Flipping Design to pump out $73M in royalties

R&D, not new product development is a lengthy effort in any companies growth. Typical large scale pharmaceutical and manufacturing firms have between a 10% and 13% investment of net revenue back in to R&D and a team of individuals who convert R&D into patented and legally defendable intellectual property securing these products positions in the creation of platforms and future products. And that’s exactly how Lonnie Johnson was able to create 73M in total royalties on his initial manufacturing partners revenues of almost 1B in revenue from his Super Soaker line. 

 

The Super Soaker Product Development Story follows the pattern of movie-esque arcs: a NASA engineer, 6yrs of prototype development and finally a manufacturer and marketing firm who (based on product design and mold costs) must have invested at least 2012 $300K in the creation of the 1st run, 1st item production models which went on to sell almost 1B in product sales. Johnson’s typical 2% royalties earned him $20M in royalties on Larami’s $1B in sales and a further 7.3% or $73M more in royalties after the acquistion of Super Soaker from Larami by Hasbro and clearly this is before legal fees. And all of this based on the idea of pumping air into a water vessel just as Lonnie pumped out of his design almost 100M in royalties from his design.

Pixar’s 22 rules for any company’s new products

Recently we were asked, as all firms are, “what makes a good product?” and classically it’s nemesis, “what does ‘good’ really mean? The fact remains, this does not apply to products – it applies to anything? Why not ask the same of “perfect” characters and then apply it to “perfect” products. Pixar’s model then sprang to mind and the rules almost “perfectly” applied. 

#1: You admire a character [product] for trying [designing] more than for their [the products] successes.  

#2: You gotta keep in mind what’s interesting to you as an audience [user], not what’s fun to do as a writer [designer]. They can be v. different.

#3: Trying for theme [grand design vision] is important, but you won’t see what the story [users full experiences with the product] is actually about til you’re at the end of it [the product life cycle]. Now rewrite [and redesign for the full product lifecycyle].

#4: Once upon a time there was ___ [product]. Every day, ___ [that product]. One day ___ [that product]. Because of that, ___ [the product]. Because of that, ___ [product]. Until finally ___ [the product was so loved that it was handed down from generation to generation]

#5: Simplify. Focus. Combine characters [functions where possible but not too much]. You’ll feel like you’re losing valuable stuff but it sets you free.

#6: What is your character [product] good at, comfortable with? Throw [design for] the polar opposite at them [to happen with the product]. Challenge them. How do they [the product] deal [with strange use-cases]?

#7: Come up with your ending [of how the product will break] before you figure out your middle [production]. Seriously. Endings [of a product life cycle] are hard, get yours working up front.

#8: Finish your story [design], let go even if it’s not perfect [when working with engineering and production]. In an ideal world you have both, but move on. Do better next time - [iterate for v2]

#9: When you’re stuck [in a products design], make a list of what WOULDN’T happen next [be the best part of the design to loose]. Lots of times the material [manufacturing & production possibilities] to get you unstuck will show up [if you keep talking to your engineering and production] team.

#10: Pull apart the stories [products] you like. What you like in them is a part of you [how you use the products]; you’ve got to recognize it before you can use it [or design it for others].

#11: Putting it on paper lets you start fixing it. If it stays in your head, a perfect idea [product or design], you’ll never share it with anyone.

#12: Discount the 1st thing that comes to mind. And the 2nd, 3rd, 4th, 5th – get the obvious out of the way. Surprise yourself.

#13: Give your characters [products] opinions [a strong visual statement]. Passive/malleable might seem likable to you as you write [design], but it’s poison to the audience [user as it makes for boring products].

#14: Why must you tell [make] THIS story [product]? What’s the belief [desire] burning within you that your story [product] feeds off of? That’s the heart of it [and why someone will buy it]

#15: If you were your character [user], in this situation, how would you feel [when you used & held the product]? Honesty lends credibility to unbelievable situations.

#16: What are the stakes? Give us reason to root for the character [product]. What happens if they [the product] don’t succeed? Stack the odds against [and design your way out of it failing.]

#17: No work [design] is ever wasted. If it’s not working, let go and move on - it’ll come back around to be useful later [or in another situation].

#18: You have to know yourself [and users who will use the product]: the difference between doing your best & fussing [over irrelevant details]. Story telling [designing] is testing, not refining.

#19: Coincidences to get characters into trouble are great; coincidences to get them out of it are cheating. – oddly there is no analog to this in product development

#20: Take the building blocks of a movie [product] you dislike. How would you rearrange [the exact components] into [a design of] what you DO like?

#21: You gotta identify with your situation/characters [products in the context of their use], you can’t just write [design] ‘cool’. What would make YOU act that way [want to be ‘cool’ with the product you are designing?

