Chapter 18
International Prototype Development
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Daniel Daly* Director, AIME, University of Alabama, 720 2nd Street, Tuscaloosa, Alabama 35401, United States *E-mail:
[email protected].
The Alabama Innovation and Mentoring of Entrepreneur (AIME) Center has had success in instructing students, professors and staff on the formation of start-up companies. Through this process, we have observed that developing Minimal Viable Products (MVP) and turning them into testable prototypes is a milestone in the commercialization of the invention. This iterative process of developing MVP helps solidify the value proposition, which is extremely important in presenting the product(s) to potential partners and customers. In conjunction with the customer discovery class, based on the Lean Launch Pad model, AIME and the start-up companies in our business incubator have been successful in partnering with international companies. These collaborations help the new companies expand their product offerings at a minimal cost, since the international industrial partners are interested in sharing these developmental and testing costs.
Introduction More startup companies fail from a lack of customers than from a failure of product development. This issue is particularly important for chemists. On the whole, chemists tend to be good problem-solvers and are able to create good products. However, chemists often scratch an itch in the wrong part of the back.” In other words, they have trouble attracting customers to their products. At the National Science Foundation (NSF), there is a program called the Innovation Corps, or I-Corps (1). Through the sponsorship of this program, roughly twenty I-Corps sites are currently dispersed around the United States. © 2016 American Chemical Society Cheng et al.; Chemistry without Borders: Careers, Research, and Entrepreneurship ACS Symposium Series; American Chemical Society: Washington, DC, 2016.
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These centers, along with the ACS Entrepreneur Resource Center (2), are designed to provide assistance to chemists looking to turn their inventions and ideas into a business. The Alabama Innovation and Mentoring of Entrepreneur (AIME) Center (3) has had success in instructing students, professors and staff on the formation of start-up companies. The goal of our center is to assess prototype(s) in an industrial setting using sensitive tests. By offering this service to inventors we will be able to help them measure the performance of their product(s) in the competitive market and establish a base value for their production costs. Many startup companies in our business incubator have found international partners interested in footing the cost of product development and testing, which results in more affordable product(s).
Product Development Starting a business is similar to conducting a science experiment. First, you have to identify a problem. Then you need to formulate a hypothesis about your product’s ability to solve your customers’ problem. Finally, you have to communicate with customers to learn whether your hypothesis is correct.
The Value Proposition A value proposition is an innovation, service, or feature intended to make a company or product attractive to customers. It can be challenging to talk to customers about your hypothesis without informing them about your produce and service. This notion can often be difficult for scientists to get their head around. Many scientists need training to learn how not to tell customers what their product or service really is. This is difficult because the product or service is typically the first subject they want to talk about. It’s important to remember that the goal is to learn what customers need and then provide a product that satisfies this need. Once you and your team have established connections with customers, these relationships need to be cultivated in order to have an open dialogue about customers’ needs. Through this dialogue, the development team can then go back to the product and make adjustments that meet those needs. This process brings customers into the loop as unsuspecting consultants, who help design the product to fit their own needs. If the customers desire attributes that your product lacks you should add these attributes to the product. If you don’t take these steps, customers won’t be interested in your product(s). While this may sounds simple, it does take discipline to follow these important steps. When creating a value proposition, you want to adjust your product(s) and services through a minimum viable product (MVP), so that you are creating gains and solving problems at the same time. The concept of an MVP will be a recurring theme throughout this paper. 158 Cheng et al.; Chemistry without Borders: Careers, Research, and Entrepreneurship ACS Symposium Series; American Chemical Society: Washington, DC, 2016.
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The Customer Segment When you talk to customers about your product(s), you will learn that each one has a different job - the chief operating officer, the person in product development, the bench chemist, etc. Once you have identified your customer segment, you need to take this information and apply it to your business model to make sure that your product is a good fit for the targeted market. For example, when I was working as a facilitator at the ACS Entrepreneurial Research Center, the Center was conducting a training program. There was a young inventor who had developed SnapFit and wanted to sell her product to bench chemists. However, the value proposition, or the “pain” that she was solving, was related to the setup time. While chemists are interested in setup procedures, lab managers are the ones who really feel that pain because they need to spend more money when it takes three hours to set up a reaction instead of one. As a result, this inventor had to change her product pitch and direct it toward lab managers instead of bench chemists, even though her invention was designed to help bench chemists. Customer Development Once you know what your customer segment wants, you can start forming an MVP - the bare bones of your invention. Then you can share it with customers to get feedback. However, the first product should be non-enabling. That is you demonstrate the essence of the invention without telling them how to create it. This can be done in person or by video. You don’t need to worry about intellectual property until you share your minimum working prototype (MWP) - the “secret sauce” of your product - with customers. At that point, you will need to have them sign a confidentiality agreement. Technology Adoption Lifecycle The Rogers bell curve (4) provides insight into how customers adopt technology. According to the curve, the first 2.5% of adopters fall into the “innovators” category. These are the individuals who bring a product to market. Next come the “early adopters,” who represent 13.5% of the market and your initial profit opportunity. These are the people who purchase a product because they are inspired by the technology or the idea of it, and are, by and large, not concerned with what other people think. However, the bulk of the customers are in the “early majority” (34%) and the “late majority” (34%). These customers are more pragmatic with their purchases and represent the mass market. They are the people who will look at customer service reports, talk to other people, and buy products and services based on what other people think. Finally, there are the “laggards” at 16% of the market, who are the last consumers to adopt a technology. To demonstrate this concept, let us look at the electric car. The early adopters purchase electric vehicles as soon as they begin mass production. The early majority and late majority, however, base their purchases on reviews and 159 Cheng et al.; Chemistry without Borders: Careers, Research, and Entrepreneurship ACS Symposium Series; American Chemical Society: Washington, DC, 2016.
consumer reports and wait until there are charging stations throughout their state. By contrast, the laggards remain skeptical and likely not to adopt the technology until gas stations begin closing and fuel is more difficult to come by. This basic patter of consumerism also applies to start-up companies.
