The Importance of Product Market Fit and Competitive Differentiation with Kevin Mako

In part 3 of our Masterclass Series on "Building a Strategic Marketing Plan for Your Business," host Eric Dickmann talks with Kevin Mako, Founder and President of MAKO Design + Invent and host of The Product Startup podcast, about finding product-market fit and competitive differentiation for your products and services.

Kevin Mako is the Founder and President of MAKO Design + Invent, the pioneer firm for providing world-class end-to-end physical consumer product development tailored to inventors, product startups, and small manufacturers.  Est 1999, Mako Design is a 30-person team with offices in Austin, Miami, San Francisco, & Toronto, has developed over 1,000 products for clients, and has earned over 20 awards including Red Dot, Inc5000, Entrepreneur360, Indigo Gold, Creative Pool Gold, Best Places to Work, Lux Magazine Best Design Firm in North America, and many others.

Kevin lectures at the Masters of Engineering program at Ryerson University is the host of the Product Startup podcast and is a keynote for The Make48 TV Show on PBS & Amazon Prime. He sits on a number of entrepreneurship and education boards, invests in small service-based businesses, and holds the Duke of Edinburgh Gold Award designation.

For additional resources on this episode and from our other episodes in this Masterclass Series, visit https://fiveechelon.com/masterclass

For more information about Eric Dickmann and The Five Echelon Group, visit https://fiveechelon.com/

For more information about Kevin Mako and Mako Design + Invent, visit https://https://www.makodesign.com and to listen to The Product Startup Podcast, visit https://www.productstartup.com/

Episode #54

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Transcript

Eric Dickmann: 0:00

Kevin. Welcome to the virtual CMO podcast. I'm really glad you could join us today.

Kevin Mako: 0:05

Eric great to be on the show.

Eric Dickmann: 0:07

Hey, this has been fun because this season we decided to do a master class format. And really walk through the elements of building out a strategic marketing plan. So in the first episode, we talked a little bit about what that means, why strategic marketing plan is important. And then we talked about really your target market and ideal customer profile and why it's so important to narrow down that focus and figure out who you're really selling to. And I'm excited as we get into part three here to really start to talk about product market fit and competitive differentiation. So to kick things off here, I'd love it. If you could just share with the audience a little bit of your background and why this is such a great topic to get into with you.

Kevin Mako: 0:50

Sure. Very excited about this topic, especially with product market fit. I've worked with over a thousand hardware product entrepreneurs. Uh, many of those with services tied to them and built my own service business. Uh, doing that. Essentially our company does world-class consumer physical consumer product development. Adventurous. Got it. Gadgets, that sort of thing, but tailored to smaller businesses. A small manufacturers, small product developers start up, entrepreneurs, inventors, et cetera. And, um, that was, uh, kind of just a crazy high school concept I had back in 1999 that I started in, uh, went to university, um, incorporated halfway through university, then went to. Uh, another university over in Hong Kong to study supply chain management and all that sort of stuff. After I was done at both of those, I Mmm. Turned down the investment banking management consulting job offers to essentially try this business and, uh, you know, left it under the premise that like, please leave the door cracked open for me in case I completely fall on my butt. I was$50,000 in student debt at the time.

Eric Dickmann: 1:58

Oh, my.

Kevin Mako: 1:59

it was a terrible idea at the, at the time.

Eric Dickmann: 2:01

Some of the best ideas are the worst ones. Right.

Kevin Mako: 2:04

Yeah, exactly right. And I, you know, keep in mind too. So when I started this, this is 1999. So that was, uh, right@the.com. Bubble bursting and exploding and everything going chaotic when I started in high school. So that was a bit discouraging. And then when I finally took the plunge in 2007, things were booming and then bam. The mortgage crisis hit. All right. So I've been through two recessions now and starting this business. So anything's possible for those who are starting a business today.

Eric Dickmann: 2:31

That's good advice. You know, we've had a crazy year in 2020 with the COVID crisis and 2021. Is kicking off as a strange year as well. And you're also the host of a podcast, the product startup podcast. So is this really the shark tank of podcasting?

