Guerilla Product Development — Scaling to Selling
Over the last 15 years I have run a consultancy focused on product development in the Robotics and Consumer electronics industry. During this time I have had the honor of being involved in the product development cycle of literally 100s of products, and working with many talented people across the industry. I have seen things both amazing and horrifying. My friends in the industry have always asked me to share experiences through stories or process steps they can learn from to help make their product development cycle better. Recently, I started writing these steps down, and I have given my steps a name: Guerilla Product Development. The idea here is using unconventional methods to fight the war of product development, my own methods mostly, and not necessarily things you will find in a textbook.
You can find part 1 of this story here and part 2 of this story here.
Here is the outline again of all the steps. I covered steps 1 through 4 in the first article, steps 5 through 7 in the second one, and now I am going to cover the last steps, 8 through 10, in this final installment.
Guerilla Product Development
- Plan your Product Development — If you haven’t written down a set of requirements, and planned how to execute, you are doing it wrong.
- Market Fit First — Field of Dreams products rarely succeed — Do your market research, then build a product for that market.
- Domain Expertise — Do NOT build a product in a domain where you know nothing. You will be doomed to failure.
- Surround yourself with close associates + a team of mercenaries — You can’t be an expert on everything — hire experts who know the things you don’t. You need a team that gets along well and is willing to admit when they don’t know something — No room for big egos or narcissistic personalities.
- Iterate early and often — Failing repeatedly is the BEST option.
- MVP (Minimum Viable Product) — as quick as possible once you know market fit — and TEST it with actual customers.
- Strike problems fast — Eliminate any red-flag tech hurdles in the beginning.
- Design to Scale — Do not pick product components from hobbyist parts.
- Partner Early — with a Contract Manufacturer (CM) and your entire supply chain.
- Sell — your product before you finish making it.
THE PROCESS
When designing a product, you want it to be scalable, meaning that you can confidently manufacture it in volume with high quality end-results. In this article, I am going to explain how this is a huge undertaking, no matter what you’re building. Most people who have either never done it before, have had limited experiences from one aspect of the cycle, or have a hard time visualizing how things get manufactured and made. I have encountered so many people these days who are launching businesses where they’re going to manufacture a product when they have perhaps never set foot in a modern factory and realistically have no idea what the steps are that a modern factory uses. It is essentially impossible to have a well designed product without the knowledge of how products are built or how factories do their thing.
Designing products to be easily manufactured is challenging and I would say that the biggest part that comes into play is typically a garbage-in/garbage-out problem. If you have a terrible design for your product that’s difficult to put together or build, you’re going to have a horrible end product. If the components that you’re using to build your product are of low quality, or you don’t have good quality control on the incoming side to determine if it’s made out of good components, again, garbage-in/garbage-out. You will pay later in customer returns, complaints, and reduced sales. If you have not thought through the process of how somebody would actually put your product together or how they would test your product, you are setting yourself up for disaster. These are all things that you need to be contemplating well in advance to the time that the product design actually arrives at a factory and you’re ready to set up an assembly line to build it.
I remember in elementary school, there was a lesson on the topic of process construction. I think I was in 2nd or 3rd grade. The exercise was “How to make a peanut butter and jelly sandwich”. The goal was to write down the steps to make a sandwich and then the teacher would attempt to actually make one in front of the class using your instructions. The teacher brought in all the component parts: bread, peanut butter, jelly…etc. and each child in the class would hand over their carefully prepared, written instructions to her, and she would read them aloud and follow them. Frequently the whole jar of peanut butter would end up on the bread, or it would be assembled backwards with the ingredients on the outside of the sandwich in a heaping mess. It was a fun exercise, with lots of laughs, and a great learning experience in process building. Designing products to be made in factories constantly reminds me of this experience from childhood.
There are a lot of good books that are out there that are fun to read, that can give you a hint on process automation or building better processes for factories or other things. One of my favorite books in that area is a book called, “The Goal” by Eliyahu M. Goldratt.