#22: What’s the essence of your story [product]? Most economical telling [production] of it? If you know that, you can [design, build and engineer] out from there.

                                

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The Birth of the Scanner (Low Cost & Portable) Culture

With the advent of pocket “supercomputers” like the iPhone and Android comes the shrinking of 3d scanning components and the ability for portable scanners to come of age. 

Licensed from the French Engineering team ManCTL architectures for image capture, motion sensing and gaming platforms combinne to form a portable system. Alternative technologies such as the Mu thermal imaging camera for the iPhone hits the price point of $300 on an almost $300K in croudsourced funding while one time Audrino sensor packs sell for $46 each ignoring the economies of scale associated with larger production runs.
In 2010 it was the advent of the Jawbone system and the 1st introduction of the wearables culture. Next came the Nike fuelband and Adidas sports system and finally the 1st of the augmented systems embedded into Google Glass. These platforms create the bedrock for tomorrows next generation synthetic systems.

Creative Dissonance & Design for “Growth Hacking”

Creativity is a destructive act regardless of necessity being the mother of invention because when “growth hacking” for eyeballs & users begins this can’t be done without competition entering. 

What happens when you’ve got the idea, but not the cash or the technology? What happens when you’ve got the technology but not the cash? What happens when you’ve just got the cash? Without the idea and when technology is the equivalent of keeping the lights / processors on, the model becomes the same as spare cycles in a machine shop. Only now the Machines are computers and spare CPU cycles cost no more if 1 CPU is running or 5 are running and in the end, it’s people costs.

In a recent article in the Los Angeles Times on the economics of the digital effects house, Digital Domain, who competed all the imagery for Enders Game, Digital Domain invested $17 million (in employees 3D design & rendering time) in exchange for a 37% equity stake in Enders Game producing $9.8M 1st day, $27M first weekend and $59.9M 1st month sales being released in 3,407 theaters. In comparison to the equivalent 2009 Star Trek movie released in 3849 theaters with a lifetime gross of $257M the possibility for 5yr shared revenue for Digital Domain could be in the realm of 92M gross on 17M invested or a 540% return. However a recent Wired Article on Enders Game and a similar article on Growth Hacking examines the outsourced model and the necessity for WOM (Word of Mouth) models – blogging, PR, banner adds, etc., as the new mechanism for product launches where the economics is in the Google’s and Facebook’s purview – traceable and convertible.
Models for Growth Hacking, work under the assumption that network topologies must be open and shareable: the Google, Facebook, Linked-In API etc., as the standard for NFC (near field communications) are still not completely open. More, examples such as:

1) Standing out
2) Doing Weird things
3) Have a story to tell

However again, all of these efforts assume a recognition of a group behavior that has a tangible benefit for the end user like the model employed by Digital Domain in the Enders Game economic model.

“Good” Disruptive Design (Diapers.com) vs. “Bad” Predatory Design (Amazon.com)

and here's how it's done. When firms and individuals with true disruptive designs, by definition, "a product or service designed for a new [non previously purchasing] set of customers" are ready to sell innovations they have created, free market economics dictates the sale goes to highest bidder. Unless of course other mechanisms, something every 1st year MBA student learns about, are used to effect pricing. Enter the cut-throat landscape via How Jeff Bezos Crushed Diapers.com So Amazon Could Buy Diapers.com and we see how in the post Google age, no longer are the innovators the creators of value, rather aggregates of opinion are.

Competitors who don't have enough users saying a product, service, innovation or disruptive design is worthy, purchase opinion makers, aggregate users who instantly communicate via the new digital news-makers: Google, Yahoo, Bing and now fully funded image based news marauders Cheezburger who recieved 30M from Andreesen Horowitz . Need 10,000 "news" intenret indexible articles talking about a product or service that is amazing, valuable, popular? Then use Bezos's Diapers Gambit via his purchase of Diapers.com or loose that revenue stream to Walmart, by not acquiring opinion. Bezos's actions however not the way disruptive design was intended to create economic benefit for end users.

Bezos's "design process" of the Diaper Gambit unfortunately is not based on Clay Christensen's 1995 coined term "Disruptive Design"
http://en.wikipedia.org/wiki/Disruptive_innovation nor the progenator of the word "innovation" Joseph Schumpeter who defined how to create economic value through creating "the new" in his 1908 economic text "Methodological Individualism"
http://en.wikipedia.org/wiki/Joseph_Schumpeter#Schumpeter_and_innovation also ignored by robotics engineer Joseph F. Engelberger who asserted that innovations require only three things: 1) A recognized need, 2) Competent people with relevant technology, and 3) Financial support. Bezos's Diaper Gambit focuses on when product design, company innocation or new product development design isn't enough, it's opinion (real or imagined) that determines outcome - something every innovator and design disruptor firm must not ignore: free market economics vs. free market predators.