Kevin Mako: 2:48

Yeah, this is interesting. I actually, I'm fairly new to the hosting side of podcasting. I took it over. It was kind of leading, um, leading essentially podcast for consumer product development, which is great. Uh, and, uh, I took it over at episode 55 and I'm only five episodes in on the hosting side of things, but it's already been great. I'm talking to a lot of professionals in the industry and essentially getting their advice for small manufacturers and startups to essentially scale build and scale their product businesses. Um, which is very interesting for me for today's topic, which is. Product market fit. Um, you know, I started myself very small and fighting through that exact challenge. Uh, you mentioned episode one, episode two. That was the big battle. Back in the day, everybody told me, you know, that product market fit. Um, would never work. Any high quality firm, let alone have the size that we are today. 30 people for offices. They said it, you know, if you want to grow to that scale. Um, You'll never, you don't work with inventors. You don't work with startups. You know, avoid them like the plague. Uh, This is you. 90% of, of, of, of the business from those firms was for fortune 500 clients. It's all about those big revolving contracts. And anyways, I didn't take their advice. Um, and luckily, uh, you know, I didn't fall on my face too badly anyways. Not much that I, you know, at least not to the point that I couldn't stand up. And fight another day and we grew this company to where it is today. Um, but a lot of this. Not only from my own journey, but from the thousand plus consumer product clients that, that we've now developed for you really get to see some of the things that work. And don't work in product market fit. So very excited to talk about that today.

Eric Dickmann: 4:36

no. That's the first thing that I want to drill down into. I mean, you have a unique perspective here because you get to see a lot of fledgling products, people who are coming to you for design expertise, and I'm sure after a while, after you've seen hundreds of these products, you began to develop a little bit of a gut instinct as to whether this product has a chance of being successful or not. What are some of the common themes that you see in products that both look like they're going to have a likelihood of success in some of the ones that don't.

Kevin Mako: 5:07

Well, if were to talk specifically about product and product features. Um, because there's really two sides to a product business succeeding. There's the people and then there's the product itself. Right. And, and obviously that all integrates with the market and timing and all the rest, but really it comes down to. The, the, the people executing on this and the product itself. If I'm going to drill down on one, um, uh, essentially theme to the product itself. And we can talk about people, uh, on, uh, you know, after this part. But the first thing first is. Something. I like to call it. It's a slogan at our company. When we're doing design work, we call it brilliantly simple design. And this comes around to the concept of MVP, minimum viable product. I can tell you without a doubt, the single greatest product reason for failure that I see is people try and be too many things to too many people at once.

Eric Dickmann: 6:03

That makes so much sense because we talk a lot on this show about casting too wide, a net. And saying that, you know, Everybody in a certain industry as a potential customer. And that's just not true. Uh, especially for a young business, right? There's no way that you could even Mark it to an entire industry. So you need to narrow down that focus. You need to be much more intentional with where you're going with your product. And it sounds like what you're saying. It's the same thing is, is people don't have a narrow enough view of, of what that product is really targeted for or to.

Kevin Mako: 6:37

And for whatever reason, um, You'll we've all heard the adage, right. The more niche you are, the bigger your business will actually be, especially in the beginning, especially. And even if you're an established company been around for 50 years, your midsize firm, you've got a strong brand presence in your industry. If you're creating a new product. That is a whole new business, essentially on its own, right? That is something new. You are pioneering something or another. And even if that's the case at that early at that, that early stage, even if you have that experience, especially when it comes to physical products, but in many other products, it's far easier to start niche. Start narrow, really hit a pain point for a very specific niche demographic. As strong as you can in that one window. And although you think you may be alienating the other parts of the market, Um, although you'll be losing certain key customers that you think might make sense. It's far easier to make sales. If you can really hone down who that our customer is, and then create a product really, that only satisfies that person. And the reason for this is twofold. When it comes to hardware and off, of course this is in software and in many ways in services, um, The more complicated the product is the exponentially more expensive. It is to develop, but not just more expensive to develop. It's going to have more defects. It's going to have increased confusion in the market. It's going to have worse reviews. It's going to be more difficult to manufacture, which means it's going to have more manufacturing issues down the road, increased warranty, claims or re return claims. And all of that comes around essentially to community review. It's far harder to absolutely nail a top-notch product to a broad market than it is to nail a very niche, very clean, brilliantly, simple, you designed product to your niche market. And the best part about all this is. If you go niche. When you actually execute on that. You can then use the user feedback to create that Holy grail, that Ferrari version, that over the top feature rich version that you were originally intending, except the difference will be one you've learned a tremendous amount from that. Execution of that first product and two, you've got a huge level of real user feedback, validating your ideas for the next one. I can assure you that it will not be the exact same model that you originally thought you wanted to create as your, you know, full feature rich version. If you wait down the road.

Eric Dickmann: 9:01

You know, I've dealt a lot with technology companies and software products, and the whole idea around a minimally viable product makes a lot of sense, right? Because you can do beta testing, you can incrementally roll out a new features, especially in this era of software. As a service, it's very easy to sort of make steady progress on a product. But if you're in the physical space, if you're designing a physical product, it isn't that a little bit more difficult. How do He successfully create that minimally viable product. If it's something that requires a machine line, you know, to create and mold and all the different things that go into a physical product.

