing it’s the same with you.

Applying the concept to your business product offerings – be it a piece of software, a hardware widget or even the development and delivery of an analysis report – we need to apply similar considerations.  A logo and a path to contact information are one step.  If there are changes either with the customer or you as a vendor, could a satisfied customer find you again? Could the connections be made between support and sales?  Is there an avenue to communicate feedback that can aid in improving your product?

In all the phases of our sock-manufacturer/vendor relationships, there are problems. In the evaluation and reflection periods, we have already forgotten which socks were made by which companies, what the prices were, and often, at which store we purchased the pair.

As well, when I go back for replacements and am in the consideration phase again, I cannot attach measures of quality, value, comfort or even vain narcissism (those socks looked great on me!) to the brands I see displayed in front of me. The only solace is that our end-of-life sock-puppets can go unbranded.

From a sock-manufacturer point-of-view, if I make an inferior product, I might be happy that the same consumer might get taken-in by my cheap pricing a second time. But for those genuinely trying to differentiate a quality product in the market place and to compete successfully against inferior socks, this is a problem.

ThesockWorn_freestock solution here is clearly going to be technology-based. Manufacturers need the ability to either print or weave branding onto the sock. Tags are of course non-starters, because feet are sensitive things, and wouldn’t that just drive you nuts?

Again, there is the odd pair with a name screen-printed onto the sole or instep, but a challenge there is that wear is intense on socks, and often the brand is illegible after a short time.

Ideally we’d have brand and model identified in some way that would allow manufacturers to get repeat business, and build loyalty, and consumers to have some confidence in being able to weed-out the poor quality products. There aren’t many businesses that have no way to build a loyal following, but sock manufacturers are there, and don’t seem to be making an effort to solve the problem. One wonders if they don’t realize the opportunity they’re neglecting or if they merely aren’t innovative enough employ R&D to address it.

Meanwhile, most of us continue with sock-roulette when we go shopping. One pair lasts a couple of years and still feels comfy and another is in the trash after a month. Who to blame? We don’t know.

Your Business Take-Away
Beyond the retail environment, these issues apply to any business that provides products to customers.  For the short term, the issue isn’t very big. If you provide a piece of software or a hardware widget for a business client, getting another order in to you is not a problem. The person who placed the order will remember, and still have the emails and invoices, likely.   But given the quicker rate of churn in the modern business environment – are you sure that a year or two after a new person whom you have never met would be able to find you and make a new and bigger order with you?  If they have to actively search for you, there’s always the chance that they will find, and prefer, your competitor.

Ensuring that your product reflects its source, and connects back to you could be the key to repeat business, even if your connections occasionally break. As well being able to get constructive product criticism and feedback that gives you the opportunity to demonstrate you are able to responsively improve your product strengthens your operations and your relationships as well.

When it comes back to the lowly sock, I’ve implemented an slightly tedious solution to get more value for my sock dollar. Upon each purchase, I lay the socks out — branding tags still attached, and receipt clearly displayed — and take a photo on my smart-phone. The pic gets stowed away where I won’t look at it again until next time I go sock-shopping.

Really, though, I’d be much happier as a consumer if I could fall in love with a quality sock-brand, give them all my business, and tell all my friends about them.sockPuppet_freestock

Until then, we’ll all be making extra sock-puppets. Totally unbranded, and untraceable sock-puppets.

Three Hiring Mistakes in Innovation-Based Businesses

It’s a tougher job to hire for a business built around innovation.  If you approach it like you would for a retail clerk or a Queue_151142factory worker, you’ll be in for problems.  There are dramatic differences between hiring for a pure development role versus an R&D role as well. Mistakes are costly.

 

Here are three big mistakes that appear to be common today:

  1. Matching Resumes to Current Role Activities
  2. Ignoring Both Ends of the Experience Spectrum
  3. Hiring by Committee AKA Covering Your Ass

1. Matching Resumes to Current Role Activities
Shocking? This is counter-intuitive, but think for a moment about what your business does.  As an innovation-based business – you have roles that probably didn’t exist 5yrs ago, let alone 10yrs.   You are likely to have roles then that will dramatically change over the next several years too.

Now you aren’t going to hire a plumber to write software for you, so keep things in perspective. But consider two types of candidates that you are likely to consider for a role.

a) those who are an exact match for the tasks of the role you need to fill now
b) those who don’t directly match, but have skills that are transferable, and have a history of adapting to new things.

In the first case, you may find someone who has only done the thing you are looking for.  Perhaps twins_328371straight out of school into your field, and five years of doing that specific role.  Five years of experience directly doing an identical job. Looks great to HR, no?

In the second case, is someone with a base of skills who has adapted to the changing landscape in your general field (marketing, engineering, administration, media – whatever).  As the business changed, they adapted – maybe even led some of the change. They understand the space in which they’ve worked from its origins. They’ve witnessed the mistakes made by players in the space, and the best-practices.

This second candidate is working in an adjacent area, and does not match your job description directly, but has a track record of learning roles of similar complexity from a similar knowledge base.

Now you may (and most managers do) exclaim that you want someone who can hit the ground running.  But given a dramatic shift in your dynamic business in the coming year or two, which candidate do you think will be better able to not only adapt, but lead into the next phase?  Which one will fight change, and want to hang on to the only skill-set they’ve developed?

2. Ignoring The Experience Spectrum.
A lot of managers will hire for a role seeking someone with three-to-five years of experience.  The thought is to find someone with ability in that space which is already developed, and avoid the expense of training. More senior workers may have salary expectations which are higher too.

This propensity to ignore both ends of the experience spectrum can short-change the organization.

Novice managers without experienced people-management or hiring skills may not have developed the instincts to recognize transferable skills that someone more experienced has.  There is great Shinykeys_790873value and potential in a new graduate, or early-stage entrant to your space who may fall under your experience expectations.  The important element is being able to recognize the transferable skills with-in previous experiences.  Often this means a careful analysis of non-employment based interests and out-of-field experience as well.

There are some interviewing strategies that can help.

Interviews of less-experienced candidates often need to be longer, and some task-based evaluation is often warranted.  This can happen at two stages.  Have those candidates who do well in a brief phone screening interview prepare and bring something for their in-person interview.  Maybe a half-page summary of what’s going on in your field.  Maybe a test for creativity? For example, have them make something – anything – maybe bounded by the size of a regular envelope, to illustrate their creativity.  The results may surprise you!

After the short-list is made, have those remaining candidates write for you a ‘plan of attack’ for a job-related task prior to the second interview.  Maybe a task you’ve already solved, or one you’re thinking they will need to address. This specific ‘plan sketch’ approach is good in that it is not a ‘Google-able’ task, requiring actual candidate insight. Have them describe how they came up with it, to illustrate that they understand that, and their brother didn’t do it for them.

At the other end of the spectrum, candidates with extensive experience are often ignored as well.  There are three main contributors to this behaviour.  First, young, new managers may be intimidated by the thought of someone with a couple of decades in their space working for them.   The second is oldkey-1251855the fear that older contributors will expect higher salaries.  Third, there is a bias that older workers may not be creative.

In the first case, the challenge is in the inexperience of the young hiring manager.  Diversity in the workplace is our friend, and a breadth of experience, just like a breadth of gender, culture or skills is fuel for creativity.   Worried about jaded attitudes, stodgy approaches? Well, that applies to all candidates and your interview skills need to be able to look for personality challenges of all kinds.
In the second case, there is certainly a ‘you get what you pay for’ mantra applicable here.  There are excellent cases of an unstable work-team becoming grounded and enhanced by an older contributor being added to the mix.  As well, as a young manager I’ve seen experienced contributors pull out hugely-valuable insights from past experience when we’ve most needed them. This ability to jump over an iceberg toward which you are headed more than makes up for any additional costs.

