Prototyping

Mark Wong

Production

www.omgbazinga.com

The path of

to

WHAT WE DO

WHAT WE DO

you’ve finished yourfirst

Congratulations,

The push into prototyping. Or Not?

What’s NEW? What are the new product’s attributes and characteristics?

What’s Novel? What is new in the product that others on the market doesn’t offer?

What’s it For? What is the purpose or function of the new product? Your new offering must meet an unmet need

Does the technology exist? Do we need any new technology to produce the product? Are there any issues with the product concerning government regulations, safety, and environmental issues, patent infringements, or other possible hang-ups?

What’s gonna pay for it? Make sure you already have customers lined up, people who say “I want it!” How much will be the manufacturing cost, and how much will people willing to pay for the product?

Prototyping is a holistic context of bringing a new product to market, rather

than as a standalone process. A prototype developer should be able to

offer engineering expertise in all aspects of the process.

http://www.phillipsmedisize.com/sites/default/files/whitepaper/Prototyping%20White%20Paper.pdf

Technology Development Readiness levels (TDRL)

1 • Basic principles defined, technology conception and/or application formulated

2• Experimental technological design, technological evaluation and POC design

3

• Breadboard validation in a laboratory, technological development, completion of POC

4• POC prototype technology demonstration in the relevant environment

5• System/subsystem model development, pre-manufacturing considerations, system

integration

6

• Alpha and Beta trials by end-users, development iteration improvements, IP filing and protection

7

• System robust testing, commercial design incorporation. Manufacturing, packaging and labeling

8

• Actual system Launch, proven through successful operations, ready for full-scale deployment

9• Sales. Distribution standards, dealership, wholesaler, manufacturer maturity

10• Mature Technology with commercial sales

Research

Applied R&D,

Demonstration

Pre-market

Manufacture

Commercial

Deployment

Post-market

Surveillance

The Path to Product – TRL1 to 4

http://www.gidcompany.com/blog/product-prototype-development-2/product-prototype-development-tips-to-get-started-with-

your-new-product-prototype-development/

http://www.phillipsmedisize.com/sites/default/files/whitepaper/Prototyping%20White%20Paper.pdf

Breadboard prototype (TRL2)

Mock-ups and sketches (TRL1)

Physical Proof-of-Concept (POCs) (TRL 2-4)Digital to physical functional replicas that meet specifications. Iterative stage.

POC to POV, robustness testing, (TRL4-5)Transforming the Physical into the Functional.BOM finalization.

Alpha, Beta testers in actual environment (TRL 6) Pre-manufacturing considerations, preparation for market entry

Types of Prototypes

Breadboard prototype• Basically a working model of

your idea

• Basic function

• Demonstrate functionality

and communicate your idea

to potential model makers or

manufacturers

Presentation prototype

(Proof-of-Concept) POC• representation of the product as it

will be manufactured.

• Used for promotional purposes

• Must should be able to demonstrate

what the product can do, but it is

not necessarily an exact copy of the

final product.

• sale price, materials, manufacturing

costs, marketing, safety factors,

• Sales and distributed, and the profit

margin. If you plan to license your

invention to a manufacturer, you

can often do so with a model."

Pre-RTM prototype• This type of prototype is for

all practical purposes the

final version of the product.

• However, keep the physical

appearance aside for a

while and test the

functionality, because if it

functions well, then you just

have to polish the

aesthetics.

• Alpha/Beta testing in this

phase

You must first

The lesson is

WORKS

SIMPLE

PROVEthat your technology

before going into manufacturing

consistently

Iterate. Iterate. Iterate.

Product Lifecycles Affect Revenue Sensitivity to TTM

http://info.arteris.com/blog/bid/64100/Calculating-Late-TTM-Revenue-Loss-Part-2-Industry-Product-Lifecycles

BuildBuy $

Considerations• increasing functionality

• Increasing complexity

of new technologies

• More product features,

certification

• increased

performance pressures

• Time to market pressure

• Can you build it

quickly?

• Does the technology

change rapidly?

• Motor vs Processor

• Can a ready-made

module do the job

specification?

http://player.vimeo.com/video/110359218

$

BUILDBUY Integrated power and functionality Quick plug-and-play Tested operation Parts that quickly go EOL/NRND Faster time to market (TTM)

Custom specifications Smaller surface area Flexibility of component parts and

suppliers Optimized design (power / signal)

Larger surface area, may not be power optimized

Redundant component sections Expensive (more manufacturer

intermediates)

Requires iterative testing Selection Integration manufacture and test Longer time to market (TTM)

• TRL 2-4• No expertise• Test various options quickly• Iterative prototypes for POC

• TRL 3+• Experienced and capable design team• Your company can retain the technology

resources for the duration of numerous iterations during the product life cycle

Accelerating Product time-to-market

http://www.kodak.com/global/mul/business/solutions/files/accelerating_product_time.pdf

Product

Part 1 Component 2 Component 3

Component 4 Component 5

Reduce the number of custom components

Part 1 Component 2 Component 3

Component 4 Component 5

you’ve reachedCongratulations,

TRL3/4

New considerations, New headaches

Bill-of-Materials (BOM)How many parts are in your product? Open market or custom fit? Your factory partner isunlikely to share the cost breakdown, so you’ll need to tap into every network you have tocompile this due diligence and decide if that (insert potentially-unnecessary-but-cool-part-you-cannot-live-without here) is really worth it. Packaging, screws, manuals, everything.