Kevin Mako: 9:40

Well, you know, two things interesting about that first. Uh, look at how the best product development companies in the world let's use Apple as the broad example, everybody loves to use. So. Every year they make a new phone. These are the best designers in the world and they don't roll out all of their features every year.

Eric Dickmann: 9:56

Hmm.

Kevin Mako: 9:56

They've had many features in the hopper for years. It only recently became waterproof. We've had waterproof technology and electronics since the early two thousands.

Eric Dickmann: 10:05

Hm.

Kevin Mako: 10:05

It could have easily been waterproof out of the gate, which is obviously upsetting in some. Ways to, for those of us, me included whoever put our phone and rice bags, the reality is. You know, they they've even a company like Apple with all their reserves. You always have a fixed budget. You always have a certain scope. And if you really want to execute well on the things that are most important to your customers, losing focus is going to lose credibility on those features. Right. The other thing that's interesting when it comes to hardware is the hardware world is changing.

Eric Dickmann: 10:37

Hmm.

Kevin Mako: 10:38

The traditional method of hardware is spend years developing a product. Maybe have many of those features in go through all these rounds of prototyping, all this sort of stuff. Then you tool up for hundreds of thousands or millions of dollars. Then you're released that product. And you sit on that for five years. Plus. Products, even at the small level are changing because technology and manufacturing is changing. It's getting really interesting and very fast,

Eric Dickmann: 11:03

Things like 3d printing and that sort of thing.

Kevin Mako: 11:05

of that. All of that. Using that technology actually to apply to manufacturing, you can do short runs of 50 units. Many of our clients do we start with 50, a hundred units. Use that go to market test. Some things change. Go do our next series. Right. That second. Product's going to be better than the first one, because of all this user feedback. If, if nothing else, then you actually tool up maybe on your third production run when you're starting to hit those bigger volumes. That could be scaled up or scale down depending on how they are, how small you're looking to launch. But the reality is manufacturing is becoming much more fluid. You look at some stuff with Autodesk is doing right now with iterative design. Whereas you can design a shoe customed to you as the user. Nobody else in the world has that shoe. And that thing gets to you within 90 days, this sort of feedback loop is only going to become more and more real time. So we can actually apply. Two hardware. Like it has been, you know, you think of agile development and agile. Uh, technology around development. Amazon obviously does an incredible job of that. Rolling out a change every second and testing it or more. Um, we can actually start applying that to hardware.

Eric Dickmann: 12:12

You know, it's interesting. You used Apple as an example, which on a marketing show is used a lot, uh, primarily because they do so many things well, but I just saw a picture the other day. I think it was on Twitter where it actually showed some of the early prototypes of the Apple watch and this thing wasn't even a wearable device. It was, you know, a screen that looked more closer to an iPhone. Uh, but what they were trying to do is get that functionality, right? They weren't pouring everything into a form factor just yet. They were experimenting with it. They were trying it, they were giving it to people internally trying to figure out what was working and what wasn't. And I think a lot of people forget that there's a lot of work that goes on behind the scenes, even with a physical product, because there isn't the same beta testing, if you will, that you can have for a software product, but. You shouldn't just be releasing a product to market without having some degree of, of testing and trial and error and making sure it actually does what you expected it to do.

Kevin Mako: 13:06

Absolutely. And the simpler, the easier your job is going to be to do that. And it know, like we've got a global marketplace now more than ever, and increasingly, so, especially with everything that's going on. So. Even if your product's niche, you now have the whole world as your oyster. So you'd rather have a tiny piece of the VR. Of a bigger pie, which is niche, which was everybody needs to have what you have because you've so you've so carefully curated the exact feature sets that that specific customer group wants. You're far better to hit those people and then figure out how you're going to expand to other demographics or. Uh, Eric, I know something you and I have talked about before is you may find that there's other markets out there that you didn't know about, or you didn't foresee, or you didn't see use cases of your product or pivot points of your product that might be exponentially more scalable than the first thing that you saw. Again. This all comes back to that concept of iterative development.