On the second point, for the topic of salary there is an easy solution – discuss salaries in the telephone screening interview process to avoid any over-investment of time on either your part or the candidates.  Often older candidates have evaluated income against work-value and have seen that an interesting job counts for more than a high salary, and what is better than someone working a role because they enjoy it.

For the creativity question – simple interviewing skills should draw that out.  Look too towards general interests and hobbies.  Or try the creativity test mentioned above!  Creative, innovative people tend to buck the trend, so you’ll find them in all sorts of places, and they’re like gold when you do.

3. Hiring by Committee – AKA Covering Your Ass.
This is a disturbing trend, perhaps borne out of fear of failure from inexperienced managers, and maybe the culpability-avoidance instincts of the modern politician are creeping in too.  The thought goes that if I have enough other people involved in the hiring decision, I can disavow any responsibility when the new-hire turns out to be a total dud.

There is a lot to be said for having others participate with you in the interview, to provide some perspective and diversity of opinion. In many cases this has been taken to extremes.

Mostly gone are the days when candidates were hired on the spot.  I can attest that it was an meetingRoom_112426invigorating experience to have someone say “Okay, you’re hired” twenty minutes into an interview.  But that’s probably a good thing to have moved away from.

It certainly seems that the pendulum has swung too far the other way as of late.  It is not unusual to hear about hiring processes involving three or four rounds of interviews, and many weeks to close.  In government roles where often the fear and bureaucracy are at their peak, it can take months.

Does this sound like your process?  Here are some strategies to rein that in.

a) Ensure the candidate criteria for the role is captured before interview selections begin.
This does not mean the job description – often you want to write a job-description strategically to avoid disclosure of product plans or other details to competitors, or to position the company in a certain way in a public forum.  Keep it short – half a dozen skills perhaps that are of interest.  Think most importantly about characteristics as well.  Remember the valuable ‘transferable skills’  rather than identical experience.  These are not your interview questions, but what your questions will get to.

b) Include other people in your hiring process, but limit the number.
If you are a sole-proprietor, or in a very small company, consider bringing in a trusted ex-colleague or advisor to give you at least on other opinion.   In a larger operation, a parallel manager, a senior team-member or someone from HR is a good idea.  Even if their skills are not in your field, a lot of what you’re looking for is personality and approach.scoreBoard_165335

c) Score candidates against your criteria initially from resume/screening process and from interviews.  Don’t get too elaborate with fifty different factors – just six to a dozen points will work better.

d) Make it clear who owns and thus makes the final decision. Make sure that ownership is established up front to avoid  a wishy-washy “yeah, I guess so” hiring process.

The hiring process is challenging for any organization, and particularly so in innovation or R&D based ones.  In conclusion, it’s important to be thoughtful about soft-skills too, and remember that attitude and approach are as important as technical knowledge when it comes to engaging effective contributors and building strong teams.

When directing inexperienced managers in the hiring process, coaching and leadership are very important.  A young manager with excellent day-to-day skills can often be a complete neophyte in effective hiring, and some structure and guidance can go a long way to ensuring your hires are an asset rather than a liability to your operation.

Setting a Price: Six Points to Consider

Your R&D has gone well, and you’re approaching commercial introduction soon. You are probably reworking a spreadsheet to put some more detail into revenue models. You might be ready to engage on a trial with a lead cashReg_351840customer. Whether a first product, a new member of a portfolio, or the 100th product, setting price is arguably the most fundamental go-to-market decision you’ll make.

When you have existing products with a track-record in the market already, and you are introducing version five, you have a lot of data in hand and the choices are easier. That situation probably warrants a blog entry or two of its own. The discussion below will still have value. Primarily, though, these points are aimed at market entry for a new product in an untested landscape.

Your pricing strategy should consider these six points :

  1. Price-to-Market
  2. Price-to-Margin
  3. Discounts and Promos
  4. Price Evolution (contingencies!)
  5. Payback and Break-even
  6. Product Lifetime curve

Each will be discussed briefly below. But let’s preface that by saying that no one approach is going to give you the definitive answer. The best strategy is to work through each approach to see what it gives you, then consider an initial price based on the variables of your specific situation.

Price to Market
This is the dominant strategy used in consumer products and services. Basically this is the process of gathering data on competitive products and prices, and positioning yours within that spectrum based on your assessments (or ideally customer consultations) of quality. Thus if your data suggests your product is in the top 20% of products in the space, you can price within that range as well. One has to turn off their “my-baby” product bias here, and this is where impartial customer testing is very helpful. Given a range of prices for comparable products, tactical decisions can be made about targeting direct competitors with your pricing.

Price to Margin
Even if you feel that the Price-to-Market strategy has given you a concrete answer, you must do this analysis as well. This is where you look at your product cost, and add your desired mark-up, and see where it comes out. Again, you need to look at  percent_983490this in the context of the competition. Even if the product is in a new segment, if your product solves a problem for the customer, you need to consider your pricing against the current way the customer solves the problem.

Bottom line here is that if you cannot make a suitable margin on your product when priced against the alternatives (direct competitors or alternative solutions) you need to either go back to the drawing-board on the product design, or even consider whether this is a market you can viably serve at all.

Margins are a relative thing – industry data shows that a successful restaurant lives on an aggregate 4 or 5% margin, while a successful electronic product manufacturer can manage a 50-60% margin. Hopefully you know what to expect before you embark on addressing your chosen market.

Discounts and Promos
Given a stake in the ground to mark your price, the marketing strategy for the product or service is important as well. There are often product goals beyond selling an individual item (or service) to a customer in a one-time sales event. A successful company builds brand loyalty, develops relationships, and generally tries to add sale_1430736value to a customer’s situation beyond delivering a quality product.

Repeat customers mean long term business success through a lower cost-of-sales, whereas one-off customers mean you have to work just as hard for the first widget you sell as you do for the 1000th. Thus discounts and promotions are often a useful tool.

Your pricing strategy should clearly define where discounts can be applied and where they shouldn’t. It should define discount profiles that don’t decimate your ability to operate. They shouldn’t restrict your ability to make future sales by creating an expectation in the market that everyone gets 50% off all list prices.

Discounts and promos are particularly useful for ‘up-selling’ in encouraging a customer to consider instead of buying widget A at full price, getting widget ‘A’ at 30% off when it is purchased with widget ‘B’ and widget ‘C’ as well. But do the arithmetic to ensure that you do not craft elaborate money losing packages that cripple your business.

Price Evolution
Invariably market places evolve. Your product price is unlikely to be a static thing, and you should plan ahead for how it will change. Changes could be required based on general cost-reduction of producers, where competitors are able to reduce their costs and lower prices. Similarly, increased costs in means of production may start road_1428506to erode margins and required you to raise prices. A new entrant may aggressively attempt to secure market share by undercutting the field.

In all cases, decisions need to be taken in the context of market share, cost, margin and operational complexity. Does the cost of changing your systems negate any improved earnings? Will there be additional frequent changes required as well? Will a price-point war with a competitor bring you both out of business?

By anticipating the road ahead, and sketching your pricing boundaries you can survive surprises.  Recognizing that markets evolve is a prudent strategies. Keep in mind, and document your contingencies for responding to unexpected threats. If a new entrant shows up tomorrow with similar features at half the price, what is your response going to be?

