Hasta La Ideas

It has been said over and over again that we now live in a service economy. For most developed countries, that means more than 70% of their GDP is driven by the service sector. For the not so developed ones, the number can range from 60–70%—still pretty high. In fact, the lowest sector-based GDP income countries are Saudi Arabia (31.1%) , Indonesia (38.8%), United Arab Emirates (39.8%), China (44.6%) and Iran (48.2%). Meanwhile, the rest of the globe is running more than half of its economic machine solely on service oil.

Before you act surprised about China being on the lower-end of this list, I should add that they expect a 4.5 points increase on their service sector GDP by the end of 2015. That, in numbers, is huge. This is not a coincidence—rather, it is a pattern that runs on top of every economy that is serious about putting itself on the development runaway. There’s a clear product-to-services economic shift taking place and it is silently, or not so, affecting the way we live and work.

In some ways, we do know what that means. Metaphorically speaking, it means that we are becoming a software-based economy while industry steadily moves away from its manufacture smoky days and grabs a slice of the digital-era pie in nearly every sector. It also means that we, as consumers, are more willing to trade possession for access and that we expect to engage in relationships instead of short-term transactions when we buy.

What about design?

Economical shifts are not new to design. In fact, industrial design was born out of a shockwave caused by the mother of all economical shifts: the Industrial Revolution. The early Bauhaus movement was about creating a new breed of professionals called industrial designers. These were people who could both look back at the artisan mindset and look forward to the new industry, not aside or against it. In order to do that, this new breed had to integrate arts and business thinking, yes, business thinking, as production was the imperative business model those days. Ok, let’s call it “production thinking.”

Despite the recent explosion of fancy design suffixes, real design was never alienated from business. No, I’m not talking about art or the shallow exploration of design in advertising. Instead, real design, since its early days, has always been about bringing a human perspective to any system in order to find opportunities to create positive impact, and, at the same time, keep a steady and sharp eye on business profitability and/or execution viability.

Returning to the present, we are now living the next shockwave. I’m talking about an economy that has moved from the commercialization of hard-goods to a more dematerialized state where people exchange electrons and borrow thing from one another instead of owning it—an economic system where it is possible to thrive whether or not you sit at an industrial plant. A system where David-like startups are seriously threatening gigantic marble dinosaurs by rethinking the way they serve their customers.

Alright. It is what it is, and gosh, thanks for the most of it. But that being said, what are the new skills and knowledge we are going to need in order to keep designing for this new world?

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OK, I take it back. Well, some of it anyway.

In June, 2010, I posted an essay on Core77 entitled “Design Thinking: A Useful Myth.” (Got a lot of responses, that one did.) Since my essay was posted, I keep encountering people who jump to solutions and who fail to question assumptions—engineers, business people, and yes, designers (and design students). These encounters made me reconsider. I observed design students who were acting mindlessly, simply doing their assignments as presented. No creativity, no imagination, no questioning. That’s not what design thinking is about. As a result, I have changed my mind: Design Thinking really is special. Alas, it isn’t embraced by all designers, but where it exists, it is powerful. However, if we call this “design thinking,” then shouldn’t all designers do it?

I am here to say that I now have rethought my position. I still stand by the major points of the earlier essay, but I have changed the conclusion. As a result, the essay should really be titled: Design Thinking: An Essential Tool. Let me explain.

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This is the third column in a series on product licensing from materious’ Bruce Tharp.

So let’s say that you have decided to pursue a licensing contract for your new product idea instead of trying to go into the production and distribution business yourself. You are OK with losing control of the final product outcome, and you are comfortable with the tradeoff of much-less-work for (potentially) much-less-compensation. I say “potentially” because even though going it alone affords a greater percentage of the profit, there is still the issue of “percentage of what?” If you choose the right licensing partner, their ability to sell product through their well-established distribution channels is likely much better than yours. A bigger share of smaller sales can be worse than a smaller share of much bigger sales.

But after the decision to license, the first question that I am almost always asked is, “What’s to keep a company from stealing my idea after I show it to them?” Enter the confidentiality conundrum…

The Buddhist notion of the “beginner’s mind” is a great way to approach the design of a product; similarly, the Licensor’s Mind is also predicated upon an inherent humility. Three of its many tenets are:

• Your idea is not as unique as you might think
• Even if some aspect is particularly unique, profitability does not necessarily follow novelty
• The licensee has more to lose than you do

I know of many designers that are so worried about someone stealing their ideas that they do nothing with their ideas—they remain buried in their sketchbook (and by “buried,” I mean dead). The licensor’s mind is comfortable with risk, knowing that there is no reward without at least a modicum of risk. And generally the risk of disclosing your idea to a potential licensee should be far less daunting than risking hundreds, if not thousands of work-hours, and tens of thousands of dollars when going into business yourself.

Of course, willingness to risk does not imply naïveté. For the licensor, there are two fundamental tools of the trade that predicate the opening of the kimono: the Non-Disclosure Agreement (NDA) and the provisional patent application (PPA). In this article we will discuss the NDA, while the PPA will be discussed in a future column.

The NDA, or Confidentiality Agreement (CA), is a tried and true contract through which two parties agree to handle the secrecy of disclosed information. A simple web search will produce many examples, or you can download a few telling contracts from my own experience with actual companies here.

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The other night, I caught myself riveted to one of those blocks of cable programing one stumbles upon with increasing frequency: back-to-back episodes of some show you’ve never heard of. On this particular evening the focus was Animal Planet’s Monster Inside Me. For those who haven’t had the pleasure, each episode is a gruesome account of parasitic infestations and the effects they wreck on their human hosts. While not quite appointment viewing—the show is definitely compelling in an ‘I-can’t-believe-what-I’m-seeing’ sort of way. On this night, as I settled into my 3rd straight episode, I found my thoughts drifting towards creativity; specifically to how organizational operations, like outsized autoimmune systems, often function in pitch-perfect opposition to creativity and innovation efforts.