Eric Dickmann: 14:01

Yeah. And, you know, we talked a little bit before, as well about this idea that many times, um, founders and startups, they look at their product is something truly revolutionary. This is going to change the world. This is so different than everything else out there. And yet it's really just incrementally different than things that are already there, uh, in the marketing world. Uh, there's a consultant that puts together this huge map of all the logos of the people that are in the. Marketing space. And you can see year after year, this has gone from, you know, dozens to hundreds, to thousands to, you know, you can barely read the logos anymore because it's so packed. And I will tell you that many of these companies are just doing something slightly different than their competitor. It's not revolutionary. I can't really name a single product up off the top of my head that I would say in marketing has become revolutionary. They certainly help, but they're different in that becomes challenging. Uh, on the product side to then figure out where is your fit in a market? You can't sort of say, I'm going to come up with this product and I'm going to take over the industry as a whole. Where is that, that pathway? When you talk to, uh, startups, do you find that they have a clear vision of where they want to go with that product or do they need to really take in that first round of customer feedback to say, this is how we're finding value with that product to truly understand their niche?

Kevin Mako: 15:25

I'm going to go out on a limb here and say that all product startups, no matter how well defined they've done your, your episode one and your episode two in this, in this series. Even if they've done a fantastic job of that was very much helps that will, that will substantially increase your marketing success. Um, when you look at our step three here, in terms of product market fit, Everybody can benefit from a small lawn and you won't have a big launch. You will not have a massive global launch that within the first month you've saturated your entire market. That is impossible. No matter how big you are. So. Realistically speaking, no matter what way you look at this, your first launch is going to probably be your launch is going to be smaller than your, your first production run smaller than your second year, third year, fourth, and so on as your product. Gets that user feedback gets that community review gets that community approval and so on. Right. So, um, and something interesting, you mentioned there about a small iteration. In hardware, 99% of new patents issued. Or more nowadays are combinations or improvements of existing technology. It's very rare that it entirely new technology is, is created in the mainstream. In any case, it does happen. Obviously new technologies created every day, but that's a tiny, tiny piece of the innovation market. Innovation is improvement. And a tiny improvement is actually spectacular. Really valuable to a brand, especially if they can isolate like your episode one and two, if you can isolate that customer solve that pain point slightly better than that competitor or that alternative product, you have a major market edge. You only need to be slightly better. All things else equal, obviously slightly better for them to choose you over the competing product. So you're better to isolate that one or two major improvements. Um, and do very well at those, then figure out how to expand from there, which will give you your next innovations and your next motivations.

Eric Dickmann: 17:23

I think, you know, we're doing a live stream of this show today. Uh, we're live streaming it to Facebook and YouTube and to Twitter, but you think about, you know, a company like Facebook, right? It started out as a, as a way to meet people on college campuses. And for a long time was restricted just to students. Uh, and now today it's this huge, uh, platform advertising conglomerate, where you can do live streams as well as connecting, you know, they've, they've continually pivoted and. And changed and added incremental features to make that platform more robust. They certainly haven't stood still over time. And I think that's, that's so important. And when you talk about companies like Apple, you know, one of their keys to success has been their focus on design, everything from, you know, their web presence to their stores, to their packaging, and obviously their products and their user interface. Uh, how important do you think design is to the success of a product?

Kevin Mako: 18:23

Um, my opinion aside. Uh, I'll just make it something really interesting. That's happening in the industry. We have a ton of customers who have. Very strong technologies for their hardware products. They're like the best batteries or, or the best enclosure or whatever else. These things that are never seen by the, the, the, the end consumer, um, stuff that goes in the back of trains, all this sort of stuff. We have dozens of these types of clients that are coming up to us and saying, okay, we have the best technology in the industry. How do we make it sexy? How do we make it look good?

Eric Dickmann: 18:57

Yeah.

Kevin Mako: 18:58

The reason is it's because you're sitting there at a trade show. At, well, maybe not this year, but in a digital trade show, let's call it. And there's three products and yes, on this very detailed technical specification document that you have, you are the best and you have all these reasons why you've created this hardcore technology, but when I'm standing there and looking at three pieces, the one that looks good, it's going to catch your eye. And it's such a simple, low think about the amount of effort and time and history has taken to make like such incredible technology. And yet for such a quick, simple, cheap project, especially like if you're using a firm like ours or something that it's a very easy exercise to take a box and make it a nice, clean, modern looking. High quality, 2021 bucks. Very simple exercise, relatively cheap to everything that's gone into building the actual technology and gives you that instant snap. Um, wow. Factor that hero factor, that halo effect. Um, of a product, right? So now that we're seeing that across industries, of course, if you trickle down to those industries, which are consumer facing, it's almost like a baseline. Now, if you're creating a product in 2021, and it looks like it was made in 1995, You're gonna have a rough ride.

Eric Dickmann: 20:09

You know, No continue.

Kevin Mako: 20:12

No, no. That's it.

