Manufacturer's Corner: The Man Who Walked on Water

One of the greatest dangers inherent to developing new products is the possibility they will become "me too" products without any unique benefits. This problem is one of the biggest reasons why sales do not materialize for many start-up companies.

Examples abound of companies investing huge sums of time and money into new products, only to find out customers already have similar products, and there is no compelling reason to switch to another supplier. And yes, this happens in all size companies. The best solution is investing the time to find competitors and evaluate their products early in the process.

Ralph Shaw, of Shaw Venture Partners in Portland, OR, knows the ups and downs of new product development and start-up companies better than most people do. During Shaw's early days as a venture capitalist, he once got a phone call from a man who said he had a unique invention—one that would enable him to walk on Tillamook Bay (on the Oregon coast). "You mean you can walk on water?" Shaw said. The man explained that he had invented a pair of retractable walking devices that could be strapped to each leg, enabling a person to walk on the mud of Tillamook Bay while the tide was out.

Shaw thought this invention had to be the only one of its kind in the world. He decided it was worth evaluating, and spent a lot of time looking for market niches and applications. This was in the early 1980s, and Shaw thought the device might have a military application in the Iran-Iraq war, in which hundreds of soldiers were trapped and killed in shallow water.

His partners thought he was crazy, but he continued to work with the inventor, trying to find a market and funding for the project. After considerable research, his company decided it wouldn't fund the project because the start-up costs and development risks were too high.

Soon afterward, Shaw happened upon a picture of what appeared to be the same invention in the local newspaper. He followed up and discovered another man had independently invented the same product in Minnesota. The moral of the story, according to Shaw, is "There are very few really unique products in this world. You just have to look hard to find the competitors."

The first reason competitive intelligence information is important is that it reveals whether you have a competitive advantage. This is extremely important, because if you introduce your new product to the market, and there are already many existing products that do essentially the same thing, the new product will fail. The new product must have a competitive advantage or a way to differentiate it from all existing products in the marketplace. Otherwise, the buying public gives it the dreaded "me-too" label.

So what do you need to find out? There are three basic questions:

1. How many direct and indirect competitors are there?

2. How does your product or service compare to the competitive products or services?

3. How do your prices compare to competition's prices?

If you can't answer these basic questions, then you'll find out at the point of sale whether you have competitive advantage or not. Needless to say, it's very expensive to find out you don't have a salable product or service at this stage of the game.

One example of a quick competitor search is Gyrocorp, a small manufacturer that acquired a contract from the Army to build a special gyroscope that was going to be used in an Army attack helicopter. After all of the R&D money had been spent, the client wanted to know where else in the world that he might be able to sell the product. But the owner did not want to take the time to do a competitive search, so he asked me to find out whatever I could at the county library.

I searched directories and buyer's guides (including the Thomas Register), did an online search, and searched the Department of Defense's microfiche records. In two hours I found 87 gyroscope manufacturers in the United States—six of which were manufacturing the exact same gyroscope product as Gyrocorp. The companies ranged in size from 55 to 5,000 employees.

The entire search took less then three hours and led to a good decision, one that prevented investment into a market saturated with me-too products.
Because Gyrocorp had few resources and a slim marketing budget, they wisely decided not to compete directly in the new gyroscope market after I presented this information. Instead, they went after the repair and refurbishing market niche, which was not attractive to the big players in the game.

Devoting some time and money to find competitive products will provide your product designers with information and ideas to design unique product advantages. If you can't do this basic information gathering yourself, hire someone from the local MEP Center to do it for you.

Remember, the cost of this kind of competitor research is minuscule compared to prototype costs or re-engineering the product to fit customer needs after it is introduced into the market. It's a good example of spending pennies to save dollars.

Mike Collins is the author of "Saving American Manufacturing" and its companion book, the "Growth Planning Handbook for Manufacturers." To learn more about the author or these titles, visit www.mpcmgt.com.