If I could just sell one!
One Simple Idea: Turn Your Dreams into a Licensing Goldmine While Letting Others Do the Work Revised and expanded edition by Stephen Key. McGraw Hill; New York 2016.
Picture this scenario: A man selling pencils on a street corner is having no luck until a couple stops out of pity and asks him the cost. “Thirty thousand dollars apiece.” the would-be vendor replies smartly. Shocked, the couple backs away. “If I could just sell one!” speculates the man with the pencils. What grit, what confidence, what outrageous optimism! But what if he had a one-of-a-kind so valuable that selling it brings in tens or even hundreds of thousands from the right buyer?
Picture this scenario: A man selling pencils on a street corner is having no luck until a couple stops out of pity and asks him the cost. “Thirty thousand dollars apiece.” the would-be vendor replies smartly. Shocked, the couple backs away. “If I could just sell one!” speculates the man with the pencils. What grit, what confidence, what outrageous optimism! But what if he had a one-of-a-kind so valuable that selling it brings in tens or even hundreds of thousands from the right buyer?
Painless scaling. Every would-be innovator, inventor or start up visionary who would prefer working on the next new, new thing dreams of it while being buried in “administrivia” or organizational politics. Not only would that dreamer be better off lying on the beach conjuring up what nobody in the corporate world has the time or latitude to imagine, the results stand to be bargains for many corporations as well. Are you kidding us! You might well ask, but I invite you to read through Stephen Key’s One Simple Idea before you dismiss this possibility.
Here is the drill. You pick an industry, one you have some understanding of and preferably a real pre existing interest in. After all, if you are going to hate your work, you’ll come to dislike your boss; and if that’s you, you are doubly a fool. So choose carefully. You should also be someone who likes to fiddle with stuff and is curious by nature. Research and development is expensive and time consuming, so if you have a well thought out idea that you’ve tested with a works- or looks-like prototype you might be a winner in the licensing game.
Why License?
You can’t sell your idea unless your buyer accepts that you either own it or have the option to own it. Patenting is expensive and demanding because the standard of evidence is high when you ask the law to stand firmly behind you. The alternative, says Stephen Key, is licensing. Nondisclosure agreements and patent applications, either provisional or non provisional are effective protection during negotiations. If your object is simply to license your idea and not go directly to manufacture on your own, you do not need the bother and expense that follow through would demand. The operative phrase is “first to file” and if you thought of the great idea you likely have the drop on anyone else who might, but don’t wait to see, start moving!
Another aspect of patenting that concerns many inventors or innovators is the mock up of your design. Again, the bar is not so high for licensing. As alluded to above, your model need not be an assembly line facsimile to gain a manufacturer’s attention. If how it appears is the principal selling point for your new and better version, then how well it works is not so important. On the other hand, if your improvement is all about better function, you can cannibalize other products or parts to prove the contraption, however ugly, actually works.
What an inventor looks like
Stephen Key gained his credentials in the toys and novelties industry. The popular image of the inventor as an unkempt figure in bottle bottom glasses and lab coat who toils secretly on cold fusion in a basement workshop is a caricature. Stephen doesn’t look or sound like that dude. Most innovation is small in scope, bringing undramatic shifts to established lines. which are scarcely earth shaking but yield good return on investment. Key explains that although you might think incremental improvement would be the normal by-product of in-house efforts to be more competitive. In reality, controlling costs and safeguarding investments is the usual preoccupation of most company employees. Risk aversion is a more reliable route for the employee to job security.
When Stephen spoke to me from his Lake Tahoe home last year, he sounded like someone who had struck the right balance between the tedium of corporate life and the craziness of the overworked small business proprietor. As he told me and writes in One Simple Idea, getting on with what you are best at while leaving the other parts of the job to those whose skills lie there, is challenging enough, but overall, more satisfying.
Licensing is a two stroke engine
Finding your niche then systematically studying both the market and the industry, mark the crucial division between burnout and success. It also helps, and this is where his book really proves itself, to know how to navigate the qualifying filters that prevent or boost your chances of getting a serious hearing. Stephen Key told me how the best, most pain free results come from listening carefully for the signs that a pull marketing strategy will pay off. Social media and communications technology have made the process of connecting with prospects much smoother than it had been only a few years ago.
However, the caution is that you will have to be quite skilled at communicating with your prospects. Never use the term “inventor”, for instance. When you are in your prospect’s office, on the telephone or corresponding to explain the benefits of your brainchild show appreciation of client needs not your own obsessions. At every turn risks appear. However, most of these are averted with a frank, common sense approach. This book, now in second edition, like the courses Stephen teaches is a boon that anyone with saleable ideas who is prepared to explain them could profit from.
Which brings us back to the tantalizing prospect we began with – what if the inventors could just be allowed to invent? Well, Stephen Key writes as he explained in our interview, if you want to be successful in licensing your ideas you do need to talk to people and you do need to negotiate on behalf of yourself and your idea. However, you have big advantages you can leverage with a little common sense. Picking a market you understand, a product line that fascinates you and enhancements you recognize as needed are elements you control. Building secure relationships of trust is partly intuition, but there are ways to greatly smooth the path.
