How China leveled the playing field for the little guy.
In a decade long push to drive lower costs, one odd thing has happened. The veil of secrecy that, many buyers have spent years protecting, has been briskly pushed aside. Allowing the little guy a chance to grow. Companies like Alibaba, and Global Source give buyers a fair shot at locating the right products out of Asia at a reasonable cost. The question is how can you use this knowledge to build your business?
This same veil of secrecy has convinced us that we can not afford to utilize foreign manufacturers. We would have to secure a massive start-up budget to be able to have the purchasing power needed to buy effectively. It’s a common belief that the little guy just can’t do this. This is wrong. An inventor of modest means can now locate a supplier, negotiate a (Non-Recurring Engineering) NRE fee and almost get off the ground without significant investment.
An example of this is a plastic tool that a friend of mine and I patented years ago. We designed a tool that would radically reduce the time it takes to cut clothing off of people in trauma settings. At the time – almost ten years ago – we couldn’t afford to get over to China to find manufactures willing to do small batch production runs. This made getting our product’s test run very troublesome. If you compare it to the opportunities today – with the internet and direct access to manufacturers – you can cut the costs down to near nothing. Your development cycle time is reduced, cost to manufacture samples and more importantly your (Bill of Materials) B.O.M. cost. What that does is categorically and dramatically change the world for entrepreneurs. Modern technology has changed the playing field and helped the little guy beat the mega-corporations to those coveted open markets.
Without a doubt almost a decade of my living in Asia has helped me see this transition from large corporations controlling the gates to manufacturers, to the small entrepreneurs. Even with small start-up budgets. Look at software, one of the most expensive start-up costs. Software that at one time cost $250,000 to develop, now can be found on websites like elance.com for less than $10,000. How can SAP or Oracle compete with that? They can’t. What they end up doing is buying the little companies that are rocking markets. Take for instance Salesforce.com; I know a direct competitor to this juggernaut. They have built a product that is faster, smarter and less expensive. It was built for less than $25,000. The owner is a sharp 20 something who found a need, a market, and has built a product to fulfill that need. What will happen? Only the two companies slugging it out will know.
On a recent weekend in Huaxiang Bay, I was able to figure out how to lower the cost of one my latest products. A tablet based device we are making for a client in the U.S. I know this sounds crazy, but you can really find amazing deals when you get creative. You just have to keep an open mind, and be ready for change. Adaptability is one of the best features of the Entrepreneur. Large corporations can not afford to be this flexible.
Lets look at what it would take to push a product through an American cellular market. Say company A pushes 6 new phones out a year. Each costing $500,000 (Wall Street Journal reported that Nokia spends upwards of $500,000 just on preliminary testing of cellular devices.) just on preliminary testing. This does not even cover spending considerable resources on development, product planning, engineering, the list can go on and on. How do you compete with that? You don’t. When David fights Goliath he doesn’t fight harder, he fights smarter. Your rock should be your brain. This is how you will conquer the giant. Remembering at all times the golden rule of entrepreneurship. Get the customer first.
Why do you get the customer first? Because then you have a real product and for a real market. So what steps should I take? Identify a REAL Problem. Design a product that fits a segment. Then find the segment leader. Don’t be surprised if they even pre-order your new best selling face mask for funny faces or wiz bang wind-propelled road sign.
The reasonable request should be asked – “shouldn’t I have patents in place?” No, don’t wait for anyone or anything unless your device and patent are something you can back up with millions in lawsuits. Even then it may take you years. A few years ago they made a movie about the guy who made windshield wipers for Ford and was never paid. He went after Ford and others for years and he finally won. What would you rather do? Go out and sell something to a customer or fight a battle you very well could loose to a Ford, GE or IBM? Because you shared with them the next pet rock that talks and will open your emails for you? Trust me, customers are key. Viagra in China cost it’s manufacture in the tens of millions of dollars trying to protect patent rights and they lost. Customers are key.
A quick note: this may take you two to twelve years of pain, no pay and no results. Whats the upside? Your own business, huge success and financial independence. Why two to twelve years? Lets take a look at a friend of mine who had a great idea that works with social networking and an adult entertainment venue. A venue which is very under served. He tried for about two years and then it faded into his background. He just couldn’t get the right people behind him. He couldn’t find investors, he did everything he could to run right at the sun. Issue: No customers. No viable product. No sales. No go.
On the flip side of that, an acquaintance of mine – who is a valiant, justifiable, true business leader – has fought for twelve years to bring a radically new medical device to market. He has hundreds of investors eagerly waiting for the device to come out and it will radically change peoples lives if it were ever to hit the market. Issue: No outside revenue stream. No customers. No viable product. No Sales. No go. It pains me personally to see this firm slide into never-ever-to-surface-land again.
In closing, China and India are wonderful places to source business ideas out of – the buyer beware part of that is, do it with a trusted friend and/or partner. You can loose everything quickly in these regions so you need to be prepared for that. My advice, find someone over in Asia if your looking to source product here – even if it’s for a quick factory visit. You need to make sure the guy who promises to make your plastic super-tool is real. You certainly can do it, and you have the ability. Get creative and figure it out. Trust yourself and don’t ever stop believing in what you have.