Payback or Break-Even
When setting price, it’s important to consider the whole product lifespan. When the development costs, and end-of-life costs are added into your production costs, at which point in your product sales lifespan will you have paid back all costs? When will the product become obsolete, and will the cumulative profits of the product cover the original R&D costs, plus those in getting to market in the first place? Is=n that context is this still a product you want to introduce?

When setting initial price, do the work to model not only the margins you want to achieve on a per-unit basis, but also consider pricing that recovers full development and introduction costs at some number of months or years into the sales projections. A good rule-of-thumb to begin with is to seek payback one third of the way through the product’s market-viability period. Whether you wish to make that a quarter or a tenth will depend on your corporate expectations, and market segment. Expectations when making cell phones are going to be different than making wheel-barrows.

Product Life-time Curve
As a product ages in the market place, a prudent business is consistently researching ways to produce it more efficiently.

The typical approach is to lower costs of components and materials, incrementally improve performance, reduce waste and environmental impact in manufacturing, make processes and procedures cheaper and faster.

At some point, sales begin to wane and decisions are made regarding discontinuation. Pricing can be an effective tool in managing that curve. When chartUp_1131288margins are sufficiently improved, a product with a diminished customer-value can often take a position in a lower-tier niche. Perhaps as an entry-level product serving as a stepping-stone into your higher-performance products. Or perhaps it can serve a more price-sensitive off-shore market. Sometimes social benefits can be had by donating the now lower-cost model to cash-strapped non-profit businesses. Tax benefits are sometimes possible based on retail-price value, while bottom-line costs to your business for the benefit are minimal, while enhancing goodwill.

A few last thoughts…

Full Product Cost – remember that product costs are more than just the materials that go into individual units, or the cost of the labour and consumables during a service call. There are substantial costs related to the R&D expenses, the selling costs, the advertising and marketing, and even just keeping the lights on in the head-office. Understanding your costs of development, support and overhead are important facets of your pricing decisions.

Customer Cost of Ownership – Remember to look at the customer’s perspective. What are their other costs beyond the simple purchase of your product or service? If you can map out all costs, tangible and intangible, from start-to-finish, you can wallet_1160544better understand your pricing options. If your product reduces other costs for the customer, it can allow you to price higher than a competitor if you are able to articulate that value to the customer. You may also be able to ease other elements of the buying decision for the customer, which contributes to a stronger relationship.

Putting It Out There – Naming Your Venture

Your innovative new venture needs a name.

Forget for a moment the legal reasons, your venture’s name is an efficient, quick way for your customers and partners to remember you and your business. It is something you and they will say often, so it’s important and helpful to ensure that it encapsulates your market approach and helps to visualize the value you intend to offer.bizcard_sxc

Effective business naming is challenging for the entrepreneur.  It is wholly plausible that your skills at building and offering a great service or product might not be the same ones that help you find the best name for the business.  Finding a memorable, effective name means finding one that will help – not hinder – your success.  It’s a first step towards taking a successful product to the target market.

First let’s look at the purpose of a business name, and then how it will be used.

A unique name allows you to differentiate yourself from other businesses not only in the general business landscape, but also relative to those competing in your market.  It’s often the first impression a customer gets, and as such can convey some characteristics about your business quickly – for good or bad.

Fun, whimsical, serious, professional, elegant or irreverent, your business name will be a big influence on how you’re perceived.  Some customers will discover your business through your products, then seek your name for future reference. Others will hear about your company by word-of-mouth – hopefully in a positive context.

The word-of-mouth usage of your business name is particularly important.  Verbal referrals, especially for a small business unable to do a lot of advertising, can be your most important customer growth tool.

There are other factors, beyond those we’ll deal with here, to consider in naming. These include legal uniqueness requirements, registration and trademarks. As well, some businesses need to think about portability of the name to foreign markets and languages where the name may have radically different meanings or perceptions.

For our purposes though, let’s focus on these two fundamental questions: positioning yourself in the market, and being effective for your customers.  Here are FIVE simple rules for naming a business.

The first two rules are the best kind. You can break them. But think carefully before you do. These two simple concepts add great value in one of the most important areas – making it easy for your business to spread by word-of-mouth.

1. Maximum seven letters
2. Maximum three syllables

Anything that helps people remember your business and tell others about it is invaluable.  Or perhaps they’re passing on a bus and see your sign.   Maybe they walk past someone holding your product and have an immediate interest.  Will they remember the name long enough to look it up later?

In the early days of telephones, researchers studied peoples’ memories to see how many digits they could retain, and found that seven numbers was about the limit.  Sure, it’s not a directly transferable concept, but a seven letter limit similarly helps people remember the correct spelling of your business, particularly if you have a creative, non-dictionary, word as the name. Less is more.

You can find many businesses that break one or both of these rules yet still succeed.  They probably have a great product that allowed them to rise above, and gain solid brand identity during an early phase of the business.  But given how hard it is to succeed in today’s tough market place, why create a new barriers to overcome?  If you can do something to make the path towards name-recognition easier, why not do so?

3. Obvious spelling.
If a possible customer learns of your business by word-of-mouth, will they be able to search for it on the Internet?  What if the spelling is totally unexpected?  How quickly will they give up?cafemeet_sxc

Maybe your business sells sweets and someone enthusiastically tells their friend “You have GOT to try the peppermint candies from that shop called Sweet Candy.”  If the friend starts searching the web, they’ve got a problem on a couple of levels (see item 5 below)  If it turns out that the actual spelling of your business name is “Sue-Wheat Kandee”  they may give up long before they get a match.

Remember too that obvious spelling doesn’t have to be a dictionary spelling. More on that in rule five too.

4. Restrictive naming.
It’s a classic challenge that businesses sometimes unwittingly bind their future options by a badly chosen name.  It is not unusual for a business to serve a certain customer base and suddenly realize they have a great market opportunity adjacent to where they started.  This is a trendy word in new venture parlance – the “pivot.”  If your business name is very specific, it may limit your growth, and make attracting new customers difficult should you decide to do the P-word.

For example, you might begin as “Joe’s House Painting” but constantly hear that many customers can’t find a good carpet installation service – a skill you possess from your past.  Reaching those new customers with your existing name could be difficult.  As well, changing your name would cut you off from previous, very happy customers who will think you don’t do painting anymore.  Starting under a more flexible name like “Joe’s Home Services” might be a better strategy.  Maybe just “Joe’s Services” would leave you flexibility to evolve into non-residential services.wrench_sxc

Again, one can find exceptions where a business pushed through this barrier.  A great domestic example in our country is “Canadian Tire,” a large successful hardware, car-parts and service company.  They successfully transitioned to “more than tires,” thought that phrase was indeed their slogan for a while. How much did that cost?  Customers were gradually able to buy hammers and light-bulbs from the store that started out as automotive-focussed.  More recently, they tried to push it further, trying to offer food items like milk, and eggs and cheese in some stores, but they finally gave up.  Tires, hammers and eggs ultimately don’t go together in people’s minds – let alone in their shopping bags – and they appear to have abandoned that attempt.

