February 16, 2011
Written by Chris Pinter
There is a standing joke in the technology industry that if engineers are left to their own devices they will come up with ideas that have great marketing potential for a market size of one. This one person who loves the engineer’s idea is of course the engineer himself. The reason why this happens is because most technology professionals such as engineers, software developers and some entrepreneurs tend to focus on the technology and not on the market the technology is intended to serve.
Engineers get most of their ideas about new technology from chip manufacturers and other component supplies for their next great idea. They tend to talk to and gather information from their suppliers because generally speaking this is the only type of people they talk to outside of their own organization. In fact suppliers such as Texas Instruments, Microchip, Analog Devices and many other Integrated circuit (IC) manufactures encourage engineers to develop evaluation boards, development kits and white papers so that the manufactures do not need to develop these tools themselves. The IC manufacture will often promote a competition to encourage many developers to create development kits. The winner is often awarded an agreement to be a supplier of the development kit for the manufacture who will list it on their website and catalogue for resale. This type of agreement works well if you win the competition but bad if you do not. Still for small independent developers, looking for a part time income this is a rather low risk opportunity but this model does not translate well for larger business.
Engineers who want to consider a bigger market risk falling into the trap of the one man market if they rely on suppliers for marketing direction. A different mindset is required in order to avoid this trap. The customer’s needs should be the focus. Market research is the area of study we need to consider. Primary and secondary research can be done on the cheap or it can be done with lots of money depending on market knowledge and the amount and quality of communication with the target audience. The figure below shows a scale of potential success, given the level of commitment guaranteed from the target audience.
Cash is king! Getting a customer to pre-pay or provide investment will guarantee success. This is not always easy but really successful business people will make deals before developing or producing the technology; often with as little as a paper study. So it is not impossible to get a paying customer before development. Doing so provides the developer less financial risk and since the customer will critic the development as it progresses the end result will meet the needs of the customer. Of course, there are many other factors that need to be considered include, cash flow, competitive strategy, production, quality, as well as marketing and distribution channel development in order to grow the business beyond a single customer. However, these areas of business become less risky when the development and start up costs have been paid for.
So before you go and start to develop some gizmo, web or IPhone application make sure you have a customer who is funding the development. Talk to them often so you get constant feedback and make sure they remain interested in your technology throughout the nine to eighteen month develop phase so that your technology to be released to the market with success.