Entrepreneurs often seek opportunities to bring a New or Innovative Product to the marketplace. At first glance the opportunity may appear to have all the makings of a winner with plenty of revenue potential. However, if you want to be first to market, be sure you understand the challenges of doing so.
When a new product is exposed to the marketplace, other businesses may see the potential and want to replicate it. Many business entities have the capacity for “competitive intelligence,” systematically gathering, analyzing and managing information on competitors. In some cases, this activity oversteps legal limits and becomes “industrial espionage,” covert and often illegal practices to investigate competitors to gain a business advantage. In other words, many companies have the resources to look for other business ideas to capitalize on and do so on a regular basis.
To meet this challenge you need to be able to produce an adequate inventory to meet the projected demand and adequate finances to market the product on a large scale. This can be a large hurdle for a start-up entrepreneur.
The risk to a new start up is that if you are not well capitalized to produce and market on a larger scale, you may be leaving the door open for another well-established or financed business to introduce this product on a larger scale. This may leave you, as a start-up innovator, in the wake of the larger market player.
To avoid this scenario, before entering the marketplace with a “winning” product, take steps to protect your investment. The first logical step is to patent the product. Patents are geographical in nature. A Canadian patent would be the first level. A U.S. patent may be the second level. This can help protect the innovator; however, be cognizant that the patent will be unique. The larger market player may still be able to “manipulate” the product into something that meets the market demand, and does not fall under the existing patent. This grey area can be a source of grief. However, if the patents are in place then there is opportunity for either the sale of the patent to larger industry businesses, or an opportunity to licence the product to the same larger player. This would allow the innovator to retain the patent, and have some control over the use of the product and generate licensing revenues or royalties. The question then becomes: do you want to have a large piece of a small pie, or a small piece of a large pie?
Either option will require money, either to expand quickly enough to maintain the first to market strategy, or to hire professionals (patent lawyers, contract lawyers) to complete due diligence to protect your interests. (Note that according to the Globe and Mail, “Due to the cost, patents may not be for the faint of heart but, for better or worse, they have become essential and highly valuable assets in many companies today.”)
In summary, before jumping into the marketplace with an innovative new product, be sure to have a clear and focused plan in place that reflects your goals and your strategies for achieving them.
Halton Region’s Access to Professionals program allows one free consultation with a local professional in a variety of areas including business law and marketing. E-mail Halton Region’s Small Business Centre to speak with one of our small business consultants to book your consultation.