5. Googleability.
Rule three already mentions that the spelling of your name should be obvious. You should also remember that most people are going to want to search the Internet to find or research your business.  Either to get your address, or phone number, to see customer reviews or to see your wares on your website. If your business name is simply “Home Services” the millions of hits generated will not be very helpful to that potential customer.  Having some uniqueness in the name will help with this.  Googling on “Tom’s Home Service” will be a bit easier. Even better would be “SpeedyTom” or  “Tom Works Wonders.”browsers_sxc

Creative name spelling will help too. But wait – remember rule three.  You can certainly get creative and try something like “Tomifaction” or “Housify.”  These are great non-dictionary words whose spelling can easily be guessed. This is branding gold.  People can easily google it and uniquely find ONLY references to your business.   This also gives you a powerful ability to track your marketing and customer activity too.  Your customers can find you quickly and easily. Just ensure you keep your creative spelling predictable.

Sixth of the Five Rules:  Testing
The best naming process is an iterative one – where you stop and test what you are closing in upon.  It’s easy to do a few tests on people around you. Say the name you’re considering and see if they can guess the spelling.  Google it and see if anything comes up (low numbers of hits, and in areas unrelated to your space is a good sign).
Test for domain name uniqueness – you might change your name when you find that housify is taken (it is).  Maybe something else would work.   This is a whole topic unto itself. (A quick-responding site like InstantDomainSearch is a pretty nice website for rapidly checking many domain names.  You’ll need to do that often to nail down one that is avaiable).

Coming up with great name ideas that meet these rules can be challenging, but there are some great techniques you can use to get there.  Contact us if you want some help on that topic.  Don’t expect to find one quickly – you should generate a big list. And don’t get married to a name right away, consider other options before you nail it down.

 

Product Timeline End-to-End

Many envelopes and napkins have been illustrated with portions and versions of the graphic below.  So it seemed worthwhile to capture this ‘product timeline’ in a structured way to aid in those discussions.  Throughout this blog and in many off-line places over the years, many of us will have debated and planned based on versions of these boxes and timelines.

ProdPhases

Various organization or groups of founders will have their own names for the steps along the path. Developers of a service business may have different approaches, but it’s arguable that all these elements are worthy of consideration in any venture built on innovation.

Debates can also be fueled by the alignments of the various boundaries. So let’s enable those discussions and make our planning purposeful.  An issue discussed is one for which we are better prepared. With the full spectrum of a project’s phases visualized, planning becomes easier.

Posts on this blog will seek to illustrate (and alter) this picture going forward. Your input and discussion is welcomed!

Feel free to use this graphic if you wish (please credit rossgk.ca for authorship in any publication/online post).

Seven Steps to Commercializing Products and Services

In most venues outside of academia, R&D is undertaken for the purpose of commercial benefit.  Topics on which research is engaged are typically central to the either the current space of the company’s focus, or an adjacent market (new or existing) where the company anticipates making a mark.

R&D is launched towards solving specific problems, hunting for commercial advantage, discovering new features or capabilities or reducing costs for existing product or service offerings.

Assuming success on the R&D front, there is a challenging bridge to cross, when the outcomes from the research work are to be moved into a commercially viable position.  Most modern $50 devices were once only possible as multi-million dollar prototypes at some point.  The path from then to now can be quick or slow depending on many factors.

Certainly, R&D that proves in the viability of a new product using non-existent or very early-stage components will have a long road ahead.   But many R&D projects today seek to exploit existing commercial-off-the-shelf (COTS) components, or perhaps represent a small increment to an existing product embodiment.

These seven steps are an effective path to a commercial product or service:

  1. Definition of problem, opportunity or goal.
  2. Establishing a viable path to goal
  3. Demonstration of elemental capability(ies)
  4. Proof of concept implementation
  5. Evaluation of Commercial viability
  6. Product prototype
  7. Commercially viable implementation

Definition of goal

Framing the goal in terms of the problem(s) to be solved for the end-user or customer is key.  An open ended research project that seeks to understand wireless communications will not take a cost-effective, or likely productive path to commercial success.  Specific R&D goals should quote measurable criteria in in terms of functionality.  Examples may be to deliver a 5Mbps data link with a certain bit error rate, or perhaps reduce the cost of a product by 50%, or maybe to develop a pizza delivery service that can route drivers to calls in a certain area within 30minutes or less.

There should always be another part to any goal – a financial element.  Goals that are comprised of the benefit to the end user/customer, and a commercial constraint are ones that remember the ultimate reason for R&D. There is not just a functional goal, but the cost of commercial deployment must be viable as well.

Path to goal

R&D proceeds through a structured exploration to achieve certain goals, as previously discussed.  We’ll leave the means of conducting effective R&D to other discussions, but towards the goal of this article, attention should be paid to:
a) tracking costs associated with the work
b) capturing learning during the process
c) retaining the skills and techniques within the company
d) protecting intellectual property where viable (e.g patents)

The reason for these steps is that the commercial development of a product or service from the R&D must not only benefit the company in unit revenue-versus-cost, there must also be a means to recover the amortized cost of the associated R&D.  As well, retaining the learning and rights that went into development of the product is necessary to retain competitive advantage, and to build on success in future product cycles.

Demonstration of Capabilities

Before an investment in a prototype product, system or approach, the elements that make up the solution must be evaluated for practical viability.  Can these elements potentially function effectively enough to justify combing them into a final product or service?  Is each a stable and potentially economical contributor to the whole?  Are there stable and viable sources for, or a means to produce, the pieces that make up the final product?

Proof of Concept Implementation

Towards the eventual commercial outcome, the assemblage of the elements or components into a system needs to be successful.   For a electronic consumer product, the buttons and display need to work with the control processor and that in turn with the networking.   For a retail service the dispatch procedures need to be transmittable to the drivers and the product-racks need to fit in a real-world truck.

Commercial Evaluation.

With conceptual system viability proven, the next concrete result needs to be a prototype matching the final configuration.  This will be intended for pre-manufacturing or pre-deployment testing, field testing, or maybe investor or reseller engagement.  It will test the practicality to assemble a final working, commercial assemblage of the validated components.  Before embarking on that crucial stage, the commercial evaluation needs to happen based on the previous proof-of-concept implementation and learning.

This analysis determines if there can truly be a profitable market for the product or service as defined.  What are reasonable expectations of cost?  Will the end-user experience goals truly be met?  Can the components, materials and associated labour be acquired and employed successfully?   Can the resulting product or service scale up to numbers that define success in the market?

Product Prototype

With successful outcomes from the evaluation, a product prototype that is indicative of the final model is needed before commercial deployment.  This will highlight any problems with manufacturing or full-operational deployment.  If it’s a business process or service, the prototype is trialled to work through the devised steps, with the tools required, and ensure the outcomes are successful.  If we’re working on an electronic product, a viable circuit, enclosure and basic software functionality is needed to work through the volume production and testing plans.

Revisiting the Commercial Evaluation is appropriate upon completion of the prototype, as much learning will occur during the process.

Commercial Implementation

With confidence the final product production can commence. Ideally a trial period is declared with close monitoring.  Manufactured product is scrutinized to ensure production is tuned to high quality.  Costs are re-evaluated to ensure they are within parameters.  Service examples begin to engage customers, and feedback is openly sought.     With success and responsiveness in the trial period, production is ramped to meet the anticipated market demand and revisited based on uptake and success.

Our work isn’t finished here.  Monitoring of customer satisfaction and returns, repairs and failures is valuable data for the next iteration of the product cycle. Ongoing learning enhances margins through cost-reduction and/or improves competitiveness.

There are challenges along way beyond product-specific ones.  Cultural and organizational challenges around interfacing research staff with operational design and support staff required attention to ensure products make it through the cycle.  Development and dissemination of skills and know-how are important to being able to support the product or service that is ultimately delivered.