Key component riskIf your invention or prototype relies on one specific unique technology, is it a single unique-selling-point? Can it be copied or replicated easily? If not, why? If yes, why? Can you use analternative? Is there a cheaper alternative? E.g. Arduino vs a cheaper microprocessor

Stand-alone modules VS custom designUsing existing standards, development kits may not translate well into a final product.

NRND / EolNot Recommended for New Designs. End-of-Life. Do not use these parts in any part of yourBOM.

New considerations, New headaches

Proof of ValuePrototype vs cost to manufacture. Pull out your cash-flow statement. The cash-flowstatement? A great prototype will tell you if you can make the product; the cash-flowstatement will tell you if you should. Before production, you must understand the numbers ofhow your prototype translates into a manufactured item.

SuppliersSpecific component? Note the lead-time? Costing. Ask a trusted network for referrals. Visitthem, and ask for samples, if the component is obscure, maybe you should use an alternative.

Potential to scaleCrowdfunding projects have a wealth of case studies for learning what it takes to scale. Whatwill delay the prototype? Missing deadlines due to unforeseen complexities in manufacturingcosts associated with scaling from prototype to production. Do trial manufacturing runs.

Customs, export restrictionsBatteries, FCC, CE, radio-communications will hamper international couriers / freight

What you must do – TRL3+

Define your specifications

Write down all your product specifications and requirements. This is the first step in

Quality control.

Make robust prototypes that can scale

Perform proper prototyping. Make Proof-of-Concept and Design Prototypes. Make

in small quantities, making 10 to 100 of them will highlight potential problems in

manufacturing. Implement design for manufacturing principles into the Design

Prototype.

Take ownership

Do not outsource a design iteration. Take ownership of your design and sign off on

all design changes, only you know what’s best and you must know everything in

your prototype.

Prototype Verification (POC to MVP)

Ensure that the design is proven and consistent in performance prior to production

kick-off. Identify your Minimum Value Product (MVP), your POC is now your pre-

MVP.

If you are creating a product from your prototype ideas..

http://prafulla.net/wp-content/sharenreadfiles/2013/07/480546/how-start-a-startup-infographic.png

Tools are important, but not everything

Do not buy cheap tools

you’ve reachedCongratulations,

TRL5+The Path to a

Let’s talk about

Is only the beginning

product…

economicsIf you are taking your product design into production tooling…

Short break…

http://i.imgur.com/fCRiSkG.jpg

Develop supplier relationships

http://i.imgur.com/fCRiSkG.jpg

Intangibles can only be seen in personManufacturing fingerprints - Nobody pays for new goods that look used. This unexpectedquality problem cost us time, money, and relationship tension with the factory.

Appearance and PackagingIt’s practically its own product. Reprints, poor packaging that cannot survive shipping,mishandled appearances will affect sales. If you need to ship goods almost any distance, youneed to protect them with inside boxes. This cost is low, but if your factory partner isn’t on top ofit, you will receive damaged goods that you own and cannot sell.

http://i.imgur.com/fCRiSkG.jpg

http://i.imgur.com/fCRiSkG.jpg

Selling price of my products?

Value$ Pricing, market share, brand awareness

Pricing

Cost-plus, Competition-driven, mROI, Cost-in-UseValue-in-Use. Must be value-based-pricing

Minimum Order Quantity (MOQ)Economic Production Quantity (EPQ)MOQ

PO (Purchase Order) + Volume BOM + Setup time +

Tooling + labour + profit margin + Freight + tax + transaction costs

Value of my products?

Price: $1.00

~300’ length

~$0.003/inch.

Cost to hang a poster: $0.01

Price: $5.00

12 strips

$0.416 / strip

Cost to hang a poster: $1.66

166 Times the cost!Consumers will always compare with existing products

http://www.slideshare.net/Brioneja/value-in-use-analysis-for-new-product-introductions-2176479

http://i.imgur.com/fCRiSkG.jpg

Pre-pre-kickstarter sales.Good idea to sell initial batch prototypes to your beta customers. This will gauge

actual market need / desire and will also generate an initial source of funds for your

first production batch deposit.

MOQ / EPQ

Quantity

Total Cost

Holding cost

Ordering costs

Annual Cost

Optimal order

Minimum total cost

http://flylib.com/books/en/3.287.1.217/1/http://home.ubalt.edu/ntsbarsh/business-stat/stat-data/forecast.htm

Optimal Selling price (single product type)

Time

Sales

Cost Price

Total

Volume

Category

Maximum publicity Costs

($)

Competitor

Entrant

Selling Price

Break-even region

Product maturity or novelty decline

Assuming products can be shipped to retailers

Perceived vs Actual Value – Identifying MVP

Price

Benefit

Manage your customer’s expectationsPerceived value affects purchase decisions

Perceived

ValueBrands. Image. Accessories..