It’s a fantastic book because it’s a novel about a guy that is optimizing a factory and how he manages to not destroy his marriage in the process. It’s a story about process optimization, and helping to take an aging factory and getting it to make money, written in the form of a novel. The writing style makes it an exciting read. I remember the first time I ever read this book, I was on a vacation in Las Vegas sitting by the pool and being completely unable to put it down. I think I plowed through it in like a day and a half. It’s a fantastic book and I highly recommend it to anyone interested in business process optimization.
Remembering to think about how your product will be made lends important insights into being able to accomplish these last three steps in the process, because when you’re thinking about designing to scale, you’re thinking about being able to work with a contract manufacturer that you’ve picked and vetted.
Design to Scale
First impressions are always telling. When someone has a meeting with me for the first time, I can usually tell quickly if they have built a volume product before, whether they have just seen part of the process or the whole process, if they have designed things that can be manufactured, and are the products made of parts that can be obtained in high volume quantities. You can build a prototype out of prototype parts, but you need a well thought out path to get from the prototype parts to manufacturing.
There are many DIY electronics/hacker, maker-space product producers out there like SparkFun Electronics and ADAFruit Industries. These companies specialize in making prototype boards that are easy to work with for trying things out. There are literally millions of development boards out there that can be put together for proving a concept or hacking together something quickly. They have recently made their way into pop culture with social media personalities who have taken DIY gizmo making an art form. They are inspiring youth to pursue careers in engineering and science which I’m all for. Take for example, Mark Rober. If you don’t know who he is, he is a famous YouTuber who is best known for his “glitter bombs” that surprise unsuspecting package thieves. He is a genius at showing how fun it is to invent things on your own and use them to inspire engineering. You can find his YouTube channel here to see what I am talking about.
Invention and Proof of Concept is step 1 of the journey to build a product that you can manufacture in large quantities. There will come a point where you need to cross over from hobbyist DIY parts to components that are found in mainstream commercial products. To really design to run at scale you need 3 items to be in place to make it work:
- Low Cost Components
- Design to be Tested at Scale
- Determining where in the lifecycle of your products your parts live
Low Cost Components:
If you didn’t know this, the inside of toys are the most cost sensitive products in the world. Margins need to be very high to be a successful toy maker, meaning the parts inside need to be inexpensive. It is not uncommon to count every penny that you spend on the inside when building toys.
People come to me and ask to optimize their Bill of Materials (BOM). In doing so, we take a look at their BOM and give feedback. For example, we might be able to help you save 10 cents on materials, but it will cost you $50k in engineering expertise, so sometimes this question is met with a raised eyebrow. Another example might be that you are shipping a product with a million annual unit volume, you have just spent $50k to save $100k in materials, maybe that skepticism then goes away. I like to call it a “penny shaving exercise” in toy design. You have to think this way when building products for high volume.
Unique semiconductor vendors like General Plus, Sonix, and Nuvoton dominate the toy market because of lower prices, and specialized silicon. It took electronics companies years to convince greeting card companies, such as Hallmark who sell 50 million talking/singing cards a year, that cards that could play tunes, or speak, were worth it and sellable. I think the original attitude was, “nobody is going to pay $5 for a greeting card that makes noise”. Nowadays, these kinds of products are essential revenue generators in the greeting card industry. The profit margin in these cards is enormous, in a card like this the electronics and battery is costing less than 50 cents to make. You don’t need to think like a greeting card manufacturer when making a product with electronics in it, but it’s helpful nonetheless to contemplate how your electronics BOM cost can fit within the total budget of your overall product value.
When you think about the target market and understand the cost sensitivity, you should make sure that you have enough margins to support the Bill of Materials (BOM). There are lots of first time product makers who don’t fully understand this and they don’t have enough margin to make a profitable company. In the toy market, you need at least a 50% margin for yourself and 50% margin for retailers at a minimum. Therefore, your finished product has to be built and in the box at ¼ of retail price to be successful. Many low cost product or toy makers don’t do this and are not profitable.
Lesson Learned: It’s a trade-off between a low cost engineering budget and a shippable low-cost BOM. You could be fine by guessing but, most likely you will not. Do a little market research to figure out which features matter, and the BOM cost impact of each. Unnecessary features are usually the culprit of jacked-up BOM costs, and can kill a product introduction.