(What next?  Beyond this high-level framework the detailed steps to make your product or service a success include marketing, channel development, competitive analysis, budgeting/finance and people management. Watch the blog for more help, or contact us to discuss.)

Funding New Emerging Ventures

R&D in a new venture relative to a corporate program is a very different animal, primarily due to the financial constraints.

Corporate R&D seeks to develop product offerings that address a market opportunity and contribute revenue to the business.  Funding and risk are understood components of the corporate R&D equation, with varying thresholds for both.  Corporations have varying philosophies about what percentage of revenue they should invest in exploring next-generation products, and the expectations for desired margins achievable vary as well.  In successful technology-related industrials, R&D spending is often in the range of 10-15% of revenue. Margins of 30-40% are typical targets to definition a successful product.  This is in general and when averaged across all firms in a sector it varies considerably.

When entrepreneurs explore an R&D project in a start-up venture, there is invariably a wealth of energy and enthusiasm, but the funding to carry it through is often the most challenging piece to solve.  As a new venture, one cannot linger too long in the R&D phase. The path is usually to find and demonstrate a solution for a specific, well-articulated market need, prototype the solution, then commercialize it to get to revenue before one’s ability to fund the work wanes.runway 615399_engizs_runway The metaphor is invariably finding enough runway to take to the air.

There is no shortage of content on the Web about funding paths, schemes and strategies. Often those lists exclude a few common options, or gloss over a few risks that I might have chosen to emphasize.   Hence this is a brief overview with some thoughts from my perspective.  These are common paths to funding a project forward towards profitability.  I have had some small experience or exposure to each of these from whence my opinions have been formed.

  1. Venture Capital
  2. Angels
  3. Friends and Family
  4. Bootstrapping
  5. Government Assistance
  6. Bank
  7. Strategic funding
  8. Crowd-sourcing

Here is a look at each of these in turn.

1) Venture Capital.  I’ll say a little bit more about this funding source, as it is often the one that first-time start-up projects tend to think about as the first stop.  Venture Capital or “VC” funding is based on high-wealth individuals seeking to lessen the load of finding investments, yet still seeking to tap into markets in which they may personally have poor depth or understanding.  They pool their money behind venturesuits 1012552_business_world_4 funds raised from diverse sources, and those funds are in turn directed by savvy managers employing subject matter experts toward target sectors perceived to be rife with potential.  They have the resources to perform the ‘due diligence’ required to engage ventures that they hope will show explosive growth.  They accept a substantial failure rate – most quote a number like nine out-of-every-ten expected to fail.  They expect, then, that the tenth will yield enough to compensate for those other losses.

In exchange for equity in your venture, a VC will theoretically provide funding towards specific goals that bridge between initial concept and customer engagement, to firm revenues, and the holy-grail of profitability.   Or at least that’s how it was originally conceived.

VC funding was arguably the engine behind the late 90’s explosion in funding that pushed the technology world into a financial bubble.

In the period, large pools of investment capital and exciting emerging technologies coincided fortuitously. There was a fertile batch of ideas coming out of the nascent Internet/Web ecosystem hungry for a rain of equity to enable a crop of world-changing companies.   So many ideas emerged so fast, that it became a sellers’ market for ventures.  Soon the stories were rampant of new ventures getting tens of millions of dollars based solely on a compelling idea described in PowerPoint slides, and a couple of good resumes.

With the crash after the turn of the millennium, VC’s moved to a brief period of throwing good money after bad – while they tried to shore-up failing concepts rather than engage in fresh ones.  After that played out, most VC’s became extremely risk averse.  Most continue to explicitly seek to invest in ventures that are not only established, but most seek only ventures that have customers and revenue in hand.   For many ventures, however, the chasm between early prototypes and commercial, revenue-generating product is their biggest barrier to success.  With that chasm to cross, once customers and revenue are in hand, the last thing they are interested in is relinquishing large chunks of ownership in their operations.

The VC risk-aversion is also played out in the sectors selected for investment.  VC’s are much less likely to lead a new emerging space now, and usually wait for traction in a space before turning their attention in that direction.  This is partly driven by their source of funds.  It’s much more engaging to tell your high-wealth individuals that you are going to get them involved in firms chasing the exciting markets of which they have heard much in the press, than it is to convince them to put more money into something of which they are unaware.

There are exceptions to any rule, and some VCs will have a bit more of an appetite for risk, or earlier stage ventures.  It’s also likely that if the market shows a period of big hits on the venture front, pressure will emerge for VC’s to take more chances to pass those big gains on to their fund contributors, and in that scenario we’ll be prime for another pass through a potential 90’s-style investing bubble.

VC Goal: High value exit event to return capital with a significant premium to compensate for the many projects which will fail.

2) Angel funding is a simpler version of the above.  High wealth individuals are still involved, but  they typically wish to get closer to the investments.  Sometimes this is because they don’t play well with others, and want more control. Sometimes it is because they have a love for a specific sector and wish to be involved at a detailled level.  Sometimes they bring no subject matter expertise yet seek to satisfy themselves based on founder relationships and financial structure and hope that the technology pieces take care of themselves.Angel 473926_cheesy_phil_1

In most cities and regions there are loose associations of Angel funders who will mix and match partnerships to engage a venture together, and spread the risk somewhat.

The Angel-funding landscape is more diverse and as such there are both better situations and worse ones.  Some Angels will meddle and micro-manage a venture, seeking to exert too much control, while others can do just as much harm by providing no guidance or structure for an inexperienced start-up team.  Indeed many angels are the lottery winners of the business world, having had a company in the right place at the right time, and sold it in a windfall.  The wealth and apparent success may not indicate any particular ability or depth of ability.

Of course, angels might also be solid, proven entrepreneurs with a track-record of success. They might be satisfied with a smaller potential market opportunity due to an enthusiasm for the business idea.  With the right match, an angel can be the second best thing that happens to venture.

Angel’s Goal: High value exit event to recover funds, but possibly also a high-value idea in which the funder(s) can participate (for better or worse).

3) Family and Friends funding is as it sounds – collecting investments from those people you know around you.  These can be a few individuals with deep pockets, or many friends and relatives with small investments.   In general, my advice is to avoid this situation.   Perhaps your family circle includes established successful business people who align with your venture direction.  That exception is an easy one to manage.  But otherwise the challenges are many.FriendsFam 422094_equipo

In most cases the investors are naive about the subject matter and business fundamentals.  In the best case they have money they can afford to lose, and know how to apply some rigour in their expectations.   In the worst case they will have inflated ideas about their ability, or yours, and may wish to meddle.  If a venture turns out poorly, the reactions can be aggressive demands to pursue other random strategies by ill-informed people.   Fundamental life-relationships are put at risk.  Focus can be challenging, and people may invest beyond their ability to lose.

There may be situations where family and friends desperately wish to invest, and to participate in something that is doing well and is well on the way to succeeding.  They may interpret a lack of will to accept investment as a personal slight as well.   And eventual success may further put up some backs.  It’s certainly possible and common in many cases to have a ‘friends and family round’ at some stage of the business.  Timing it to a lower risk profile, and capping the participation rate might be a good strategy to manage risk to your sanity and life beyond the venture.

In the event of any investments from this group, the best guidance is to ensure there is just as much structure around the investment as if you were dealing with a stranger.  Protect both parties with formal documentation of the outcomes, including the worst  (and most likely) case – total failure.

Friends and Family Goals: Partly to support a friend or loved one, partly to become fabulously wealthy from what is obviously a brilliant person.