Key first explains each logical move with instructive examples then summarizes the whole process as a ten step strategy near the end of the book. (Chapter 18.) So far, we’ve touched on the importance of market research, affordable research and effective manageable ways to protect your intellectual property and One Simple Idea is thoroughly systematic about how to get those things done. Getting your foot in the door is obviously also important. Once your idea is tested and prototyped adequately, you will need a one-line benefit statement and a one-page sell sheet. Fortunately, this book devotes two chapters on how to do this, but it will take practice. As anyone who has ever developed an elevator pitch or prepared for a job interview realizes, encapsulating a value proposition is no piece of cake without concentrated practice.
The ten steps and associated skills are entirely within range of mastery. As I could tell during my talk with the author, a big part of the fun and deep satisfaction he takes from the lifestyle he has created for himself, lies in applying that learning. Royalties can be a steady source of income security while the inventor promoter explores exciting new opportunities. A regular revenue stream pays for patents not already covered in licensing agreements. Stephen Key emphasizes that as in any role that requires initiative or continuous self direction, remembering why you are doing what you do is vital, but the actual doing must be motivating in itself.
Inventive ways to get inventions out there
Proof that the independent entrepreneur who pursues the licensing route is an important catalyst appears in interesting new initiatives that publicize and promote partnerships. On of these is a company called Quirky that accepts submissions through its site then sends these out to its million-member community to vote on their market value. After a winnowing process that includes a publicly broadcast meeting and the pursuit of big business partners, a few ideas come to market weekly. Thousands of submissions boil down to ten selections per week of which five may get a green light.
Ninety per cent of sales returns are what pays for Quirky’s extensive role and the remaining ten is divided between the original inventor and other contributors to the ultimate idea. On average a submitting inventor might receive four per cent of sales revenue. Not a great deal? That depends on perspective. Let’s suppose you have a good idea for an innovation but no feasible way to personally pursue licensing or patenting. Quirky does the work for you without your risking anything (except rejection) and you are free to pursue whatever else you want to.
Somewhat better odds are available for inventors who pitch to network shows like Shark Tank and Dragon’s Den. Even participants who are turned down by the risk averse sharks and dragons often benefit from the exposure attracting the consumer and investor interest so necessary to move forward. To impress these very public investors, you should already be in a market one or more of them knows well which promises a high rate of return and a big potential pool of consumers. Participants must be able to show clear evidence of product ownership – not what the independent entrepreneur seeking a licensing agreement is typically after. The odds of either Quirky or these network shows coming through for you as an inventor are minimal of course, but they do teach a great deal about what it takes to get to market and entertain at the same time.
Greater probability of return for your time invested is offered through crowdfunding which gives consumers input, provides a capitalization boost and often convinces licensing manufacturers down the road of value. Another more frequently productive route lies through direct response television such as shopping channels and programs. Here, as with other arrangements, the inventor is cautioned to avoid paying for upfront or other charges including video production and other promotional tools. The DRTV media outlets do rigorous market research and maintain a highly focussed telephone sales force. You will still have to sell to one of the five or so companies in the field, but they don’t ask for patents and a well prepared video sales sheet does much of the pitching for you.
Stephen Key not only sees many more and many more painless avenues to pursue the licensing option, he also has come to realize how beneficial the outside inventor channel is to embattled competitive companies. Shareholders are not keen on financing exploratory research and much of company management is fixated on cutting costs. Yet there is no business future without continuous development of new products. The creative outsider with the killer “simple idea” is a scarce if crucial lifesaver. Key believes smart companies should hire “product scouts” to find people like him who know plenty about their industries, but are not chained like company insiders to preserving the currently cost effective, but short-lived, limited status quo. If he were starting out today, he would become a product scout chasing down licence opportunities.
Symbiotic intrapreneuring?
From a larger economic perspective, the licensing alternative could be a boon to companies facing fields crowded with a surfeit of small players, a handful of big international operators and darn little in-between. The ability to grow or even keep thriving is hard to achieve in fast changing environments. Biologists inform us that our guts are populated by billions of single celled creatures we might call parasites if they did not do indispensable work in breaking down needed substances our metabolisms haven’t evolved to handle. You might say these free lance microbes introduce adaptive innovation in exchange for all the necessities they could dream of. The analogy is a bit crude, but suggests that once again new ways of creatively adapting the core of many organizations might lie in copying from nature.
Typically, investment loans or tax breaks help the little guys but these are no longer available if the company needs to grow. For the few potential superstars in embryo there are dozens of struggling small caps which can see no obvious path to healthy growth. Could licensing feed the ” internal flora” that might sustain the painless scaling to something bigger and better?
Why the hole in the middle matters
For some decades, employment economists have tracked a dismal long term trend in the labour market. While there are several amazing career opportunities appearing on the horizon daily, they are reserved for the highly gifted, ultra hard working and extremely well placed. Sadly, there are far fewer “good” jobs and many, many more sub standard, hard grinding, yet insecure openings. Creativity and autonomy are needed for any career to be nourished and flourish. Where will those ladders to happiness and fulfillment come from, if we don’t build them ourselves? How will the workforce of tomorrow develop reservoirs of imagination and resilience? Like the little company, the talented independent innovator has so much to offer. Let’s get imaginative about getting into the game!