The Online Inventor -- September, 1999

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THE ONLINE INVENTOR -- September, 1999

(c) 1999 Market Launchers, Inc.

http://www.marketlaunchers.com

Publisher: Paul Niemann

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PUBLISHER'S NOTES:

We've added a new feature to our web site, called the "Invention Tip of the Week." Since the process of inventing and commercializing your invention is more of an art than a science, the tips found on this page will benefit novice inventors as well as experienced inventors. There's a new invention tip each week.

As a reminder, the "New Product Search of the New Millennium" continues from now through December 31, and inventors whose products are selected will receive a $5,000 -- $10,000 signing bonus with a licensing agreement AND ongoing royalties from the sales of the product. For all the details, go to: http://www.marketlaunchers.com/search.html and be sure to tell your inventor friends and colleagues about it. For your inventor friends who do not have Internet access, you might want to print out the form for them and have them mail it to us (along with pictures of their products).

Since the desired end result of inventing is to reach a licensing agreement with a company to manufacture and sell your product, our first article provides some valuable insight into the world of strategic partnering. This article provides a good insight into the ways that companies sometimes operate when making decisions regarding the licensing-in of new products from outside inventors.

Many of our readers have submitted their new products to us in the Think Tek New Product Search. Two of them, though, really made a big FIRST impression, and stood out from the rest. It wasn't because either of these two products was any better than all the others; they weren't. What impressed me about them was the fact that they were both submitted as a professional-looking presentation -- on professional-looking letterhead -- rather than just filling in the blanks on the form like everyone else did. They wanted to
differentiate themselves, and they did. They included a cover letter / introduction, description, pictures, market data (such as who the product is intended for and the type of retail stores that would be likely to carry it) and enough details about their products to allow them to be easily evaluated. Each was presented in an organized, easy-to-follow format.

Neither of these presentations were perfect, but they didn't need to be. They created a good first impression, and made the reader WANT to read them, because they looked like they might be something special. The old adage about first impressions being lasting impressions often rings true.

By the way, if you submit your invention(s) to us for the New Product Search, you don't need to write up a business plan -- we (along with Think Tek) are aggressively looking for new products, so we're more concerned about what the product IS and what it DOES than how it looks on paper. There are two points
worth making, though, when you're looking for a prospective licensee or for investors:

1. Writing a well thought-out business plan forces you to think through the business end of the inventing process.

2. It is important to have a professional-looking presentation when you pitch your product to prospective licensees or prospective investors. A professional-looking presentation makes you look like a true professional and may be the difference between whether or not your product gets a fair shake from the people who evaluate it.

Don't rely on luck on the road to success. Prepare yourself and your business well. And remember, luck is where preparation and opportunity meet.

Finally, this issue marks our one-year anniversary. Thanks for your feedback over the past 12 months -- your comments have helped make this newsletter what it is today, and the number of readers has continually increased.

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In this issue:

Article # 1: "Strategic Partnering," by Harold A. Meyer, III

Article # 2: "Overcoming the "Inventor Paradox," by Dr. Doug Brown of Professional Market Systems, Inc.

Article # 3: "10 Hot Trends to Look at for Coming up with a New Product Idea," by Ken Tarlow of America Invents

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Article # 1: "Strategic Partnering," by Harold A. Meyer, III

Win Win:

Strategic partnering is a technique for teaming up with one or more companies which have complementary resources to achieve a mutual business objective. Strategic partnering is done by some of the biggest national and international corporations, yet is very useful for smaller entities as well. Strategic partnering can be very helpful for inventor organizations which may have valuable and negotiable intellectual property but may lack capital, R&D facilities, manufacturing and distribution capabilities.

Without these vital resources and means to put a product on the shelf, the value of intellectual property is greatly diminished. Whereas straight licensing of intellectual property may involve simply signing over or assigning patent rights, strategic partnering usually includes direct involvement of the innovating company in the venture, and may have definite advantages over licensing.

Top entrepreneurs have remarked that sheer happenstance of geography or other factors often plays a key role in the establishment of alliances. Often companies that at first glance might appear to be the logical partner will turn a cold shoulder to new products. Licensing technology to "the logical manufacturer" may not be an option and often fails due to corporate ego, timid salaried company underlings and other reasons. Probably the biggest reason is due to fear of undercutting existing product lines. But what these staid company men don't realize is that if they do not innovate, someone else will, and they will eventually lose more market share by not staying fresh.

Bottom-Up vs. Top-Down Product Development:

Rather than upgrading with the available technology, some corporations often try to force the customers to buy what they (the corporations) want them to buy, a recipe for disaster. This dictatorship to the customers may be a fact for a while, as in the former Soviet Union where that was a period of little choice for consumers, or in the early years at the Ford Motor Company when all you could get was a black colored car -- but consider what happens to top-down implementation. It never works. The Soviet Union collapsed not through war, but because nobody had toilet paper. Russia now has a growing, albeit spastic, free market -- and cars come in every color of the rainbow from a wide variety of manufacturers.