3) Bootstrapping is a tough road, but for many ventures today it is also very rewarding one.  The barriers are much higher, the learning is much more intense.  For many ventures it is not an option, as the capital costs are too substantial to cross from concept to commercial product.   But in a wide range of markets, there can be low capital cost opportunities where small customer engagements may create the trickle of initial revenue that allows a skeleton founder’s group to emerge slowly into the market.bootstrap 1136536_old_scummy___

Young entrepreneurs, or those with a good nest-egg may be able to work without pay for an extended period of time.  Partnerships may solve some near-term issues.  Co-working spaces, of which there about 1000 world-wide, provide for functional environments for networking and collaboration.

The path to success is certainly more difficult, but the basics learned about controlling costs, pride of workmanship and work-ethic are invaluable.  Out of this culture of bootstrapped business has come a philosophy that many report to be effective.  Rather than labouring towards the perfect product and a huge introduction date, the mantra is now to fail quickly and often.   This is particularly well suited for software and web-based services, but can apply to more physical products as well.

It’s a little tongue-in-cheek, suggesting failure quickly and often. Obviously everyone secretly hopes to introduce the perfect product on the first try, but it is essentially a call to recognize that if a market is large enough, you can get a very minimal product in front of your initial customers, and even if the product fails, you will find additional customers on your next try, or some will stick around if they see the promise of the concept.  Customer tolerance for roughness-around-the-edges will be higher with a product from a bootstrapped venture.   The company can learn a lot in a short time, making product revisions rapidly.

The founders get something out of the process too, in that they retain much more ownership going into an equity event where a payoff is possible.  They also retain much more leverage in such a situation.

BootStrapping Goals: Get product out to market before founders starve or have to abandon the project and get ‘real’ jobs.

5) Government Assistance is often available in areas where there is some political will to support innovation and small business growth.  The challenge with many of these programs is that they require substantial cash-on-hand to take advantage of them.   Much has been learned from poorly managed government programs that were abused in the 80’s (e.g. Canada’s SRTC), without actually fostering much R&D or new business development.  Thus the most common approach now is matching funds for a described R&D or commercialization project, or newer tax-credits after the fact for spending that fits into one of those categories.government 1383653_parliament_hill_ottawa

These can be very lucrative for ventures that have reached the stage of having funds to spend on new exploratory development, but they have less value to very early-stage businesses.

Government programs are best considered later in the cycle, when funds are already secured, and these programs can provide supplemental aid in covering a portion of a contributor’s salary, or recovering some spending that meets R&D tax credit criteria.

The other caveat in government programs to consider is that there is often a very high administrative burden.  If it takes a dedicated contributor’s full time attention for weeks to apply and follow-up the application and subsequent reporting,  it might turn out to be a zero-sum game.  The same effort invested in a revenue-generating task would have been as (or more) valuable to the venture than the funding program.

Government Funding Goals: Gain political points for government in power by showing successes in the market place from taxpayers’ money. But more dominantly, run a funding program without abuse or corruption scandals. All the documentation and paperwork seek mainly to avoid such risks.

6) The use of bank financing is only appropriate for a certain class of ventures, and almost never suitable for emerging technology ‘R&D’ type businesses.  The funding is loan-based and tbank 1415802_bank_loan_concept__2hus a bank will seek some asset-based protection of the funds, and require repayment.  The criteria applied to secure the funds are based on assets evaluation and cash flow.  In some cases, loans can be secured with customer commitments and projected accounts receivable, but the personal risks are greater in the case of venture failure.

Bank Financing Goals: Get money back with a specific interest rate on a rigid schedule, with little-to-no risk to the funds.

7) Strategic funding.  This path is an attractive one as it can offer the best of both worlds – the guidance and structure of a big player in a relevant market, and the agility and creativity of a start-up team.   In this scenario, a large established strategicFund 1198017_silhouetteplayer expresses interest and financial support for your idea and guides your path forward.   In some cases, motivation can be that the company desperately needs your product to enable part of their business.  In other cases the company may recognize that they cannot within their internal corporate culture assemble a team as agile or as inexpensive as yours to address a certain market opportunity.

Long term scenarios can be either the eventual acquisition of your venture into the business, or perhaps a prolonged customer/vendor relationship that makes the business a going concern.  There are sometimes multiple equity events as a company moves towards acquisition at a cautious pace, or instantaneous purchases outright.

Strategic investment is not without risks as well.  Without a structured relationship, the company may develop their own internal capability and eliminate their need for your product.  Internal decisions in which you have no say may suddenly result in an exit from your engagement all together.  In a worst case scenario, a heavily bureaucratic and slow-moving company may weigh you down and export a non-functional culture into your venture making it unable to address a fast-moving opportunity.

Strategic Funding Goals: Create a product or market that the company cannot do inside due to culture, bureaucracy, risk-exposure or talent deficit.  Ultimately likely to pull the venture inside if it succeeds.

8) Crowd-sourced funding is emerging as an exciting new path for entrepreneurs.  Prominent sites like Kickstarter, RocketHub and Indiegogo are changing the venture landscape.  Founders pitch their ideas to a broad audience and if they are able to create a compelling story with wide appeal, thousands of individuals provide small investments toward a specific product goal.  Often a portion of the funds invested are put towards the purchase of the target product, creating an immediate path to getting product into the market.Crowd 1370392_crowd

There are challenges in this environment as well.  An idea has to have mass consumer appeal to get attention, and often those who are able to create a compelling YouTube pitch may not be well suited to implementing it.  A non-viable product can result from a poorly funded group of enthusiastic but inexperienced founders, and interest can wane quickly.

However, even with a poorly implemented final product, sometimes a crowd-funded product can be an impetus towards gaining traction on other forms of equity.  The initial funds may provide the learning curve that teaches founders that they need some specific skills added to the team and may bring deeper pockets forward towards a next step

There have been some challenges on early funding sites, in that visitors were beginning to think of the engagement much more like a shopping process than an investment process.  They might then raise unreasonable displeasure with the path to delivery of the product they thought they had ‘bought.’

There have also been questions raised that need more attention regarding taxation of crowd-sourced funds.   It appears that in some cases tax authorities will see a portion of the investment raised as simple revenue from sale of a product.  If founders use up all of the funds for development and production of initial prototypes that get sent out to investors, they may suddenly find themselves owing associated retail sales tax without having the means to pay it.

Crowd-funding Investor Goals: Participate in the innovation people always hear about but which is typically beyond their reach.  Acquire a product that is compelling, visionary, revolutionary or simply neat.

That’s a quick overview of venture funding options and a few caveats for each.  Many ventures will find themselves traversing a few of those categories along the way to success.  Many more will touch on one only before a quick departure.  In either case those involved will learn a lot and have a shot at changing the world.

 

Fostering Innovation in R&D Projects

In any development work that involves uncertainty, like all R&D projects, there are diverse influencers that contribute to success or failure. Perhaps most fundamental to success are the skills of creativity in problem resolution, and the tenacious commitment to incremental progress. R&D team members are usually good at embracing uncertainty by their nature, and are often fuelled by the endorphin release that accompanies success in conquering barriers that block their way.

But jobs are not static things, and when a researcher occupies a role in an organization for a significant time, there are weights that begin to bear upon them. Some of the more predictable ones are:

  • Solving the same problem multiple times
  • Evolution from innovation to maintenance
  • Repeated cancellation of the same project
  • The distant carrot – a project that is always put off until later.

