Crowdfunding is trendy. This is a very convenient way of financing for creators who want to bring their ideas to life. However, many projects fail and products are never delivered. Why ? Simply because industrialization can not be improvised. This is a complex process that large manufacturing companies find difficult to master themselves (just think about the many product recalls for failure). I will take an example and explain how operational excellence could have helped these creators..
March 2015, three ambitious Niagara Falls entrepreneurs launch a Kickstarter project to industrialize their 3D printer prototype: Tiko. In just 3 minutes they find 400 “backers” who pre-order their product and quickly are 16,538 people who join the project and raise nearly $ 3 million. Wow! It’s a good start for a young company. They are proud, they are passionate and they have redone all their price calculations for parts, assembly, etc. January 2017: a comment on the website announces that the feelings are mixed and they crumble under the difficulties: in short, they give up. The money has evaporated and almost 17,000 people around the world are pointing fingers! Sad end for such a beautiful adventure!
Economies of scale or just-in-time?
Unfortunately, through inexperience, their first mistake was to order their parts in bulk. They thought they would get substantial discounts and economies of scale. Inventory, however, has a significant counterweight: an error costs more, because it is all the inventory that must be taken back or discarded. Alas, that’s exactly what they experienced. By improvising mass production, they noticed design errors in both the product and the software. They spent months trying to arrange their 3D printer with the components and software, balancing the two, but without achieving the expected result in terms of quality and reliability.
Just-in-time is the technique many manufacturers use to limit the impact of inventory. Components are ordered, delivered and paid as you go.
Buy products or negotiate contracts?
Then they discovered, despite one of them being of Chinese origin, that the negotiation and purchase of subcontracted components in Asia is not an easy thing. They had to deal with many quality problems and up to 10% of the lots were defective. Even worse, they did not know that the component was defective before mounting it. In short, additional hours, increased production costs, and a collapse of the economic model of their project.
Instead of looking at the price of the component alone, you have to evaluate it as a whole, with the associated risks. For example, the failure rate, the ability to test, return components, are all things that a buyer knows how to negotiate and learn to manage in a manufacturing process. He must know the principles of industrialization and evaluate the component, as well as its criticality in its complete environment. This is true for both products and services. Thus, the choices must be made by integrating from the beginning the after-sales service and support.
Finally, their product, highly technological, has not been fast enough to adapt to new entrants on the market. Even if they delivered it perfectly functional, with many months of delay, their product is already obsolete. 3D printer technology has evolved very quickly. Even by investing ten times more effort and their personal money, the model of economic profitability of the product was in any case exceeded, making it impossible to get new orders to make the project profitable.
If you want to buy a product to meet a personal need, use online or traditional commerce. However, if you want to support young (or less young) entrepreneurs, buy on Kickstarter or any crowdsourcing platform. A bit like a business angel (Business Angel) you risk, of course, to lose everything, but on the other hand, you will have the chance to follow an industrial adventure from the inside!!