SkyCribs
#SkyFunding777
Best viewed in desk-top mode
INCUBATOR PRODUCTS-SkyPro 01
SkyCribs New Product Development Funding Model
"God, your Industrial Designer and SkyCribs have something in common ... we like to create things"
Welcome
Our approach to new product development funding is called SkyFunding, a risk and reward model where all stakeholders who stand to benefit from the introduction of a new product also has to share risk with the inventor / entrepreneur. It provides for a truly collaborative partnership that promotes new product development. The funding could come from the marketing budgets of the supply chain with exclusive supply contracts and no competition as reward if the product is successfully taken to market. It also creates a vested interest by all stakeholders in the successful introduction of the product into the market i.e. a team effort.
Product Development Life-Cycle Management (PLM)
In terms of explaining our approach to funding we need to firstly differentiate between the distinct phases in the Product Development Life-cycle that requires funding:
-
The Ideation Phase - the creative process of coming-up with an idea for a new product, packaging it for validation by the target market and having it validated
-
The Product Development Phase - materializing the idea into a tangible product and accompanying manufacturing process. Many people who make hard business decisions are not the creative type i.e. they need to see and touch the new product to be able to receive the message before they can begin to translate it into a business opportunity
-
The Launch Phase - converting the product into a business opportunity
-
The Build or Commercialization phase - capitalizing on the business opportunity
Key SkyFunding Role Players
In term of the key role players that one would find in the new product value chain at some stage or another, we have identified the following:
-
Inventors and Entrepreneurs i.e. the dreamers without which we would not have new products and services and whom in many cases also have the ambition and passion to become businesses owners of their own new and related products. In terms of the traditional funding model these role players carry all the risk and often with little or no reward
-
The Supply Chain i.e. the companies who could stand to gain significantly from a new product in the market place
-
Material suppliers i.e the companies that will supply the materials for the new product
-
Manufacturers i.e the companies who will manufacture the new product
-
Industrial designers i.e. the companies who could and should ensure a properly designed product and manufacturing process but who are in most cases too expensive for small inventors and entrepreneurs
-
The Marketers i.e. the messengers that educate the market, advertises the products and promotes the brand. The services of this group are essential in the launch of a new product but are in many instances also out of reach of the small inventor and entrepreneur. The success of a new product is often the result of the work of the Marketers
-
Other service providers i.e. the merchants, wholesalers and retailers that sell the new product
-
-
Investors i.e. the businesses and individuals who make money with money i.e. venture capitalists, angel investors, corporate monopolies, etc.
-
The Crowd - This term comes from a modern funding model is now known as Crowd Funding* and is a product of the advances in information technology supported mass communication i.e. social media platforms and networking and includes the following groups:
-
Prospect Customers i.e. those who will ultimately benefit from the successful introduction of a new product. Their contributions are to get involved in the validation of the idea initially and ultimately to buy the product. In terms of funding the development project they could pre-order the product very early in the life-cycle
-
Sponsors i.e. companies who are not in the Supply Chain but could see some benefit coming their way from the introduction of a new product that indirectly promotes their products
-
The Public - everyone else who wants to see our country become more successful through innovation, new product development, small business development and/or at the same time receive some form of tangible reward for their contribution
-
* Wikipedia: "crowdfund", verb: crowd-funding - fund (a project or venture) by raising money from a large number of people who each contribute a relatively small amount, typically through the Internet e.g. "he's launched a campaign to crowdfund the first album he'll record under his own name"
We map the funding requirement of the various phases of the product life-cycle to the role players as follows:
-
The Ideation Phase to be "funded" as usual by the Entrepreneur / Inventor in the form of time (which is money) and cash
-
The Product Development Phase and Launch Phase to be funded by the Supply Chain and the Crowd
-
The Build phase to be funded by Investors who only has an appetite for low risk and high reward and would therefore be interested in new products that are no longer ideas but proven concepts with accompanying solid business plans that can be subjected to "due diligence"
SkyFunding Roles & Responsibilities
SkyFunding Risk & Reward
In terms of risk & reward we map the roles players to their rewards for their contributions (risks taken) as follows:
-
Entrepreneur / Inventor - In return for the idea and initial risks the Entrepreneur / Inventor should retain some or all of the IP and a significant share of the new business (sales) if that is the ambition. This is based on the fact that the Inventor / Entrepreneur facilitates the introduction of the new product all the way from Ideation through Development to Launch i.e. gets credit for facilitating all the investment to that point (even if funded by the Supply Chain and Crowd), plus the investment by the Investors (which is also facilitated) i.e. direct investment + product development cost + COS + Sales.
-
Supply Chain - In return for the risk taken (calculated of course), the Supply Chain gets exclusive supply and service agreements to develop and build the new product with some conditions and escape clauses. Their risk and reward projections are based on the product development costs (Designers, Marketers) and cost of sales projections (Material Suppliers, Manufacturers, Other)
-
Investors - If they are approached and commensurate with the risk profile, which is vastly reduced as a result of where the product is in its life-cycle at this point in time, the Investors would receive reward in the usual form but hopefully in a less aggressive quantum than the traditional investment process. Their risk and reward projections are based on the sales contract projections
-
Crowd - The Crowd Members who make donations gets nothing in return other than the satisfaction of their attempts to make South Africa great. Others could receive discounted product, for example. Sponsors could piggy-back on marketing campaigns for their efforts and demonstrate their investment in economic and social upliftment
Summary - Traditional funding vs. SkyFunding
In summary our approach is all about changes in timing, and changes in roles and responsibilities when compared to the traditional approach as illustrated in more detail in the two diagrams below.
​
Please click on the images to enlarge or download if not legible.
The SkyFunding model has been applied in the SkyBakkie project, a range of new products that SkyCribs is developing.
SkyFunding Case Study
About SkyCribs and Product Development
At SkyCribs our interest, skills and experience in PLM comes from our experience and skills in SAP, the engineer-to-order process, project management, passion for cars, entrepreneurship, leadership, creativity, work/life balance, engineering, etc. We also love the great outdoors i.e. camping, hunting, 4x4 stuff… we subscribe to the notion that one must have a passion for what you do… combined with bread & butter = perfect balance?
"Have you hugged your Industrial Designer today?"