Design to be Tested at Scale:
We get a lot of customers that come to us with a prototype that is made of hobby parts that they want to turn into a production product. When this happens, we need to figure out how we can eliminate the hobby parts at a reasonable cost. Frequently this causes customer friction because it’s hard to explain to someone sometimes their product is hard to make. Just because you make 10 doesn’t mean you can make 10,000.
Once you have an early design, you want to be thinking about how the product will be assembled and tested. You need a high level test plan on how it will be tested in an assembly line arrangement. Products that are made in the US need to heavily rely on automation to be manufacturable at a low cost. When you think about putting the product together, make sure that you know how much labor is involved in assembling a unit. For example, if it takes 30 mins of labor to produce a single unit, your labor cost will drive too much into the overall cost of making the product. One common mistake is assuming that the cost of a product equals the cost of the bill of materials and packaging, which is NOT TRUE. You are forgetting to add in labor cost and the logistics of where it needs to go. Forgetting these items can sink a product just as easily as the bill of materials and the supply chain can. This is why many factories are located in countries with a low cost labor force. This is a Macroeconomic problem and global political discussion overall, and could be a source of a whole other article, and I would rather stay focused here on product design and building, than to have a discussion about global world politics.
One way you can try out your ease of assembly and test of your product is to build a few, and when doing so time how easy it is to put together. Then, build your own set of “McDonalds Instructions” for assembly.
You can do this by thinking about the kids peanut butter and jelly sandwich construction example mentioned at the start. Document each step of the process as you are putting it together. If you have never been on a factory assembly line, ultimately each step in the process is documented pictorially to show what step they are on at each station. This is the most common methodology for assembly line building.
Here is a picture from a SodaStream factory in Israel. Notice the pictures of the assembly steps hanging on the bar at the station they are working at.
Determine Where in the Lifecycle Your Components Live:
As I mentioned before, online sources of DIY components can be a great place to start when building a prototype, but many have chips on them that come from a unique source or a source that sells excess parts from someone else’s production. There are also many electronic recyclers who take leftover parts and resell them at a deep discount, so it is often difficult to tell what the actual price for the real part might be. For example, I have seen some start-up’s with a product prototype where they have been obtaining LCD screens from a hobbyist site. Because it’s from a “hobbyist” site, it is common that the screen is a “leftover” screen from someone else’s production that fits into only that one product. Once all these leftovers are sold at a deep discount, it’s very unlikely you’ll be able to acquire more at a reasonable price in the future. The problem is that because that screen is so specific to that one product, you need to be careful that you don’t choose one that is discontinued. Another example is the PlayStation Portable display screens: they are custom made for that product, so you can’t buy those screens anymore. If you are going to buy a screen, you want to be sure that you use a reputable screen manufacturer, find out the lifecycle of the product, and that the part is not near its end of life. The same goes with semiconductors. Most consumer grade semiconductors have a short life span, like a couple of years, and then they are not made anymore by the manufacturer.
For electronic components there are 3 main different grades: Commercial, Automotive, Industrial. Parts are marked that way because of the temperature conditions or life cycle of the product. Automotive parts and industrial parts usually have the longest lifespan, with a minimum of 7 years. As a result, when purchasing those parts, you pay a premium for those parts because of their long lifespan. Make sure to consider the life-span and temperature rating of your parts when selecting them, or you might be signing up for problems later down the road.
Lesson Learned: If you take away anything from this section, remember: do not use a hobby part for your final product and fully vet where the parts are coming from as well as where they are in the life cycle because you want to make sure the part you design is not near the end of its lifespan. Make sure that the parts are not marked “NRFD” (not recommended for new designs, which are marked on products right before their EOL (end of life)). Luckily, most reputable semiconductor brands warn you.
Partner with a Contract Manufacturer (CM) Early:
You have a choice when you are going to build a product: build it yourself or outsource to a contract manufacturer that is a professional. Chances are good that you don’t know how to run a factory that is efficient, has an economy of scale, and with high output quality. You don’t want to have to learn how to build a factory and a product. I am highly biased towards using a CM. By doing so, you will take advantage of the economies of scale that CMs have in place: better deals on parts, labor, and specialized equipment. Design a product, don’t decide that you want to design a factory too.
