Know your options before moving forward with product development and manufacturing
You have a great new product idea and are committed to bringing that new product to market – congratulations! Have you thought yet about what kind of CEO do you want to be? A great one, obviously – ok enough said. But have you thought of the different operating model choices you have? As a CEO or Founder of a new product, there are four different models that you can consider.
There is no right or wrong on this choice, this is all dependent on you as a leader, and what feels right for you and your (future or current) team. You can be successful with any of these models – they have all worked for many CEOs before you!
Here are the four that we commonly see :
1. LICENSING
This is when you sell the use of your idea to another person or company, while retaining ownership. You get a % of the revenue or profits, but the majority % goes to the company who is now making and selling the product. Do this when you do not have any interest in being involved in selling, producing or promoting your product idea. You don’t even need to be a CEO at all, or you can keep being CEO of your own inventions company.
PROS : The absolute most hands-off option. You are now free to spend your time on ideas for new products and enjoy the cash flowing in.
CONS : There are lots of scams in this area, and not as many companies willing to license as it may initially seem.
2. OUTSOURCE IT ALL
This is when you run the company, but with a minimally sized team and hire other companies do to all the operations for your new product (marketing, sourcing, promotions, manufacturing, logistics – everything!). A great example of this is Skinny Girl Enterprises by Bethenny Frankel.
PROS : Hands-off for operations but you stay involved in the brand and the leadership of the company. You can focus on new products.
CONS : Each outsourcing cuts into your profit margin, make sure you have room. And make sure you choose your partners wisely – customers will still hold you accountable for outsourcer problems.
3. RUN IT YOURSELF WITH EXPERT SUPPORT
If you want to run the company, but have areas that you want to keep internal and are open to others being run by partners, this model is for you. In this case, you choose which stages or tasks in which to use agencies or contractors. Example : You may use a product development company to launch, use a sourcing company to find a factory, and use a freelance buyer to do all of your reordering – and keep your marketing and sales teams in-house.
PROS : Experts know how to avoid expensive mistakes, while you retain both control and leadership. You have flexibility in who you use, when.
CONS : If you want your full team on site, in house, this is not the way for you.
4. DO IT ALL YOURSELF
This is the most involved way of launching new product companies, where you figure it all out with yourself and an in-house team as you grow. You are deep into your product and your operations, and your team gains expertise over time. You may even manufacture the product yourself – or if you use a factory to do that, your own team manages all the factory communication and relationships.
PROS : You control all of your processes and operations for your new product, and your team works directly for you, building in-house loyalty and trust.
CONS : Seems like the cheapest option, but often can be the most expensive as the team needs to learn new areas (manufacturing, logistics, sales) or you have to pay for more senior, experienced employees.
HOW TO CHOOSE?
Now that you have seen all of these – does one in particular resonate with you? Great, now you know how you will go forward with your new product, and whether you need to think about hiring employees or experts. Or maybe you want to just license your new product and not deal with either! If you are not sure, that is ok – you can start with one model and always switch later. But keep these in the back of your mind as you go forward – the most important thing is to know that you have choices, and are not stuck with any single approach.
Build Better Supply Chains – Supplino’s MISSION
Supplino is changing how physical products are designed, manufactured, and shipped. As the world’s leading talent marketplace for experts in design, logistics, manufacturing and more, we allow companies to tap into on-demand services that allow them to be as flexible and responsive as the modern economy demands. By enabling companies to operate more nimbly, we are creating global supply chains with less waste, more efficiency, and greater sustainability. Visit us at Supplino.com
