When it comes to product-development in today’s hi-tech, fast-eat-the-slow economy, “speed” has become the only “size” that really matters. A large company’s “size” can and often does, stand in the way of progress or even become a liability. Especially when established brands butt heads with smaller, more nimble companies with great products, scalable infrastructure and most importantly, entrepreneurial blood running through the corporate veins.
When large companies evaluate competitive opportunities, they sometimes have a tendency to assign higher weighted-values to “risk aversion” than “growth opportunities”. If left unchecked, this dynamic can morph into its unofficial corporate mantra. And at some point, it comes time for stockholders to log into their brokerage accounts and start buying put options on those once-dominate brands.
We have met with many of the smaller consumer-product/consumer packaged goods companies (CPGs), have bright futures ahead “if” they can overcome the financial challenge of filling the initial supply chain. Once the orders begin to flow, banks and private equity firms will line up at their doors to offer capital for the expansion of any proven success.
A classic example of this dynamic took place a few years ago with Dollar Shave Club. The company was launched in its founder, Michael Dubin’s garage in January of 2011 and was purchased by Unilever just five and a half years later for $1 Billion dollars. Perhaps you remember seeing DSC’s entertaining (and highly effective) YouTube commercials like the one on this link, which disrupted the entire shaving industry, yet was produced in one day for a total cost of $4,500.
In wake of DSC’s explosive success, another entrepreneur, Jeff Raider launched Harry’s just 18 months later. Ironically, Gillette, the company that had dominated the category since inventing the disposable razor over 100 years earlier, didn’t offer a D2C razor subscription until 3 years after DSC disrupted their market.
Now consider the demographic of NW Arkansas – often touted as the “Retail Capitol of the World.” We have the highest concentration of retail and consumer packaged goods (CPG) expertise in the entire world, but NWA will never reach its real potential until it acquires the one leg, still missing from its “milk stool”: pre-revenue venture capital.
Conversely, a seemingly unlimited supply of growth capital sits on the sidelines in NWA, as elsewhere, for any CPG that manages to bootstrap their business long enough to get their product(s) out of their garage and onto the shelves and ecom platforms major retailers. But when the inevitable finally happens… when the deep-pocketed venture capitalists from the left or right coast discover NWA’s pent-up opportunity, this region will explode as never before with high-paying engineering and manufacturing jobs on a magnitude capable of overshadowing our retail heritage, by becoming the “Innovation capitol of the world.”
I am sure there are a lot of skeptics who might chuckle at this notion while pointing out that established brands have plenty of capital to invest in consumer product innovation – and they are correct, but big, risk-averse companies will probably not be leading that charge. They will be far too busy defending their market share from the next generation of competitors who use “speed” as their weapon of choice.
In today’s competitive world, fledgling CPGs cut their teeth on the flesh of century-old brands as soon as they find the seed capital to prime their pump.
In the eight years since we launched AON Invent, 320 of our product innovations and inventor-collaborations have successfully made to market – some as line extensions of existing brands, some in response to category-specific requests from retailers or CPGs, with a growing number through D2C startups that were bootstrapped by the inventors. In response to the success of their first collaboration with AON Invent (which involved more than 100 individual products) one large specialty retail chain, created a corporate position to serve as their innovation liaison, in order to minimize the risk of missing out on future relevant innovations.
From our perspective, consumer-driven product design, simply makes sense. After all, who knows more about the kind of stuff people buy, than the people who buy stuff? Which brings me back to a point I’ve made in previous blogs, “Even in today’s digital world, “merchandise” is still, and will always be the most important part of the e-quation.”