This idea first started knocking about in my head a few months back when a client lent me a copy of The Other Side of Innovation by Vijay Govindarajan and Chris Trimble. The book presents some interesting arguments as to why innovation efforts frequently fail. It’s not merely that these efforts generally traffic outside the norms of the organization, according to Govindarajan and Trimble, they operate in direct conflict with them. Think about it: an organization strives to achieve a certain measure of success and that success, if met, leads to growth. Overtime the organization necessarily figures its business out; they learn how to do what they do. Growth is the proof that they’ve cracked the code for doing it in a manner that’s repeatable and in balance. This state of equilibrium, and the mechanism that keeps it all humming along smoothly and without friction—is the performance engine. A codified system of hard won practices and truths that keep the flywheel spinning 24/7. It’s the recipe that works within the context of the business as it is.

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Kickstarter made some interesting changes to the rules Project Creators must follow last week. What’s really interesting about these rules, is that they mainly affect only Product Design and Hardware projects.

Let me take you through each rule change, tell you how I think they will effect Product Design projects, and then finish up with something I think Kickstarter should consider.

Change #1: Risks and Challenges section

Located at the bottom of a project’s home page, this is a Creator written overview of the risks and challenges a project will/could face. It’s now in effect for all Kickstarter projects.

This is a great idea. Backers should know upfront what needs to happen to make a project a reality and it reinforces the idea that Kickstarter is not a traditional store.

Ultimately, this rule will be more beneficial to Creators than Backers. The more you think through potential pitfalls, the better prepared you will be. Many of the Creators I see doing product design projects on Kickstarter are novices and don’t think about this until it is way too late (crying to themselves at 2AM, ten months past their estimated delivery date).

I actually think Kickstarter should take this a couple steps further, with Backers receiving more background information on the Creators. Things such as the number of people on the project team, how far along in development they are, what their professional/educational background is, and how much manufacturing experience they have, should all be made available for Backers.

One thing I want to note: The projects I’ve seen use this new Risks & Challeneges section don’t seem to have put enough thought into it. On one project I saw, the Creator wrote a three sentence description that boiled down to, “There are many steps to complete,” with no explaination of those steps. Perhaps Kickstarter could give a basic outline that would help Creators fill this form out and make sure they answer important questions?

Verdict on Change #1: A good change that should go further.

Change #2: Product simulations and photorealistic renderings are prohibited. Pictures of prototypes in their current state, technical drawings, CAD designs, sketches, and other parts of the design process are allowed. This only effects Product Design and Hardware projects.

The problem Kickstarter is trying to address is the right one, but the way they’re trying to solve it is wrong.

Here is what’s currently happening: When Backers see a hot looking computer rendering, they (understandably) think what they are looking at already exists and support the project believing that the project will ship with no problem. This is bad.

The problem isn’t renderings, it’s that Backers don’t know how to interpret renderings. Most of them probably don’t even realize they’re not photographs. However, you don’t solve this communication problem by eliminating renderings, you just create new problems.

Kickstarter’s solution is to only allow pictures of prototypes as they exist at the time of the project launch.

Prototypes are really important and should be required for all Product Design and Hardware Kickstarter projects. You learn more about how your design works and will be produced from making a physical mockup than you would from 100 renderings.

But here’s the thing, prototypes can be just as misleading as renderings. It’s easy to make a single prototype, just like it’s easy to make a photorealistic rendering. The trick is actually mass producing that thing. I can’t tell you the number of projects I’ve been on where we get what looks like a finished prototype back in a month but then it takes another year to get it through production.

Eliminating renderings does not make manufacturing easier, it just makes it harder to describe to Backers what you are trying to do.

Here’s how I would solve the problem. Make prototypes required, but also allow renderings. The difference will be when Backers see images of those things, they need to be clearly labeled as to what they are with Kickstarter provided explanations of what a rendering is and what a prototype is. That way, Creators would still have the tools they need to tell their story and Backers would have an explanation of what they’re looking at and a better understanding of the level of development that has gone into the project so far.

Verdict on Change #2: This rule doesn’t solve the real issue: Backers need to be educated on what they are looking at.

My recommendation: Kickstarter should start requiring prototypes, but renderings and simulations should still be allowed. In either case, both must be clearly labeled as to help Backers understand what they are looking at.

Change #3: Offering multiple quantities of a reward is prohibited. This only effects Product Design and Hardware projects.

In the past, Creators were able to offer different quantities of a single product. Say my project is to develop a “widget”. I could offer a reward tier that would allow you to purchase one “widget” and another reward tier where you could purchase five “widgets”.

Kickstarter’s hypothesis is that by limiting the quantity of “widgets” that are produced, it will help make life easier for Creators. This is a fundamental misunderstanding of how to streamline manufacturing.

Producing large quantities of a single item actually helps Creators. It allows them to make larger purchases with their vendors, giving them more clout with that vendor, which keeps Vendors motivated to help the Creators. Smaller orders always get less priority, leading to delays. Larger orders can also mean more efficient use of a Vendor’s equipment. Once a production line is up and running, the difference between producing 500 and 5,000 can be minimal.

For Creators, large quantities of a single item can lead to bulk discounts. If 1,000 “widgets” costs $1.00/unit to produce, 5,000 “widgets” might cost $0.50/unit to produce. This is hugely beneficial to Creators, especially when the unexpected happens. It’s common on Kickstarter for shipping to end up costing more than estimated or a project turns out to need more development than anticipated. We shouldn’t punish Creators for things that happen all of the time in even normal product development.

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