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The Earlyvangelist Once you have developed your MVP, it’s time to find an “earlyvangelist” someone who has thought about the problem and might have some extra money to invest in the project. This person is likely to be a lab manager, who is fairly innovative. After making contact with an earlyvangelist, you will want to share your MVP with that person. By examining your MVP, lab manager(s) can learn what you are developing and see the value in developing it further for their company and company projects.
Working Examples IOLITEC and MagnnPro IOLITEC (5), a company specializing in the production of ionic liquid technology (organic salts), won third place in a business competition put on by L-Bank. After winning, they contacted me and asked if they could incubate in our facility, which I allowed them to do. While incubating in our facility, IOLITEC also began exploring the production of nanotechnology materials. At that time, MagnnPro (6), another nanotechnology company, was also in the incubator. This was a one-man-show run by a graduate student who had developed the technology. The company was having trouble selling its iron oxide magnetic materials. Knowing these two companies, their interests, and the issues they were having, I encouraged them to get into business together. They then signed a distribution agreement for uniform iron oxide materials. IOLITEC had distribution channels and knew how to sell MagnnPro’s iron oxide. Plus, it had the quality assurance steps and necessary instrumentation that most startups lack. Ionic Liquid collaboration of the University of Alabama with BASF Initially, there was a MVP in which cellulose was treated with a solution of ionic liquid, making cellulose water-soluble. The process began by injecting the liquid on one end and resulted in solid fibers being pulled out on the other. Once the university had seen the process, they were interested in seeing whether the technology could be scaled up. Following the MVP, a slightly larger model was made to demonstrate its scalability. After seeing a second and larger demonstration, BASF developed an even larger-scale machine that was based on the same principles as the previous two, but that could be used to produce fibers on an industrial scale for commercialization. The fibers could be embedded with a range of materials. 160 Cheng et al.; Chemistry without Borders: Careers, Research, and Entrepreneurship ACS Symposium Series; American Chemical Society: Washington, DC, 2016.
This example highlights the importance of finding a partner who can help you scale up, especially when they see that the product has a business application.
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Neural Net Original Plan and Market In its original conception, the Neural Net was created to help the electricity micro grid and the smart grid. Employing a unique controller, the technology is able to even out the fluctuation in electricity generated from wind and solar so that it is grid-viable. It does this by drawing electricity from the wall and then controlling its output, which helps with longevity and reduces the wear. At the time, customers who were interested in solar energy were not very concerned about the fluctuation of energy generated through alternative means, since they had nearly given up on trying to sell the energy back to the grid. Instead, they had been storing it in batteries. As a result, it was difficult to find companies that were interested in making the alternatively generated energy grid viable or the resources to get it done. Finally, after consultations with a business consultant, the Neural Net creators realized that there were other industries outside of renewables that could use this technology. Having recognized controlling electricity from the grid as an input to their technology, they could modify the output, and would help with longevity and reduce the wear of most electric motors. In order to demonstrate this technology, the inverntor and his team created a model and a video to show to any potential earlyvangelists. This shows that you can create an MVP and not spend a fortune. Moreover, once you find your earlyvangelist, he or she will know what the majority of customers want and all the “bells and whistles” that will be needed before the public will really accept your product.
Final Remarks In conjunction with the ACS Entrepreneur Resource Center and the Tulane University I-Corps development site, a customer development program will be held in New Orleans during InformEx 2016. Teams of inventors will have the opportunity to talk with up to 500 customers. Once producers and customers have identified each other, they can use private conference rooms for more in-depth conversations. This event is a great way to find earlyvangelists. Many startup companies suffer from a lack of money, product development, knowledge of running a business, and contact with customers. Using MVPs to attract interest in your product is an important step in starting a business. We have found this process to be successful and encourage entrepreneurs to come to the NSF I-Corps Sites - Chemicals and Materials Customer Discover Program coinciding with InformEx 2016 (7) taking place at Tulane University. If you are interested, please visit our website (3) and talk to your local I-Corps site (1). If you work with them, they will assist you. With the right information and the right product, we will even pay for your travel and get you a free pass to InformEx, in addition to covering room and board. All the expenses will be covered by NSF. 161 Cheng et al.; Chemistry without Borders: Careers, Research, and Entrepreneurship ACS Symposium Series; American Chemical Society: Washington, DC, 2016.
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National Science Foundation. NSF I-Corps; http://www.nsf.gov/news/ special_reports/i-corps/about.jsp (accessed February 2016). American Chemical Society. ACS Entrepreneur Resource Center; http:/ /www.acs.org/content/acs/en/careers/career-services/resourcecenter.html (accessed February 2016). The Alabama Innovation and Mentoring of Entrepreneur Center. Bama Technology Incubator; http://aime.ua.edu/BTI/index.html (accessed February 2016). Wikipedia. Diffusion of innovations (Rogers bell curve); https:// en.wikipedia.org/wiki/Diffusion_of_innovations (accessed February 2016). io·li·tec. http://www.iolitec-usa.com/ (accessed February 2016). Business Alabama. Upstart Startups; http://www.businessalabama.com/ Business-Alabama/May-2013/Upstart-Startups/ (accessed February 2016). InformEx. http://www.informex.com/ (accessed February 2016).
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