How Great Ideas
Become a Great Product!

My Uncle Eddie used to develop products. One minute he'd be talking normally when a faraway look would come into his eyes. Next thing you'd know, he'd be muttering to himself, drawing on napkins (that went over well with my Aunt Hattie when they were her good linen napkins!) and making notes.

About a year later, more or less, he'd tell us he had a new patent and he'd start manufacturing something that would solve a problem. Uncle Eddie liked things clean, so the two inventions he made that I now remember were the butt-snuffer ashtray and improved kitty litter. (How's that for the high glamour life of an inventor?)

Very often, that's how you can get your great idea. Something annoys you and you figure there's got to be a better way. You think about it, hmmm, and by golly there IS a better way to solve that problem.

Now what?

Write it down. Sketch it. Get it clear in your mind because those initial moments of insight of HOW to solve the problem may be very productive.

Next, you need to think about all of the problems that this product can solve. Who needs it? What are they going to use it for? How much do they need it? What are they doing--if anything--to solve those problems right now? Is your solution clearly better than the current solution? Why? Will it cost less than the current solution? Could the companies making the current solution sell it for less and under price your new product? How many buyers are in this market?

Some of these questions you won't be able to answer entirely right now. It'll be difficult to figure out exactly what it's going to cost you to make your product until you get deeper into the process you need to have these questions in your mind as you go about investigating the potential for your product idea.

You might make a better mousetrap, but if it costs $10,000 for each unit, you're going to have a tough time selling them to anyone but the Government. The demand for a product may change as the price comes down. In the early days of computers, experts believed that the entire world need for computers could be met with 30 highly expensive machines. In 1998, Intel alone shipped $26.3 billion dollars worth of computer hardware components. The falling price of computers meant that people could use them for far more applications than if they cost over $1 million apiece.

Check out your competition. What are they offering? How much does it cost? How do they sell it? Are their customers happy? The worse they're doing, the better opportunity for you to succeed. But even if they're doing a good job, you might have a product that solves the problem better, costs less or has another advantage that will make customers want to buy it.

In order to find out whether you can make a profit with your product, you'll need to know who your potential customers are. That way, you can figure out how many of them there are and make reasonable estimates of how many you might be able to get as your customers.

Let's look at the process I use to estimate the size of a market. Let's say you've invented a dedicated computer module for controlling the electrical functions of a house: lights, fans, refrigerator, garage door opening, sprinkler system, etc. This device will allow you to connect into the internet so that you can tell what your house is doing at any time. More than that, you can tell your house what to do. Let's say that you can plug this product into any electrical outlet in the house and that it will then use your house's existing wiring system to control each of your appliances, controllers and communication devices.

What is the size of your potential market? It's anyone who lives in a living unit that has communications connections and house wiring. (We won't address industrial applications at this time but that's an additional market.) What's the size of the U.S. market? When I want to look at the forecast sales of an industry, I usually start with the U.S. Industry & Trade Outlook which is available over the Internet at http://www.ntis.gov/yellowbk/1nty752.htm . You can purchase the reports you want for each industry at @ $20 or you can buy the whole handbook through our affiliation with Books.com for $55.91. Or you can go to a library that has a copy of this book and do your research there.

In this case, though, I want to address the entire amount of housing stock available in the United States. The best information would be from the U.S. Department of the Census but the quality of that information can get skewed because of the amount of time since they did the last Census. You can find the Census information on the Internet at http://www.census.gov/ . Based on the 1995 American Housing Survey, which is good enough to show you whether or not you have a market, there were then 109,457,000 housing units in the United States in 1995. Approximately 97,693,000 were occupied as regular residences and 11,764,000 were vacant.

That's a start on the estimate. The market is huge! But will everyone who lives in a dwelling unit want to buy your product. No. Only a few will at first, the innovators. That's usually about 1% of the market. So you've got slightly less than 1 million homes that might buy your product in the near future before it becomes widely known and proved as a valuable piece of technology. Eventually, you can probably figure that up to 70% of the potential market will be interested in buying over the next 20 years.

Okay, assume that the average occupant of a dwelling unit will want to install one controller and 8 satellite modules. You need to now know how much it's going to cost to send they'll have to pay for the product. That means you've got to know approximately what it's going to cost you to make it. And that means you need to build a model.

If at all possible, build your own working model of the product. Usually, the first model you build won't look a lot like the product that you'll end up selling, but it will do the same job. Start with a list of what you're going to need to make it work and then go get it. Keep at it until you have something that works. Only rarely will you absolutely need someone else to make the first prototype. However, if you do, you'll want to find a professional who has experience making models for the industry that your product will be serving. You can find these professionals listed as engineers, designer, model makers and product developers. In the case of our imaginary intelligent house system, I would have to hire an electrical engineer to put it together because I don't have the necessary expertise.

Okay, it works but it's ugly. Now what? First, this is the time to start looking at whether you want to patent your product. In 1998, America's independent inventors filed 15% of the 256,666 applications sent to the Patent & Trademark offices. I suggest that you at least have a patent search run to find out if you've got any problems with another company that holds a patent for a similar design. You can get great information on the patent process from patent agent Don Moyer, http://www.donmoyer.com/ and also from the brand new Patent & Trademark Office's Independent Inventor's website at http://www.uspto.gov/web/offices/com/iip/index.htm.

Next, design your product so that it looks like something people will want to buy. Working models can have all sorts of exposed parts sticking out all over them but customers usually want to buy something that looks professionally made. You might start by building something that has room to hold the parts but only looks like the product you might sell without doing the job. Build prototypes until you've got something that looks right AND works well.

It's a good time to understand what this is going to cost to make and how much profit potential it has for you. To do that, you need to learn a number of things. First, decide on the size of the first production run you intend to make. What will it cost per unit? By costing out what has gone into your production model, you know what the parts cost when purchased in small quantities. Find out how much they'll cost when purchased in the quantities you are intending to make. Keep a close eye on price break points, too. Quite often, the parts for making 10,000 units will cost less in total than the parts for making 8,000 units. You need to know what the manufacturers will charge you to make or assemble your product, then how much it's going to cost to sell your products. You can estimate this by seeing what's going on in your industry, perhaps talking to manufacturers representatives who sell products to distributors and retailers that might carry your product. Trade associations and publications can also give you a feel for the normal in the industry, especially if you read the advertising sections, too. Finally, you need to know what the trade terms are in the industry. How long after your product is delivered can you expect to be paid? What are standard return policies? What kind of discounts will you give for quantity buys.

What will you be able to charge for the product? It's got to be more than it costs you to make and distribute the product or you won't be in business for long. The best way to be able to tell how much you can sell a product for is by test marketing it at various price points. Short of that, you can hire a marketing research firm to conduct a survey or focus group where the people participating get a chance to use the product or see it in use. They then respond with what they find good about it, what they find that's bad and how much they'd be willing to pay for its features. (There are a lot of things you can also test, but this gets right to the bottom line). Or you can do it yourself by interviewing potential customers. Only if you know that you can sell your product for enough to cover your costs and make a profit should you continue into production.

Once you're ready to put it into production, you'll probably need to hire a contract manufacturer who can make it for you, since it's expensive to buy equipment, lease space, train people and carry all of the additional effort that goes into having your own production facility. Later, if your sales justify it, you might want to have your own facility. Finding a manufacturer is relatively easy. Perhaps you already have connections in the industry. If not, you should be able to find a number of potential manufacturers by going to the Thomas Register at http://www.thomasregister.com/ which includes hundreds of thousands of listings for companies in North America.

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-Cynthia Nemeth-Johannes