You might have a good idea about how your product will be put together, but you might be surprised at how much experience is out there in the factories where these products are made. Depending on where you are in your product development cycle, you might need a CM sooner than later. If you are a US based company building less than 5000 pieces annually, it makes the most sense to build domestically. On the other hand, when building 5000+, it makes the most sense to outsource to another country. Typically companies outsource to countries such as China, Taiwan, Japan, Malaysia, India, Mexico, and the Philippines. Some customers might pick a factory in China for the long term, but use a local factory in the US when manufacturing small validation products. Some companies run a local factory in Silicon Valley and go through the early engineering there and then they transfer to Asia once the assembly process is fully vetted.
Yeah I know I promised I would avoid talking about geopolitics, but uncertainty in the geo-political scene and the pandemic have caused some US product makers to move their factories from Asia back to the US. This is evidenced by this recent move by Peloton to build a $400 million factory in Ohio, instead of building their fitness machines in Asia. This is a huge deal to be pulling out of Asia. This could also mean that the traditional CM model of prototype in the US and then manufacturing in China may be changing. At OLogic, we have worked with some fantastic Chinese manufacturing companies over the years and have made some amazing products with their incredible expertise.
Lesson Learned: The main takeaway here is that partnering with a CM early, will allow you to resolve all the manufacturing related issues early on, so you won’t get stuck designing something that can’t be built. And where you can integrate their manufacturing and testing expertise into your product design.
Sell your Product
When it comes to selling, a really good salesperson can easily sell things that don’t exist yet to others. Engineers tend to have a difficult time selling things that don’t exist yet because it goes against their engineering sensibilities. So, wouldn’t it be nice if there was a way that you could take an idea or a concept, and come up with a really great way to visualize what that idea is, and then imagine it to be true in a way where you could turn around and sell that imagined thing to somebody else?
It is an ironic concept and makes me think of this book that was written back in the 2000s called “The Secret” by Rhonda Byrne. It’s about the whole idea of the power of positive thinking, and thinking about if I could just imagine it would be true then it actually will become true.
How do you get yourself to a point of believing? Start make-believing. Be like a child and make-believe. Act as if you have it already. As you make-believe, you will begin to believe you have received.
— Rhonda Byrne, The Secret (2006)
It is a kind of magical thinking. But the reality here is that if you can visualize it in a way where people think that the product is real and done, you can actually sell it and collect pre-sales on that thing. Before you do this, you want to really test the market as to whether or not there’s a demand for your product.
A lot of companies do this through Kickstarter or Indiegogo campaigns where they will make a minimum viable product and a working prototype and presell it there. It may not do everything that they promised it would do, but they will turn around and show a video of what it would be like in the world to have this thing for real. Then they use that to pre-sell the thing that they’re ultimately going to finish building, then they turn around and deliver on the dream that they sold to everybody. All through pre-selling. There are a number of amazing electronic products that we’ve worked on over the years where they pre sold it and had amazing presale success before they actually finished making the product. On the other hand, there have also been some horror stories of products that have been pre-sold. This is where the maker of the product was not able to execute on the actual plan to build it. And as a result, ended up with the company going broke or whatever, absconding with people’s money and not being able to deliver what they pre-sold to customers.
As a result of broken promises like this, now sites like Kickstarter for example, place heavy restrictions on hardware related products on their website. The problem of people pre-selling hardware products which never get finished, or where they struggle to mass produce it and run into huge problems, means they fail to deliver on their promise to deliver a unique product to the customer.
A fantastic example of a Kickstarter success, that ultimately turned out okay in the end, but was a huge, hugely difficult thing to do, was when the Pebble Watch was put on Kickstarter. I think they pre sold around 50,000 watches in their Kickstarter campaign, but then they really struggled to figure out how to deliver them. 50,000 pieces of anything is a huge number. There was a significant struggle to deliver it in the timeframe that it was originally promised, which angered a lot of people and really brought a lot of the spotlight to these hardware projects on Kickstarter. Ultimately they did deliver, and for a while Pebble was a huge success…until Apple decided to enter the smart-watch market.
