Here Are The Steps To Go From An Idea To On The Shelf With Tracy Hazzard From The Killer Innovations Podcast With Phil McKinney
What do you need to do if you want to bring your idea to the shelf and make a profit from it? We find out in this informative episode. Phil McKinney is on hand to interview Tracy Hazzard on the design and commercialization process. Tracy discusses their design process, the common issues companies face in getting an idea realized, and some manufacturing woes. Plus, we also get a short discussion on intellectual property to boot! Listen in for a fun and fact-filled episode on design and innovation.
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Welcome to episode number one for Season 12 of the Killer Innovations show. I can’t believe it’s been that many years since we started. The very first show was me sitting with a laptop, and a cheap microphone plugged into my laptop in a bathroom at a Marriott Resort in Phoenix, Arizona. The original show is still out there in the archives. If you’re willing to dig in and make fun of me from the early days, I keep reminding people I’ve been doing this show before iTunes even existed. You could either call me an innovator or you can call me old. Be careful of which term you use.
In this episode, we have a special guest, Tracy Hazzard. Tracy got referred to me through some emails that I got. I chased her down and we scheduled her to appear on the show. Tracy has a lot of background in innovation work that she does for clients, etc., but what’s impressive is Tracy’s track record on commercialization. It’s not about having the ideas but turning those ideas and making them real. Tracy, welcome to the show. I appreciate you taking this time to join us.
Thank you so much for having me. Congratulations on twelve seasons.
My wife keeps asking me, “Are you going to keep doing this?” I said, “I could wheel my wheelchair even into the studio and keep doing the show. It’s so much fun. I’ve met many people.” You’ve got a show too. You know the joy of getting up there, putting together content, getting it out there and waiting for people’s feedback.
We’re about to hit our anniversary.
You’re a rookie.
We did almost 220 episodes because we do five a week.When you don't have a lot of money and time to get off the ground, you don't have a lot of runways. #KillerInnovationsPodcast #PhilMcKinney #podcastinterview Click To Tweet
In my first year, I did one a week in 2005. March 28th, 2005 was show number one. I did 51 shows in 52 weeks in the first year. Back then, since you didn’t have iTunes, there was a lot of hand-holding. I had to write a lot of HTML code to support the show. This is before any plugins even existed for WordPress to do a podcast. I think I was Libsyn customer number four. Nobody’s got a lower price at Libsyn than I do. I got grandfathered in. I went through all of them. Tell us a little bit about yourself. Give us a five-minute intro about you and what you do.
I am a designer. I went to Rhode Island School of Design way back when I met my husband there who is my partner, which a lot of people are shocked at. I do work 24/7 with my husband and happily. We’ve been married for many years. It’s working. We have a business called Hazz Design. We have a lot of core clients who we get on the shelf at retail. I don’t want anyone to be mistaken by what it means to get on the shelf. We design the products that get on the shelf. We’re like ghost designers behind the scenes. We normally work for brands that already have an established product and we help them figure out what to make next. That’s our core competency, what you should be making.
How long have you guys been doing this as a service offering?
In this particular formation of the business, we’re coming up for several years. We’ve been working together on and off. We had a business in the late ‘90s, early 2000s, where we did accessories for handheld computers. We ended up with an infringing product with IDEO, Palm Computing and some crazy things. When we talk about IP, we’ve got some stories.
I’ve got stories because I was the one that did the Palm acquisition at HP, and also 33,000 patents in the patent portfolio at Hewlett-Packard. Hundreds of patent attorneys on the payroll to deal with patent litigation.
That’s our specialty. It’s doing and building an asset portfolio of not just patents but designs that are valuable so that someone can get acquired. We’ve done it three times already. Get a client to a certain level, build up their design and asset portfolio, and then they get sold.
Is there a certain segment that you focus on? Is it consumer electronics? What’s the segment that you tend to focus on?