These challenges are not new, just as keeping creative people in a productive mindset is not a new challenge. Decades ago, research into R&D management explored and reported on the need to keep contributors motivated, productive and engaged.  Many of the same pressures remain, though modern R&D development sees many of the identified factors on a compressed scale.  With development innovative staffcycles shrinking, many pressures arise, make their impact and disperse more quickly.  It’s interesting that some of the remedies proposed as management strategies in older analyses have been adopted organically by individual contributors themselves, almost as a by-product of quickened pace of development (or arguably the fire behind it?).

In Jain and Triandis (ref 3) there is an interesting section dealing with keeping researchers at the Innovation stage of their engagement.  The premise is that a contributor goes through three stages – socialization, innovation and stabilization.  The time scales described ( back in the 70’s and 80’s) seem humorous now. They suggest that the stabilization period arises six to eight years after assuming a given position.  In many fields of R&D today, particularly outside of academia, entire companies and product sectors come and go well within that time period. Contributors may find themselves working in a handful of two or three year engagements within a decade, and the team which has been working together with a stable cohort of members for more than a couple of years is rare.  Still, there is value in the analysis juxtaposed into our modern ecosystem.

The research cited suggests finding ways to prolong the innovation stage, and a few helpful ideas are quoted.

Changing up supervisory roles was an advocated remedy.  Interestingly the suggestion wasn’t lateral shifting of leaders between projects, but rather a rotation of technical staff into and out-of the leadership role.  The idea is that if an R&D manager expects to be back in an individual contributor role in a few years, they will make more effort to stay technically engaged.  And, once back in that role, they will renew their technical chops so that upon a future rotation into leadership, they bring enhanced technical knowledge.

This approach is often somewhat unfeasible, as for some leaders the transition would be seen as a demotivating demotion.  Similarly, those contributing in a leadership role will rise to that position based on cultivated leadership skills.  There is an experience as a technical contributor where one has had increasing project impact to the point where they cannot physically do more as an individual. By moving to direct multiple contributors enables further continuity in contribution and thus business impact. Shifting someone who profitably wield the ‘synergistic’ power of a team back into an individual contributor role leaves them contributing reduced value, which can be demotivating.

Furthermore, lean contemporary R&D groups are much less built out of cookie-cutter skills sets these days.  Specialized knowledge and career paths mean movement of people between roles is less likely to be possible.  There is certainly value in cross-training, and developing technical breadth, but some contributors are disinterested in inout_the_doorvolvement in other tracks.  In a competitive employment market, attempting to push a contributor into a different area for breadth-enhancement may result in loss of a contributor.

Still, there is value in the changes proposed for sustaining the innovation phase, and modern start-up culture demonstrates this.  There today commonly exists a self-managing process that provides benefits similar to the role transitions advocated between hands-on contributor into leadership and back.  As a new venture progresses from concept to product, those involved in early stage phase will often become leaders of a growing work-force. An innovative product emerges in prototype and matures into prime-time adoption.  Those involved often find that the culture of a nascent venture is very different than that of a going-concern and they will eventually move away from the original product to be involved either in new exploratory projects that are complementary, or into new ventures all together.  These contributors who evolved from technical hands-on explorers into team leadership and later back into innovative development of the next big thing, preserve their innovative phase perpetually.  A case in point is Vint Cerf, who decades ago was instrumental in defining the original Internet protocol is currently involved in the interplanetary internet, innovatively defining a future-proof data communications for a hostile and time-dilated environment.

An advocacy of structured sabbaticals for researchers is also encouraged in Jain and Triandis.  As the authors note, large corporations often preach that “people are their most important playing_in_the_windresource” yet are hesitant to absorb the costs associated with sabbatical leaves, even though it is widely recognized that researchers who can recharge their perspective and develop new skills are more valuable contributors.  Google famously encourages employees using 20% of their time on a side-project relevant to the business. Other businesses are taking a page from this playbook as well, integrating innovative time into the schedule.

In the absence of such programs in most companies, the rapid innovation cycle has brought an equivalent to the innovative class.  The more cyclic modern career trajectory means that role changes occur frequently, exposing one to more new projects, and as well to opportunities to explore engaging in start-up ventures. These transitions serve a similar function to the sabbatical concept – detaching from a corporate environment, and immersing oneself in a new idea or exciting experiment.

In both managing other people and our own career paths, we should think about the opportunities for fostering innovation and creativity, as well as giving contributors a path to recharge and stay current. Can we add some discontinuity? Can we employ sabbaticals?  Can we cycle the roles of highly-productive employees without jeopardizing their participation?

Planning an R&D Project – Eight Risks to Success

Launching an R&D project towards a successful outcome begins with structured planning. But how to plan the planning? Okay, that’s a little recursive and obtuse, but seriously, it does require some thought.

What are the characteristics of our project?  By the nature of our project being defined as R&D (as per previous posts on the topic) we already know that achieving a desirable outcome is uncertain.  Should we persevere and succeed, we solve a specific problem or address an opportunity.  Furthermore, we have a desire to achieve a commercially-viable application of what we learn from the project.

There are projects upon which one may wish to embark  that do not fit our criteria, but as previously discussed, those may be more accurately deemed pure “research” or  just incremental “development.”  Elements of this discussion may or may not apply in such situations.

The risks embodied in the uncertain nature of the R&D activity require special attention in the planning process.  These risks take many forms, such as:

  1. the path to a solution may follow false trails
  2. the team may achieve a false solution
  3. the attainment of a solution might not be recognized
  4. a solution may be impossible with current science and technology
  5. a solution may be impossible with the skills and knowledge available to the team
  6. a solution may be inaccessibly expensive for the team to achieve
  7. the team may achieve a competitively inferior solution
  8. the solution may be wrapped in difficult intellectual property ownership

These are diverse risks but with each comes remedial actions for which we can window_cleanersprepare at the planning stage, along with associated responses that can be applied as signs emerge that one of those pitfalls is emerging.
Let’s consider these risks in order.

False trails are a particular challenge. The probability of such an occurrence increases with lack of experience in the team or researcher.  The best management of this risk, beyond seeking a more experienced contributor, is through managing schedule, deliverables and communications.  By crafting a schedule that includes regular checkpoints along the way, warning signs can most easily be noted.  Of course, while we follow steps toward a goal which may be solution of an unknown form, it’s reasonable that the path to that destination may itself not be well articulated.  By investing effort in pre-project exploration with a directive to create a description of projects intermediate and likely-final goals, and as well to describe the characteristics of a solution in broad strokes, the risk of the finding the project on a false-trail is greatly reduced.  The plan can build on the pre-project work to raise the confidence in success, and to make mid-project deliverables more relevant.

False solutions are a plague which is perhaps the greatest risk.  Included in this risk, let’s consider also item 3 – the situation where attainment of a solution is not recognized.  Again, within the planning phase, care must be taken to gain sufficient knowledge of the path to, or towards, a solution and recognize what might be considered false positives and false negatives in our outcome.  Attention should be paid to having a conversation about the characteristics of a solution.  What tests can be done to anoint an outcome as a solution to the original problem?  Has the original problem/goal itself been clearly articulated. Remember that a problem definition and a solution definition are not the same thing.  Forgetting that significantly raises the probability of risks 2 and 3.

stackedWrenchesRisk items 4, 5 and 6 are similar in that they describe barriers to attaining a solution.  In market-centric R&D we often call these ‘barriers to entry.‘   These can, in some circumstances, be just as good friends later on as they are foes during the project.  Should we overcome these barriers with great effort, or if we should face an opportunity that we are, for one of these reasons, unable to crack, these barriers will be the obstacles that similarly hold back competitive forces. In the latter situation, where we fail to reach a solution, these barriers may ensure that our lack of a solution is compounded by a competitors who finds one and excludes us from the market.