Despite massive failures like "New" Coca-Cola, top down dictatorship to customers is a perennial favorite. IBM, for example, delayed its entrance into MANY key emerging computer markets such as the PC and the mini computer for fear of hurting its cash cow mainframe business. Of course, this ultimately cost IBM dearly and they lost BIG money to competitors with market driven motivation. Using strategic partnering techniques, blinders, obstacles and commitments to old technologies can be reduced. In strategic partnership, a partner or joint licensee is much less likely or able to "shelf" a product by licensing (and then mothballing or burying) promising new technology for fear of undermining existing product lines.

Commitment and reality is forced on the team by the partner with 20/20 vision and no conflicts of interest. Of course, a firm agreement helps to assure that each partner lives up to their end of the deal.

With the disadvantage of large corporate egos and protectionist attitudes at some of the biggest companies, it may be wiser to seek out companies a few rungs down the market share ladder and ask them if they'd like to take a shot at the #1 market position. It may make more sense to court an aggressive, adaptable and up-and-coming company that is looking to make a mark, rather than the stodgy and indifferent standard bearer.

Executive Access:

Keep in mind at all times that the single most important factor for successful strategic partnering is unquestionably: EXECUTIVE ACCESS. These people make the decision. If it comes from an underling there may be ego problems in getting it approved. Also, employees further down the corporate food chain frequently have very little incentives themselves to recommend a deal for approval, and may even have large DISincentives to undertake vital risk. They are frequently more concerned with their pay raise, coffee break, office romance and especially, with NOT making a mistake. If you try to do a deal with a lower manager, you will inevitably witness a dysfunctional situation of excuses why the product doesn't fit with the company's objectives. The plain fact is that at the level of management approached, ANY transaction is turned down. So go where you are wanted. Top executives or owners are generally much more concerned with bringing together necessary new partnerships and with putting out essential new products and services.

The Stick Works Better Than The Carrot:

If one can convince a company that the technology fits with theirs, large companies like Westinghouse have spent and will spend up to hundreds of millions of dollars (or more) to participate in new ventures. In these strategic partnerships, the largest single benefit may be to drastically shorten the product development cycle.

Strategic partners often offer the expertise to shorten the learning curve. Business professors counsel their students on the importance of being "first" in a market -- be first, be first, be first -- or risk losing the race. The quicker you get to market, the more market share you can get and the easier it is to stay ahead. A potential loss of market share is more persuasive to most companies than a new opportunity.

Clear Understandings:

Strategic partners often have the necessary capital, credibility, distribution, infrastructure, marketing, public relations and R&D facilities. Certain steps and actions maximize efficiency and return. Again, it cannot be overemphasized: seek out the top executive decision makers. This can be done as easily as with a "cold" letter.

Take control of the situation and have your lawyers write the first draft of any agreement, mutual understanding or letter of intent. Make sure to carefully list each participant's responsibilities, as simple to do as making two written columns, one headed, "IBM's Responsibilities" and the other entitled, "Microsoft's Responsibilities." Up front payments typically only account for 5 -- 20% of the deal, so realistic milestones for payment and reasoned exit strategies should be outlined.

A thorough and detailed written agreement made with the assistance of competent corporate counsel is essential. Of course, the best agreement is the one that's forgotten about because it never needs to be enforced, but real world demands almost always cause revisions and amendments. The more contingencies and situations initially addressed, the less problems that will crop up later. Some issues that are important to consider include: non-warranties of technology, indemnifications, non-soliciting and non-hiring of employees, potential conflicts of interest, patent royalties from cross-licensing and non-compete covenants restricting the partnership as the exclusive vehicle for the individual parties to conduct their business. These are but a few of the many issues which need to be formally addressed for the proper functioning of a successful strategic alliance.

The Green Stuff:

With the right product, a good partner and a thorough agreement, strategic partnering can offer unmatched market penetration -- and can make money for the participants.

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This article originally appeared in Inventors' Digest magazine Sept./ Oct. 1996, but the information is as timely today as it was in 1996.

� 1996 by the author

Harold A. Meyer, III, 36, is Chairman of The Hook Appropriate Technology, a performance based patent broker (http://www.thehooktek.com). Meyer is also past President of the non-profit inventors group, The Innovators Guild.

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Article # 2: Overcoming the "Inventor Paradox," by Dr. Doug Brown

Your enthusiasm and confidence in your idea: your strength.
Your enthusiasm and confidence in your idea: your weakness.

Inventors want to be successful with their ideas. Successful inventors I've known share a common characteristic: overwhelming confidence in their invention. This characteristic is a strength but, beware! -- it can also be a weakness.

Many inventors assume that potential customers will endorse their product as enthusiastically as they do. Unfortunately, this is often an erroneous assumption and one that can be costly to the inventor's mental and economic well-being. This inventor duality -- which is a necessary strength and an unnecessary weakness -- is what I call the Inventor Paradox. To resolve this paradox, inventors need to balance the championing of their ideas with the understanding of the value of customer focus.