Eric Dickmann: 20:13

No, I was gonna say, um, the next episode after this is, we're going to start talking a little bit about building a brand story and the messaging that you develop around that. And one of the interesting things that I've heard from one of the guests that I had on my show, a Michael Solomon, is that we tend as, as companies, we tend to live in our own little bubble, our own little world. And what Michael Solomon suggested is that consumers buy things because they want to see how they fit into their lives. We don't buy things in isolation. So here's a kind of a dumb example. I'm sitting here at my desk, I've got computers and lights and microphones and everything. I've got a lot of things plugged in. If I go look at that power strip underneath, you've got one or two products that take up four outlets because they've put this huge brick of a power supply right on the end of their power cord. And so it doesn't take into consideration that you're going to plug in anything else, but this one device, whereas you have other things that, you know, have a very small plug in a Plugin and you can plug in something underneath it. That may be a dumb example, but the idea is, is that things, products aren't purchased and used in isolation they're often used in conjunction with other things. And I think one of the elements of good design is how your products work with others on the software side, it's all about integrations, right? Does your product integrate with the commonly used tools that would be in that space. And I would guess that from a consumer product standpoint, these are some things that you have to consider as well.

Kevin Mako: 21:47

Really good point. Um, you know, that. The thing that's kind of overlooked, is it, uh, everything evolves and if. Some things that were obvious, you know, I think, I think of something simple, like the wheel, right? Obviously after that, we almost created while this is an obvious way of doing it. But before the, we always created, boy, that was a pain. So we see these things happen now in design, that happens at an accelerated rate and so much behind the scene. Every year we've got designed, like even just internally at the firm design libraries, best practices, integrations, collaborations with other products, hundreds upon hundreds of hundreds of techniques that are now obvious that two years ago were not. So if you have a product which has many different elements to it, even if it's a relatively simple product, like you said, even the plug is a pain point. The plug has evolved the USB cable. Like anybody, if you're not using the latest USB three and you have to plug in that USB cord and figure out if it's up or down. Well, now you can just plug it in straight either way, right? Even that tiny evolution is helping those pain points, but the reality is your product needs to evolve with the times because otherwise, when you add a number of these pain points up, if you have a product that's. 20 years old or 10 years old. There's all these obvious things that the consumer see that you don't. And that's why it's very important to actually have those best practices to revitalize it with, which is its own innovation. And in itself, that's the next evolution of the product. The best companies in the world are doing it. So you showed as well. You know, something interesting about that simplicity too is as a design firm, the more complicated a product is the more money we make.

Eric Dickmann: 23:22

Hmm.

Kevin Mako: 23:23

yet I can't help, but tout enough. To keep the product is absolutely simple and clean and direct and modern as possible. Because I know that that's what leads to actual product success itself when it comes to a launch in many ways of that we discussed here on that show. So, if you talk about that, W what you just mentioned there about evolution of a product and making sure it integrates well with others and it's up to best practices and all that combined with keeping it clean, focusing on that product. It's almost an easy way as well for you to take that next step. Whether you're a startup coming up with your first product, it's gonna be very difficult because you're learning everything on the fly. So that's step one. And for sure, you gotta keep it simple clean. If you've been in the game for 50 years, you still need to keep it simple and clean because whatever evolution you came up with or whatever improvement you see. You have to first focus on ensuring that you have done that, right. And done that to a modern standard and got consumer feedback and review before you actually roll that into your, your full line. Even if worst case scenario, you want to launch everything at the same time, do it behind the scenes. Um, Eric, like you mentioned earlier, uh, do it in prototyping and user tests and all that sort of stuff. If you really have to launch everything or you're full fledged thing out of the gate, still use this method. Still apply this method in your development. Just have it happening behind the scenes before you go Click.

Eric Dickmann: 24:41

You know, it made me think, as we're talking here, how much design can also fall into that category of competitive differentiation and, you know, staying on the topic of plugs, I guess for a second is it might not look like it, but I actually do shave and I have an, a Rocco shaver. you know, which is for, you know, under the beard. And then I've got a new Rocco shaver. That's a beard shaver, and that I have a hair clipper, all three from Norelco. All three of them use different chargers with different plugs. They're not interchangeable. So I literally have a box of plugs and they all look very similar, but they're all slightly different. And I look at that and I say, you know, again, you look at something like Apple, they came up with a lightening adapter for their phones, every phone use the same one. So you knew if you went over a friend's house and say, I need to charge my phone while you just grabbed their, their plug and you plug it in. Right. That was actually a competitive differentiator, I think because they made some of that stuff. So interconnected. And you just know if you stay in the family, you're stuff is going to work together. How do you look at things like design as becoming a competitive differentiator for companies?