Remedial action to avoid these three risks come with varying levels of difficulty.  Where scientific/technological impossibilities hold us back, the important element is being able to recognize the situation in a timely manner.  To further to articulate and capture the associated observations is important, because we might later recognize through the onward march of innovation that something previously impossible has been enabled, and the associated opportunities with it.

When required skills and knowledge are lacking in the team, recognizing this in the planning stage means that prompt acquisition of talent can remove that barrier.  Where the cost of a solution may be prohibitive, early recognition of that issue, means effort is best directed towards funding acquisition or partnerships as keys to launching a successful project.  I’ve seen projects launched without enough ‘runway’ to get an outcome off the ground. Resources dwindle and it is a demoralizing way to bring a project to an end.

Attaining a competitively inferior solution is a risk not uncommon in early-stage start-ups. A lack of awareness, often due to enthusiastic blindness, can be the result when unbridled excitement about a goal causes a launch of activity before a thorough analysis of the competitive space and proper preparation has been done.  Successful planning should involve a careful comparison of the characteristics of a solution against the broken_chaincurrent state-of-the-market.   Ensuring that eyes are directed broadly is important.  It’s not unheard-of that a solution to your opportunity in a particular market exists already, or perhaps even in some parallel market segment that you hadn’t considered.  Designing a fancy $50 spice grinder kitchen product becomes a failure when the market discovers a $2 stainless-steel woodworker’s rasp does the same thing.

Finally let’s consider the risks around intellectual property which adds complexity to innovation in our modern technology-rich world. If your desired goal is to find a solution in a crowded or high-profile market segment, be cognizant that critical elements of the technology may be well wrapped in patent protection. This need not preclude participation in the space, but it may require some careful planning.  Licensing may be necessary for elements of your solution.  Ownership of some facets of the solution by hostile competitors may make them inaccessible.  This is also good reason to explore protection of your intellectual property as it is developed as well.  Again – planning makes this manageable.  Schedule in a review or ‘harvesting’ of innovations that may be conceived or demonstrated at mid-points of the project.  Coach team members to keep notes on ideas, even if ancillary to the core project goals.  Often these may be forgotten as progress takes the path in another direction.

Similarly, at the conclusion of a project, I’ve had good results from spending a day or afternoon with R&D-team members and a patent lawyer to mine the outcomes for innovations suitable for patent protection.

Patents are valuable as protection for your competitive position, but often as revenue opportunities for your business as well. Not only through licensing or out-right sale, but often (in larger organizations) they contribute towards possible cross-licensing opportunities between competitors which may avoid an otherwise “wild west” of litigation in a crowded space.

This is a cursory look at some primary risks in R&D projects and how consideration at the early stage of a project can make them manageable as work progresses.

Planning, Motivation and Rewards in R&D

These three elements are important parts of R&D programs, regardless of whether a project phase is skewed more towards the “R” or the “D” side of the spectrum. Each topic can be treated independently with an entire book’s-worth of depth, and each will be the subject of future blog posts, but a cursory discussion here is prudent to examine how they interlink.

The base of literature that I’ve read in the R&D management field has a varied approach to these topics, but I’ve noted that rarely do they combine them to look at the interplay at a project outset. Planning a project is most often treated from a very structured date-and-milestone-setting perspective. Scheduled meetings, itemized rankings of on-target versus slipping,  red-flags, yellow flags, mid-point reviews of the plan are all the norm. That approach also feeds into the not-always-successful “project-manager-as-an-isolated-role” philosophy that has become common in the R&D management psyche in recent years.  Under generally applied PM theory, an individual, often with only cursory understanding of the subject under consideration, will track a list of deliverables against schedules and perform the associated data-capture and pestering behaviours to push a project forward and chart the progress. The result is a decoupling of conceiving and planning from tracking and oversight.calendar

In theory the project manager will filter the information from the front lines into charts for the program director. The motivation is that the director can direct a wider number of projects with a clear view of project status, gathered with low effort, from whence decisions can be made without all the messiness of interacting with the individual contributors to the project on a daily basis.

Where this falls apart is that often the project manager is neither a subject expert, nor holder of directing authority. The somewhat confrontational element to the PM role erects a barrier between team members and the PM office, and creates a less than positive dynamic. From the individual contributors perspective, the project manager has regular interactions asking

  1. where you are on these deliverables?
  2. are you still on track for your milestones?
  3. why aren’t you on track on some deliverables?
  4. I want you to work harder to meet this date

All these have the hallmarks of authority, judgement and control over the individual’s work, yet complexity in the “why” answers may often be lost on the project manager, due to lack of depth in the subject at hand.  This becomes apparent to both players quickly, causing defensiveness in the PM and frustration for the researcher/developer.

The interaction creates work-stress and loathing of the impending interaction where these questions will arise. These stressors possibly coupled with the interrogator having only cursory subject knowledge and a low-rank on the totem-pole of the meritocracy can result in conflict for an R&D team.

The on-going tracking of progress is important in managing an R&D program, but it is equally important that the management process be sensitive and dynamic in dealing with the uncertainties of the project. Indeed, the uncertain nature of R&D work should have contingency elements in the original plan. It’s a delicate balance for an R&D director to trade-off productivity-expectations in solving challenges and retain tolerance for dealing with uncertainty.

roadblockA counter-intuitive notion is that uncertainty, and road-blocks to progress, should be seen as positive elements in projects that ultimately hope to deliver commercial advantage. Each difficulty is a particular barrier to competition, a point at which a less-worthy adversary may be left behind, assuming your team is able to persevere and progress to a solution.

Thus we recognize that motivation during a project requires pre-planning that accommodates a suitable level of uncertainty. But also required is an ability in the manager to guide, discuss, and appreciate the challenges that arise. To make judgment calls about a difficulty that requires support and coaching, versus one that requires simply more committed effort from the researcher/developer.

As part of that, a manager needs to have a body of experience which enables the coaching and support that aids an individual through the challenge at hand. These are typically drawn from experience with subject-specific knowledge, but more generally a seasoned manager brings transferable techniques that can be independent of the current subject. A breadth of experience, and balance in applying directing and supporting behaviours are sometimes discussed in management theory. (This also forms the basis of techniques of “situational leadership.”)

friends handsNow this part is important – The strength and cohesion of a team is built on how these barrier-situations are handled. When they are managed through a collaborative process, by leaders with the right balance of authority and responsibility, successes that are achieved build a foundation for the organization on which strong future projects are built.

When directing behaviours without coaching/supporting behaviours are applied with a contributor who is facing unfamiliar territory, or worse, when schedule-centric behaviours decoupled from subject-matter knowledge or coaching ability are applied, foundations are eroded.

A strong planning tool is to ensure there are enough mid-project milestones to detect a project getting off-the-rails early, rather than having a surprise days before a long-term project is supposed to deliver results. From a motivation and reward, perspective, the director should similarly schedule check-points to test for enthusiasm and motivation so that encouragement and support (both moral and material) can de-risk a project in danger of fade-out.

In a future blog entry I’ll discuss the motivation factors around individual self-actualization, challenge and reward. There’s a big body of work on this topic (e.g. Redmond and Stephens in the refs) and I have some observations from a couple of decades in the trenches. These concepts are important in solidifying the experience of a well-led project into building blocks for future projects, rather than creating a sources of recurring weakness, like dry-rot in the frame of a house.