Building Hardware Products: There Is A Better Way

on September 04, 2013

Over the last few years, we’ve seen a fundamental shift in the product development process.  In the “old” days, companies would spend millions of dollars and several years under the radar building hardware products. Then, they’d spend millions of dollars more on marketing to create demand and hopefully drive sales. I have seen this approach work well in some cases, and catastrophically in others. The trouble is that you don’t know when it’s going to work, and the danger is that all of the risk is pushed to the end of the product development process when the penalty for failure is the greatest and the most expensive. With this old approach, it’s very difficult to predict what features the consumers want, what price they are willing to pay, and how much inventory to build. Given the long lead-times with hardware, the result is lost opportunity and frustrated consumers.

There is a better way. Over the last few years, with the advent of crowdfunding, it is now possible to answer the hard questions up front, greatly reducing the product development risk profile. Entrepreneurs can now test product-market fit.  They can build a passionate community of Backers who will promote the product via word of mouth (which is much more powerful than paid marketing), and help brainstorm / prioritize new features. Because the Backers pre-buy products before they exist, there is strong validation that the product will be successful in the market. In addition, crowdfunding relieves the burden of cash flow needed to purchase the inventory, tooling and engineering required to bring the product to market.

However, there are several serious pitfalls with crowdfunding that can derail a project if the campaign is not properly setup. Before going live, it is critical to accurately understand the costs of goods sold (COGS), tooling and engineering support. In addition, it is essential to perform a detailed design for manufacturability and assembly review and create a robust manufacturing strategy based on volume. We have seen many cases where Entrepreneurs with the best intentions to deliver a great product did not perform this upfront analysis and subsequently ended up disappointing the Backers that believed in them the most by not delivering.

Today, I’m thrilled to announce that Dragon Innovation’s Hardware-focused crowdfunding platform is now live.  

The process starts well before the actual funding campaign with the Plan stage. A project can only launch on Dragon once our engineers review the BOM in detail and work with the Entrepreneurs to come up with the most cost effective solution possible.  We make sure labor, factory markup, scrap, overhead and packaging are included. The Dragon team also estimates tooling and production costs so the Entrepreneur can set a realistic threshold and have confidence that if they reach this funding threshold, they are on track to deliver.  Once the Plan foundation is complete, we move into the Fund stage where Entrepreneurs share their product with the public to gain support and sufficient funding to move into the Make phase.  Entrepreneurs are welcome to work with Dragon as an API for manufacturing, to do it themselves, or work with another partner.  As long as there is a solid plan for delivery, we will support whichever route the Entrepreneur chooses to take.  In the very near future, we will integrate the Sell phase so that a campaign can very quickly go from funding to pretail, thereby providing a platform that can allow for a seamless transition from functional prototype to customers’ hands.

Which in turn goes back to our mission but with an expanded goal. We help Entrepreneurs succeed, ensuring the greatest success of all: customer satisfaction.

Scott N. Miller

Scott has been fascinated with hardware since he was old enough to hold a screwdriver. He worked on a robotic tuna fish, life-size robotic dinosaurs for Disney Imagineering, and robotic baby dolls with Hasbro, before joining iRobot where he was responsible for leading the Roomba team to scale the functional prototype to high-volume production of the first three million units.

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