#HTE
A Big Picture Overview of Product Licensing Strategy
Companies are increasingly willing to look for new product ideas beyond their four walls. And why wouldn’t they? Embracing open innovation is fiscally sound, not to mention rational: Creative people want to work for themselves. In the U.S. alone, contingent workers are predicted to exceed 40 percent of the workplace by 2020. When companies invite the brightest minds to submit their concepts to them, they simultaneously reduce their research and development costs. In that way — as well as countless others — the licensing model dovetails ever more neatly with current trends.
But what are companies that embrace open innovation really looking for? What kinds of ideas are they willing to take a chance on? Broadly speaking, companies are risk-averse. So your objective is to make it as easy as possible for a potential licensee to say yes. In practice, that means focusing on designing simple improvements to existing products — ideally, their own. Simple ideas win. Put another way: You don’t have to reinvent the wheel to license an idea. Products that are too new are painful to bring to market. They require storytelling, and having to educate consumers is expensive and tedious.
In Makers Who Made It: 100 Stories of Starting a Business — the nearly 800-page e-book published last year by product launch platform The Grommet — cofounder Joanne Domeniconi writes, “The more innovative a product, the less likely it is to succeed. Why? Because most people can’t imagine or relate to ideas that they don’t expect or they don’t understand.” That’s exactly it, and especially true of licensing. Category-creating product ideas are risky, and therefore much more difficult to license. That’s not to say they’re never licensed, but certainly not often nor reliably.
When you focus on refining and enhancing products that are already on the market, you set yourself up for success. Potential licensees know demand for these products exists. They can count on it. There’s also the fact that there’s a better chance they’ll be able to manufacture what you present them without having to invest in new technology. Inventions that cannot be brought to market at a competitive price point do not see the light of day.
When you focus on refining and enhancing products that are already on the market, you set yourself up for success.
Most inventors encounter a problem, try to solve it, and then go looking for interest. That is not the best way of coming up with marketable new product ideas. Start out by familiarizing yourself with an industry, then categories that interest you within it, and finally, specific product lines themselves instead. If you’re an industrial designer, this research should come easily to you. What conclusions can you draw? Look for holes, for missed opportunities, for products that haven’t changed in many years. (What I like to call ‘sleeping dinosaurs.’) Amazon product reviews offer a veritable treasure trove of insight. What do consumers wish were different? What do existing products lack? How could the category be reinvigorated? What could be altered?
If you’ve studied product design, you’ve been taught to focus on the details. From observing how consumers interact with a product, to prototyping, market analysis, and even pitching — that it’s all about the details. At this, classically trained product developers do a truly fantastic job.
To become successful at licensing, you need to think differently.
Details? Those take time and money, and licensing is a numbers game. For many reasons, the more designs you submit, the more likely you are to license one. Remember, you’re not on salary, nor being paid on commission. You can’t afford to devote your energy to a project that ultimately goes nowhere. You need to test your ideas quickly, to get feedback before moving forward. Is your idea marketable? Is it worth developing further? It sounds crude, but why waste your time if not.
Submitting an idea for licensing consideration is actually a way of testing the market in and of itself — an incredibly, wonderfully low risk one. (Especially if you rely on the tools I’m going to detail later on, like a one-page sell sheet.) If you continue submitting your ideas for new products to the same companies, you’ll end up developing a rapport. They’ll tell you what they’re looking for. In time, you’ll get better at identifying meaningful benefits, not to mention opportunities for innovation.
When it comes to licensing, you need to focus first and foremost on identifying and presenting the big benefit of your design instead. Most often the benefit is to the end-user. Benefits are compelling. They answer the question, “What’s it do for me?” They are not synonymous with nor the same as features. Features change; benefits don’t. The more straightforward and easily understood a benefit is, the easier it is to license. I know a lot of product developers are confused about what they’re actually selling, because they do things like show me their patent or drawings when I ask, “What’s your idea?” Those are important, but they don’t tell me why I should care.
If the big benefit of your design isn’t very clear, relevant, or engaging to a potential licensee, the company is not going to ask you for more information. It’s that simple. Stay tuned for what to do after studying a market.
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