Kevin Mako: 25:51

So Erica is brilliantly brought that up. That's actually for, for listeners out there that are established or mid-size manufacturer or those who are kind of planning their brand. Um, this is called, this is called brand or product continuity brand continuity. This is one of the easiest, lowest hanging fruits. This. You know, if your, if your product is, is God like old, archaic visual, look, that's an easy one to fix. Uh, if you, if your products look or function relatively differently as if it would be hard to tell one adapter from the other, uh, which, which product or which brand that belong to. Uh, whether it's low, whether it's colors, whether it's design language, that again is also something very easy to fix, but brand continuity essentially. You take those products that you have and make sure that if somebody sees those products and don't see the logo, no matter what way they're looking at those things, they should always know that is an Apple product. I'm quite certain that almost anyone out there, whether you're looking at an iPad and iPhone, a heck of Apple comes out with a car, I'm pretty sure you'll be able to look at it and say, that's an Apple product without seeing the logo. Knowing that that's the case. So brand continuity. You've already got this, this great. Uh, customer base, you've already got these great products. It's very simple. Just go in and buy a design language. If you have the design capabilities, in-house great. If not hire an outside firm, this is a fairly simple process to go through, clean up your line, modernize it at the same time, come up with any of those, you know, low-hanging fruit, that one or two key features that you have, uh, at the same time and then make sure your brand. Uh, through the product, through the product design language, all looks the same. One other thing you mentioned in that as well is a competitive edge. Which has a bit of a separate topic. Again, that's one of those things that if you look at kind of modern design, It's very easy for experienced professionals, especially a team of professionals to look at something. And look at the competitors and find dozens of improvements, tweaks, fixes that you could potentially use. And of course that again, you'll trickle it down to the one or two that you really think are the main fix. But you mentioned earlier in the call of being stuck in the bubble, one of the most difficult things for a company to do, or a brand manager or a VP. Uh, or a product lead or whatever it else is, took, truly understand both the pitfalls of their product. With their customers. But even more difficult to understand as a potential opportunities. So that's where yes, you need to kind of work a little bit outside the box, create some new thinking and get some fresh ideas and suppression integration either from your client base or from outside support or whatever else to try and figure out what those missing opportunities are for the evolution of your product or your brand, or a secondary version or a different version or whatever else. Um, there's going to be a new market for that product. Uh, or a new type of product that will serve your existing market.

Eric Dickmann: 28:43

Yeah. You know, you mentioned, um, just how, when you look at a product, you might be able to tell this is an Apple product or whatnot. I would argue that, you know, if you went to a website and the logo wasn't there, or if you walk by a store, You would still know that you're entering an Apple store or an Apple website because they've kept that design aesthetic across. And I really think that has become a competitive differentiator for them. And for many of the businesses I deal with, you know, who our software technology businesses. A lot of times their differences, their user interface, their simplicity, their ease of use the, the ease at which a software allows you to get something done. So then what do you say to a young company that says, well, we just can't afford good design right now. You know, we'll, we'll, we'll make it prettier later. We'll invest in that box later. Uh, we'll fix the UI later. Um, that can be almost fatal to accompany. Right?

Kevin Mako: 29:40

You know, but it it's, it's very, it's tough, but not impossible. Like there are examples of. Um, you know, a handful of very experienced, very talented people that can get together and do it all themselves. That's okay, but you really have to be honest with yourself if you have that skillset in-house and what is going to be the net effect, because you know, one of the beautiful things about a simple launch, whether it's hardware or software. Is that if you have kept it really simple, you're audience is relatively small and you've solved a major pain point, meaning they're going to be raving fans. So that's like your one opportunity as a startup to come out. And come out, swinging.

Eric Dickmann: 30:17

Yes.

Kevin Mako: 30:19

The problem is, is if you come out with mediocrity, your business may be dead in the water forever. This is very different than a firm that has multiple products and, you know, long established. They can come out with a dud, not ideal. I still highly. Recommend against that. You should be doing it right. That's a mistake, but you can weather the blow. If you're a startup and your first, first, product's a dud. How are you going to raise investment money? How are you going to get that second buyer on board? How are you going to re-engage that customer base? How are you going to fix the reputation? Of all the negative reviews. Even if you come out with that next version that fix all those problems. Now you've got. 50 bad reviews online of the first one that you released, people are just going to assume that's following through with the brand. So it's almost arguably more important than earlier stage. You are in the development process to ensure that you're doing it correctly, whether or not that means outside help is another. As a, as another topic. Um, but realistically speaking, just be absolutely sure that that thing's coming out. Um, as a quality product, doesn't have to be featured. But absolutely unquestionably. It has to be top grade in terms of quality.