Product

Features

Neutral Customer

expectations

Customer’s

expectations greater than

product benefit

Product benefit greater than

customer expectations

Feature 1 Feature 2 Feature 3 Feature 4…

MVP MVP+

Absolute price/unit is irrelevant. We must compare cost in use and value in use.

Multiple run Average cost curves

Cost/Unit

Output - Units / month

long run average total cost curve (LRAC)

Minimum efficient scale (MES) or MAC (minimum average cost)

1/3 MES

1/2 MES

Diseconomies of scale, rising LRACEconomies of scale, falling LRAC

http://tutor2u.net/economics/revision-notes/a2-micro-economies-diseconomies-of-scale.htmlhttp://marketingscience.info/assets/documents/205/10743.pdf

Selling price of my products?

BOM @ MES_EPQ

BOM @ MOQ

4-10x BOM

Bill of Materials @

Minimum Efficient

Scale at Economic

Production Quantity

Now you know how much it

costs per unit of your

prototype/product-to-be

Bill of Materials @

Minimum Efficient

Scale at Economic

Production Quantity

Your MOQ is usually your

biggest startup cost!

Suppliers have low profit

margins and must produce

large quantities to break-even.

Return-of-Investment

(ROI)

• SHIPPING FULFILLMENT

• Taxes

• international delivery

• transaction cuts

• TTM (Time to market)

• Iteration

A good estimate will be 4-10

times the selling price of your

BOM.

Ask your customers if that is a

fair selling price.

Reorder point – production and consumption

http://home.ubalt.edu/ntsbarsh/business-stat/stat-data/forecast.htmhttp://flylib.com/books/en/3.287.1.224/1/

Time

InventoryImperfect Quality / Defective goods

Safety stock

Re-order point

Delivery

Lead time

(Avg demand x Lead time ) +

Safety Stock = Reorder point

Managing Defects

http://leardon.com/how-to-successful-product-change-3-tips-for-product-change-management

Product defect severity can be broken down into four categories:

LowVery limited customer impact. Low severity defects should only be fixed in the early

prototyping phases and should be ignored in all later stages of the lifecycle.

MediumModerate customer impact. Medium severity defects should drive changes the

early stages of the product development lifecycle but should not be resolved

during production.

SeriousHigh customer impact. Serious defects should be fixed as soon as feasible and

rolled into prototype testing or production.

CriticalSafety or regulatory issue. Critical defects should always drive an immediate

change and the production line should be shut down if the product is in

production.

http://i.imgur.com/fCRiSkG.jpg

http://i.imgur.com/fCRiSkG.jpg

Shipping, customs and taxAt some point, you’ll need to get your goods from the factory to somewhere else. Whether youuse a plane, train, truck, or ship, Before that, unless your factory partner is within driving

distance, you will be doing a lot of business with FedEx to get samples back and forth. It doesn’tsound like much, but will add up.

http://i.imgur.com/fCRiSkG.jpg

http://leardon.com/product-development-considerations-for-2012

Summary

If you are creating a prototype from your product idea (TRL 2-4)

• Write down all your product specifications and requirements prior to creating a

prototype .

• Perform proper prototyping. Make Proof-of-Concept and Design Prototypes.

• Select the best supplier who can take you from the beginning to end of the

product development lifecycle.

• Take ownership of your design and sign off on all design changes.

• Implement design for manufacturing principles into the Design Prototype.

If you are taking your product design into production tooling (TRL 5-6)

• Know the price at all order quantities.

• Decide on the best place to manufacture your product with the best suppliers.

• Properly qualify the product using Production Prototypes.

If you are starting to produce inventory of your product (TRL 8-10)

• Sign off on all manufacturing and design changes.

• Buy only the quantity of products that is necessary for immediate sales.

• Don’t Pay until quality is confirmed.

The Pebble Case study

2009 2012 2013

• Production tooling • Large component order• Global Bluetooth

certification• Late deliveries• Failed Quality Control

$10.26M on KickstarterFebruary 2012

CustomersReceived their products

inPulse

$375,000

Y-combinator

The GoPro Case study

2002 2012 20142011 2013

2008 - Digital HERO 5

2007-’08 2010

Founded

Competitor

Entrants

How can we help you?

• Consultation advice

• Prototyping services

• Dev boards to custom

electronics

• Custom projects

• Custom enclosures

• TRL 3 to 6

• IdeaBins

How do we keep costs low?

Hi Volume, Low Mix

Hi Mix, Low Volume

Seriouslyl o n g j o u r n e y

Before you will see

a return of your

investment

But the rewards and returns

Worth itare well

If not nowThen when?

Mark.wong@omgbazinga.com

@fusion2x

@fusion2x