Guidance for Solo Inventors and Entrepreneurs Seeking to Commercialize a New Product

Most students of product development and product development professionals have at some point had an idea for a novel product. Often further thought results in a product concept, which sometimes embodies a patentable invention. A common misconception among inventors is that a raw idea or even a product concept is highly valuable. Here is some advice based on observations of many inventors and product commercialization efforts.

A nice framework for thinking about the question of whether or not to pursue commercialization is known as "Real, Win, Worth it?" or "RWW?" This framework poses three questions:

1. Is the product and market real?

There are lots of ways you might assess this question, but probably the simplest test is:

Do you have a working prototype of the product that a real customer is using consistently to address a real need?

If you don't have a working prototype, you can not typically extract any value from an invention. There is just too much hard work and uncertainty between an "idea" and a working prototype. Resolving that uncertainty, and doing the associated hard work, is what you would be rewarded for if you commercialized your product.

How to build a prototype?

Most people who ask this question, are asking the wrong question. They typically mean to ask "how do I design my product?" Building a prototype is something one does as part of the design process. It is not the same as designing the product. You need to have the skills to both design the product and to build prototypes. If you don't know how to design and build a prototype, you do not have the correct team to pursue this opportunity. You need someone on your team who can do this. Typically this will be professional product designer or engineer who is a partner in this enterprise. You typically can not afford to pay a design firm at rates ranging from $100-$300 per hour to do this work. (Of course, larger companies and well financed start-ups hire design firms all the time...I'm speaking here largely of individual inventors/students.)

Most successful innovators can display dozens of versions of prototypes of their inventions. The early ones are often made of cardboard, duct tape, PVC pipe, and other found objects. Early physical prototypes are good predictors of product success. If you're reading this and have not yet built a few prototypes, you're probably getting ahead of yourself.

2. Can you win in this market?

In order to be able to win, several conditions must hold:

You must have access to the customer.

How will you reach your target customer?

How will this person become aware of your product?

How will they buy it? How will you deliver it?

You must control the "complementary assets" for the product.

Someone recently invented an "undo" button for an elevator. If you press the wrong button, you press "undo" and the floor is de-selected. Cute idea. It is also highly unlikely that the inventor can extract any value from it. There are only a very small number of elevator manufacturers in the world, one would need them to adopt the invention to really get it into use. It is highly unlikely that one can get a strong patent for the basic idea of an undo button (a patent search would verify this guess), and so there would be nothing really for an elevator company to buy from an inventor, even if a licensing strategy were pursued. Ideally, your invention does not require anyone elses product (or other assets) in order for it to provide value to your customer.

You must be able to prevent others from doing the same thing as you are doing.

A variety of barriers can prevent others from doing what you are doing. They include: know how that is difficult to acquire, patents, and unique relationships.

You must be allowed to practice your invention (i.e., you must not infringe a patent).

Check out Google Patent and see if there are existing patents in effect that prevent you from practicing your invention. See the chaper on Patents in Product Design and Development (Ulrich and Eppinger) to understand the basic concepts of intellectual property and patents in product design. Please understand that just because a patent has been issued for something that looks something like your invention you are rarely actually blocked from practicing your invention. The action is in the claims, which are technically very precise descriptions of exactly what has been patented. (Read PD&D or Patent it Yourself to understand the details...not trivial, but not rocket science either.)

3. Is entry worth it?

These questions are worth answering:

How many customers could use this product?
How many customers are currently buying something similar?
How many units do existing companies sell in this product category?
How many units do the smaller competitors sell in this product category?
What is the average price point of similar products? What do you think your product can sell for?
How do similar products get to market? What are the margin requirements of the distribution channel (distributors, wholesalers, retailers)?
What do you estimate your gross profit margin can be for this product? (The price you get for the product when you sell it to the distributor/wholesaler/retailer less your cost of sourcing the product.)

Based on the answers to these questions, you should be able to estimate how many units you are likely to be able to sell if you entered the market with the appropriate resources applied to the project.

Using your estimate of the sales volume and your estimate of gross profit margin, you can estimate the gross profit you would expect to receive if you were successful in introducing the product.

If this gross profit is not at least USD100,000 per year and preferably well above USD 1 million, you probably shouldn't bother with this project. (Remember, this is the gross profit. You'll still have to pay for selling, general, and administrative expense to support the business.)

Come to think of it, you should probably ask the question "Worth it?" before you even address "Real?" and "Win?" If it's not worth it, go work on something that is.

License or Take it to Market?

The short answer is that you should forget about licensing. It almost never works. Just forget about it unless (1) you have a biotechnology/pharmaceutical invention, or (2) you have a materials or other very basic technological invention, usually out of a university. You might eventually license, but rarely without first taking your product to market.

If you are serious about your innovation, you have to be willing to take it to market. Usually this means coming up with enough cash to make the first 1000 units of the product (or so) and start selling them. Once you've started selling product, you can revisit the question of whether a partnership or licensing arrangement might make sense.

How do you make 1000 units?

This depends of course on the product category. However, typically you are going to find a manufacturer who will do this for you in exchange for your cash. You find such manufacturers by networking with people who make similar stuff and who might be willing to share their contacts. (I am very rarely willing to share my contacts because solo inventor/entrepreneurs are usually an annoyance to manufacturers and because good agents/suppliers are somewhat hard to find and therefore closely guarded secrets.)

Patents

A patent can be a useful element of a plan for developing and commercializing a product. However, it is not really a central element of that activity. Patenting an invention can wait until many of the technical and market risks have been addressed.

A patent by itself rarely has any commercial value. (An idea by itself has even less value.) To extract value from a product opportunity, an inventor must typically complete a product design, resolving the difficult trade-offs associated with addressing customer needs while minimizing production costs. Once this hard work is completed, a product design may have substantial value.

In most cases, pursuing a patent is not worth the effort except as part of a larger effort to take a product concept through to a substantial development milestone such as a working prototype. If the design is proven through prototyping and testing, a patent can be an important mechanism for increasing the value of this intellectual property.

Licensing a patent to a manufacturer as an individual inventor is very difficult. If you are serious about your product opportunity, be prepared to pursue commercialization of your product on your own or in partnership with a smaller company. Once you have demonstrated a market for the product, licensing to a larger entity becomes much more likely.

File a provisional patent application. For very little money, an individual using the guidelines in the chapter on Patents in Product Design and Development (Ulrich and Eppinger) or Patent It Yourself (Pressman) can file a provisional application. This action provides patent protection for a year, while you evaluate whether your idea is worth pursuing.

Fun Examples

Bug-a-Salt YouTube Video