Eric Dickmann: 31:23

You know, I don't know how familiar you are with this example, but you know, recently there was this launch of this short form video content website called Quimby. And it had some of the biggest names in Hollywood behind it that we're producing content. And the idea was, you know, well, if you're sitting on a subway, you've got 10 minutes in between stops, you could watch your short form video and, you know, we'll charge a subscription fee and this'll be great. We've got a lot of big names behind it. It was a flop, you know, the investors lost millions and millions of dollars on this thing, even though you had some really smart people behind that. And I would argue that validates a lot of the principles that you're talking about today. They, they went big. Uh, they went broad. Uh, they did an idea that seemed good on paper, but really hadn't been tested in the marketplace to know how people were going to consume content, or even if they wanted this kind of a service. And it flopped, there was really no chance of recovery.

Kevin Mako: 32:22

Yep. And, you know, what if it's, uh, whether it's hardware, software, and you want to try the let's call it hack approach, which again, rarely works, but it occasionally does. If you want to try the hack approach, take the methodology. I mentioned about earlier for the bigger companies and just do it privately. Do not launch publicly with this thing. So if you're going to hack it through and get your, you know, rough prototype and you're going to try and pre-sell it to some people sell it to friends and family. Get their honest feedback, ideally, which is also a bit tough, but really search for honesty there. Um, try and keep it off of social media and whatnot. But, you know, that's a really difficult way to do it. You're going to be far more successful, just finding the right investor that believes in you to help you do it properly. Then you are trying to hack it through and go through, you know, refer, lease rounds to eventually get to the point where you can. Um, do it properly or whatever else. So, you know, you're looking at chicken or the egg here. Well, this one's easy. Just if you really can't afford it financially to do it properly, get somebody on board that can help you with that. Or if you absolutely have to. Do it in, in, in the privacy. Uh, the public market's not going to see and just essentially call it your R and D right.

Eric Dickmann: 33:37

When you design a product, especially a physical product. Again, you know, if we have this understanding that there's probably something similar in the marketplace day, that this is a variation of an improvement and upgrade, how much attention do you pay on the competitor's product projects? Our products, I'm sorry. And the reason that I say that is because sometimes we can be a little closed minded, right? We can look at the world, uh, based on what's already there today instead of taking the blank canvas approach and saying, if we completely rethought this from the ground up, maybe we could do it in a better way. Do you. Do you see that there's too much focus on looking at what others are doing and then tried to do it differently versus that blank canvas approach.

Kevin Mako: 34:19

I'll tell you the worst thing that we get that happens more often than not. People come and they say, okay, here's our competitor. And I got an idea. We're going to make it better and it's going to be cheaper and we're going to spend less on development.

Eric Dickmann: 34:31

Hmm.

Kevin Mako: 34:32

Pick one. There it is. I'll tell you the first step that you can do, um, is never look at a competitor and say, we're going to do it cheaper.

Eric Dickmann: 34:43

Hm.

Kevin Mako: 34:44

Unless you're actually changing something, which arguably is an improvement. Even if it's a reduction in features, it's an improvement to a specific, let's say demographic, you're going to more narrowly target a piece of that audience. And that in turn is going to make it cheaper because the reality that most people, whether it's software, hardware, again, if you think that you're going to do something simply because it's cheaper, you're fighting against a company, who's done it for many years. There's a reason they're charging the price that they're charging. Maybe there's a chance that they're gouging a bit and yeah, there is some margins, but let me tell you, as soon as if you do become a real player, it's very easy for them to flip the switch and, and, and, and reduce their prices. And all of a sudden, if that was your competitive. Uh, advantage you now just lost it overnight. You're far better off as a far easier road to improve something. Even like we talked about earlier, even if it's something, uh, something small. And understand really what your value is, which goes back to your episode one and episode two. How have you figured out that? Okay, my small improvement or my small change, or even my small reduction to make a slightly different product is going to really hit the nail on the head of this consumer segment. And then you do everything you can do to make that a quality product or service or website or app or whatever it is to ensure that you're hitting that demographics, that you can win in that demographic. Without competing on price because that's very hard, almost impossible thing to do.

Eric Dickmann: 36:07

And I would even argue that one of the goals should be, how could you charge more for it? Right. You know, you, you want to build those margins up and have a premium product. Not be in the commodity business and selling the, the low cost product. That's a, that's a tough road to hoe.