Inventors must maintain their essential optimism and confidence and carry the torch for their ideas, while eliminating the idea that production creates its own demand. A product or service will not sell itself. Those who produce a product with little or no regard for marketing and seeing the product through the eyes of potential customers are forgetting an important key ingredient to success: customer focus. This lack of customer focus is self-defeating and must be wiped clean from the minds of inventors (and, incidentally, from the minds of many who develop products in large organizations). In today's world, you can't achieve your goals without first satisfying the needs of customers. Marketing must be part of the new product development process before the product is designed, not after it is produced!

I was reminded of the Inventor Paradox not long ago when I received a call from a frustrated inventor who was convinced that he had a better new product. You remember the old saying that if you can build a better mousetrap, the world will beat a path to your door. It is no small coincidence that this inventor actually had what he believed was a "better mousetrap." It was an elongated tubular device that the mouse entered at one end to be trapped inside, with no way to escape. In contrast to the conventional little spring-loaded trap that millions of mice-hating customers have purchased for years, this device only traps the mouse but does not kill it. The mouse can then be disposed of outside. What could be a better mousetrap?

The inventor had spent upwards of $200,000 on development and tried selling the mousetrap for several years. By the time he contacted me, he had sold only a few hundred and had a warehouse full of "better" mousetraps. He asked me where he'd gone wrong? This is the inventor paradox: he had aggressively
championed his "better" mousetrap with no success because he lacked marketing and customer focus. Customers may be looking for a better solution to mouse problems, but not necessarily for a better mousetrap. A better solution may be an edible poison food product, an exterminating service, or larger and cheaper spring-loaded traps. This inventor also had marketing problems in his packaging, pricing, and promotion.

Overcoming the inventor paradox greatly increases the probability of success because it changes the focus from the product to the customer. Successful inventors learn what customers need, want, and desire, and they create products that fill these needs and can be marketed at the right price.

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Dr. Doug Brown is President of Professional Market Systems, Inc., a New Product Development firm. He can be reached at (800) 805-2714 or P.O. Box 34022, Omaha, NE 68134. He offers full services to help you get your product to market successfully.

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Article # 3: "10 Hot Trends to Look at for Coming up with a New Product Idea," by Ken Tarlow of America Invents

1.    THE AGING OF THE POPULATION:

Think about products that appeal to an older age group. The average age of
people in the U.S. is growing each year as the Baby Boom Generation moves
into its 50's, and as advances in medicine prolongs people's lives. One of
the hottest-selling catalog items these days is a long handled "picker upper"
so that older people do not have to bend down to pick up small objects.

2.    THE NEST / FORTRESS / HOUSE:

People are spending more time in their homes. They are constantly looking
for ways to make their homes more comfortable, more entertaining and more
secure. New interests in gourmet cooking at home is a result of this trend.

3.    WORKING AT HOME:

More and more people are telecommuting and working from home offices. Think
of the countless ways to make life easier for this growing population.

4.    ROAD WARRIORS:

People are spending a lot more time in their cars, and in some cases, they
are becoming offices on wheels. Think of ways to make life more bearable,
entertaining, comfortable and safe for the commuting population.

5.    HOME ALONE:

The number of women in the workforce continues to grow. Kids of all ages
need entertaining, educational, safe things to do while not in school and not
supervised by a parent.

6.    THE ENDLESS FITNESS QUEST:

Fitness seems to be an obsession in the U.S. There is always room for a
product which creates a really new, fun, efficient way to exercise.

7.    THE SHRINKING HOME:

As living space decreases, there is more need for ways to organize all the
stuff we collect. How can we hang it, hide it, divide it, store it, display
it or collapse it?

8.    INFORMATION SUPERHIGHWAY:

It is still a little uncertain as to what we are all going to do with the
Information Superhighway. But it is here! Keep an eye on ideas for items to
assist people on this superhighway journey. A whole industry has been
created in items associated with computers -- it is not hardware, it is not
software -- it is middleware! Things for organizing wires, holders for
disks, stands and swivels and anti-glare screens, etc. Chances are there will
also be products needed to support the use of the Info Superhighway.

9.    INTERACTIVE EVERYTHING:

Interactive video, virtual reality, sophisticated electronics that simulate
reality and respond to our individual movements and questions. It is
happening now and expanding rapidly each year. Look for novel applications
for this new technology. You do not have to be a techno whiz to do this.
Try to understand the capabilities of this new medium -- then say "What if
..."

10.    CLEAN UP OUR MESS!

Saving the environment has replaced the Cold War as the biggest challenge to the continued survival of humans on this planet. There is a great opportunity in re-inventing products and processes to make them
environmentally friendly. The throw-away society is out of favor today. How can we throw away less? How can we conserve our limited resources more? How can we reduce our polluting ways? This is a product category that can be financially profitable and save the planet at the same time.

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Ken Tarlow runs a company called America Invents, a one-stop shop for all your product development ideas. He can be reached at (415) 927-0311 or at www.americainvents.com. Services include: Product evaluation, design, prototyping, patent searches, patent writing, patent drawing, licensing and manufacturing.

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Click here to read the August 1999 issue.