On the other hand, one of the worst campaigns to ever go on Kickstarter was when Central Standard Timing promised to have the “world’s thinnest watch”. They ended up raising more than $1 million and had over 7,600 backers on the platform. Unfortunately for them, there were many delays because the company struggled to find the technology that would turn that watch from a dream to a reality. After this delay, they ended up staying silent until 2015, when they admitted their mistake and explained how they parted ways with their manufacturer. They also ended up filing for bankruptcy. This is a prime example of a company who was in way over their head because they did not do the research and didn’t partner with a CM early enough when trying to sell their product.
You can still sell those types of items on Kickstarter but they implemented a new rule where you can’t just show pretty renderings and videos, you have to show actual working prototypes that are close to being production ready. Then, obviously there’s the old Silicon Valley motto, “fake it till you make it”. The big problem that comes up when people attempt this is, how they execute on this in a way where they are not committing fraud. Where one is walking a fine line between the product being almost ready for production and ready to sell, but then not being ready to deliver it the moment that they actually start selling it. The more pre-sales that you can collect on a product that you’re building, the more traction that you can show with investors. This leads to more ways that you can gain the financing that you need to maybe produce a good solid long term production business that you can deliver on. It is a critical part of the overall cycle that as soon as you have a minimum viable product, you need to be working on a plan for how you are going to engage potential customers to sell the product to them before it’s produce. This step is critical, because you may receive feedback during those early sales engagements that allow you to improve the product and make it better and more capable.
I think an important point about this idea of selling your product before you finish making it is to not cross the line of setting customer expectations you can never meet. Selling a dream is one thing, but blowing it up into something with an unrealistic expectation will result in a betrayal of customer trust. The most famous Silicon Valley example of this is Elizabeth Holmes, and her company Theranos. She created a terrific product vision of something the world wanted, and needed, but as reality set in about her ability to deliver in the vision she resorted to committing fraud. She is the most extreme example of “fake it till you make it”, with the most extreme outcome.
Lesson Learned: Do lots of market research as to what your customers want to buy. Pre-sell your product, but don’t over promise and under-deliver. There is a good balance to be had where you can get potential customers excited about your forthcoming product, and setting their expectations on when it should be available.
Conclusions
This is the final segment to my 10 steps of Guerrilla Product Development trilogy. I have covered all of the steps. From planning your product, finding your market fit, building domain expertise and bringing in experts that are specialists in the domain; surrounding yourself with close associates and mercenaries from the outside who know what they’re doing; iterating early and often; getting an MVP built quickly — as soon as you know your market fit; followed by striking problems fast; designing to scale; partnering with a contract manufacturer early; and finally, selling it before you finish making it.
Included were examples of all of the various steps and how that could be useful. I think it’s important when you think about the entire product development cycle, how you go from the start to finish, and to be contemplating all these things as you go. I know it’s not simple to go from the napkin sketch to the shelf at the Apple Store, but maybe hopefully some of the nuggets that I’ve outlined in all these experiences would be helpful to others in their product development, and it would be useful knowledge.
When I think about product development, I draw parallels between it and mountaineering. Just because you can climb to the summit of a tall mountain, doesn’t mean you can climb back down alive. The descent is almost more perilous than the ascent. Tasks like this cannot be accomplished alone, or without experienced guides or teachers, and these things cannot be accomplished through brute force. Doing it correctly is almost an art form.
“Climbing is more of an art than a sport. It’s the aesthetics of a mountain that compels me. The line of a route, the style of ascent. It is creative.” — Reinhold Messner
To me, product development is like mountain climbing in this way.
This concludes my series on Guerilla Product Development. It is my chronicle of my experience of how I do product development. Hopefully you have learned something you did not know, and it will help you on your product development journey on a new product you want to build.
In case you just showed up and read this, Part 1 of this story is here: Guerilla Product Development — A new approach to produce development stages
About the Author
Ted Larson is the CEO of OLogic, Silicon Valley’s premier robotics and consumer electronics consultancy. Ted is a Software/Hardware Geek with 25+ yrs. of experience designing, and building consumer and robotic products. His current interest areas are robotics, artificial intelligence, and embedded systems in consumer electronic devices.