Kevin Mako: 36:19

Margins are key. Every product we look at where in the hardware space, obviously it's different in, and, uh, you know, software as a service and whatever else, but the same principle applies. Uh, when we look at a product, if we're manufacturing that thing for a dollar, we want to be selling it to the end consumer for four to$5, five times the price. That's not because they're getting ripped off it's because if your manufacturing cost overseas is a dollar. It's probably two to$3 and all the distribution, marketing, uh, logistics, et cetera, to get it to that end buyer. Right. Everybody's taken a cut these days. Amazon takes a major cut. Everyone takes a cut. So you need to build that into your margin so that you have room leftover to create, uh, your, your business around that product. You need to ensure that the profit is there. Do not, again, this comes down to doing it for cheaper. Um, if you're doing it for the same price, but you're twice the cost, that's also the same. You've got a problem, right? So if you're twice the cost, you need to be twice the price as the competitor or more so you can build an extra value in there.

Eric Dickmann: 37:20

The whole margin game is so interesting to me because obviously once you start to get some scale, little tweaks can make a big difference. Uh, you know, back to our Apple example, you know what the latest iPhone, I know they left out the charger and of course, leaving out the charger, saves them some money. But the hidden thing that I didn't even think of was that it allowed them to change the design of the box. The box is now an inch less thick than it was before that allows them. To get X number more iPhones on a pallet, which allows them to get X. Number of more pallets on the plane, uh, you know, which reduces their shipping costs. And it just has this trickle effect, uh, that can really impact margins in a significant way. And I think it's really fun to go through those kinds of discussions. And maybe it's not the thing you think about when you're releasing your first version of the product, but as you're going through, you know, getting rid of unneeded features that people aren't using or figuring out ways to do things around the manufacturing process or the packaging or whatnot, there are so many areas of potential improvement.

Kevin Mako: 38:22

Absolutely. Start with one size, not one size fits all. Start with one demographic. Start with one quality class, start with one feature, all these things kind of combined together, right. To keep it really simple, really niche. Um, you know, and that, that, that. One of the big things. When we talk about that, I'm going to make it cheaper. You know where it's going to say, I'm going to make it universal. So I'm going to create this product or this website or wherever that it has all these customizations. So anybody can basically use it. Customizations or multiple sizes, uh, or, or for compatibility. That's another big one. I'm going to make this compatible. So, okay. I want to do it simple, but I'm also gonna make a compatible for the future. All of those things are ridiculously expensive. If you want something to be forward compatible, like truly forward and backwards compatible, whether it's software, hardware. 10 X your budget. Because a tremendous amount of thought and consideration has to go to India every possible. Or I say every major likely scenario, both backwards and forwards to how that product is going to integrate over the years that isn't major exercise. So forget forward and backwards compatibility, forget making it size, adjustable, forget customizations for again, all these extra features. Um, keep it to the bare bones when that, and then you build the credibility. You've gained the revenue you've learned from it. You've got your audience, then you'll crush it after that. No question about it.

Eric Dickmann: 39:46

I'm truckling because, uh, I, I'm a fairly slim guy and I'll go to the sale rack at the department store. And you know, the only shirts that'll be left are the double XL slim fit. And I think to myself, is there really that much demand for a double XL slim fit shirt, you know? It seems to be a kind of contrary. And it makes me think about, you know, what you're saying is sometimes you just don't need all of those choices. Kevin, this has been a fascinating discussion. I think we could talk about it for hours, but I want to give you a chance to talk a little bit about where people can find you on the web and a little bit more about your podcast.

Kevin Mako: 40:21

Yeah, I actually that's. That's the, uh, you know, the thing that's most interesting to me right now, um, w we've just got some great guests coming onto the podcast, so it's a, of course it's free and it's easy to check out. I'm just going to product startup.com and. Uh, less than for advice on a hardware product development. That's uh, that's pretty much it. Um, if you're interested in our company, of course, you can go to our website to macro design.com, M a K O design.com. Uh, we've got over 900 blog articles, all organically written by us on product development from, from end-to-end. Uh, client journeys, all that sort of fun stuff. So feel free to check that out, but I would encourage anybody in the hardware space. Uh, check out that podcast because we are doing everything we possibly can to get the best and most unique, a very powerful and impactful guests on the show. Just to talk about how to build and scale. Uh, product businesses.

Eric Dickmann: 41:13

It's not easy being a startup. There are so many challenges that you have to deal with, uh, you know, across your organization that any help that you can get from people who have been there or going through some of those same challenges, I think is a, is truly valuable. And I've really appreciated your insights today on this whole idea of product market fit and competitive differentiation. I think it's a, it's some really good insight for the audience. So I appreciate your time today.

Kevin Mako: 41:35

Thanks, Eric. You're a fantastic host. Great questions is really enjoyable to do this.

Eric Dickmann: 41:39

Thank you. I really appreciate that. Thanks again.

Kevin Mako: 41:42

Take care. Transcribing...