We don’t do food or chemicals. I don’t want to deal with it. It’s too difficult. There’s a haul of regulations and it takes longer to deal with those things. We don’t do anything that the FDA might have to approve. That’s the number one rule. We don’t like to do fashion, although I have a Textile Design degree, so I have a background. There are fabrics incorporated into what we do on occasion, but we don’t like to do fashion because it’s too fast and too seasonal. We want to do things that are going to last longer than that. We joke that we don’t do food and fashion, but that’s about it. We do everything else, but we don’t do coding or software. We work with people who do and help make the hardware that it goes into, but we don’t do that.
Do you focus then on the design side of it, the aesthetics of it, the industrial design portion, and then you have others that you work with that then do the UI, UX guts of it?
That’s our specialty, but we take it from an idea. Even if you didn’t have an idea yet like a lot of our clients, it’s like, “I need to make a broader product line. I don’t know what to make next.” We take it from idea and we take it all the way until it’s in the box. We baby it through. We source for clients. We do everything you might imagine in the process of getting it back on that shelf, including sit-in on buyer presentations on the sales side and convince them that they should buy it.
You graduate from college with your Textile Degree. I was an Architecture major. I have never been an architect. I changed my major to Computer Software Engineering. What did you do right at school? You didn’t jump right into doing this, obviously.
No. I went on the corporate track. I worked for Milliken & Company, one of the largest textiles design companies in the world. That’s where I got my business crash course. I learned statistical process control and we had leadership orientation training. I wrote an article for Inc. about it because Roger Milliken is partially responsible for Trump. He changed Republican politics through a course that I took down there called Freedom School. It was all about libertarianism. This is what you do when you come out of college. You go through this course that teaches you about business and libertarianism. It was crazy, but it was great because design school doesn’t teach you that. I then went to Herman Miller. You can’t get more innovative than that. I got an extreme crash course in Design, Research and Innovation and how to handle in-house and out-house design, which is a lesson about when you need that.
When were you at Herman Miller?
I was at Herman Miller when they introduced the Aeron chair. I helped work on the fabric for the arms and the back.
It’s the mesh back. At HP, we partnered with Herman Miller on the replacement chair. I can’t remember what it’s called now because the code name was Amsterdam, but I can’t remember the name. It had this orange cloth back to it. At HP, we had a huge design team in ergonomics. We sometimes got pulled in, given also that once all we saw a lot of office equipment. It was a good collaboration, but Herman Miller’s unique in the fact that they do that external. They use those external designers. They may come up with a rough idea, but then they give the whole thing to some outside designer that either they’ve worked with before or want to get their design thoughts on.
It’s a unique model and they do it because they want to have that outside perspective. They want you to have a broader view of it and not get so tunnel vision with what’s going on in the company. I think it helps. It makes for a better design that has a universal appeal.
I remember going up to the Herman Miller headquarters. There’s that wall where they have all the materials. You already had paint combination, foam and fabric.Market product fit is always the most common problem among companies producing products. #KillerInnovationsPodcast #PhilMcKinney #podcastinterview Click To Tweet
That was my responsibility.
You won’t believe it. This wall goes on forever and you can basically take this off and walk down and match it to those things. That was great from the standpoint of allowing you to have that visual keeling to what works and doesn’t work from a design perspective. I always enjoyed going up there to see the headquarters.
My job there was to make sure that we didn’t obsolete any of those so that if you wanted them time and time again, you could recreate them.
That’s true. That is a tough problem, isn’t it? Once you designed something and it gets integrated particularly culturally, how do you make sure that it can extend for a very long period of time? What I want to talk about now is that commercialization because it sounds like what you’re doing is somewhat unique to other design groups that I’ve worked with, which is participate all the way through that commercialization versus handing it over at the point of the design.
We dialed that in and realized that early on when we were being asked to as an industrial design firm to do the design work, things weren’t successful. They weren’t making it to market. There are so many things were going wrong. If we had entered into a deal that was royalty-based, we were not getting our funding. We weren’t getting the money in the end. We were working our butts off, dropping it off at the door and then not getting any of the upsides.
Mostly it was these companies not being able to deal with their sourcing or their commercialization marketing, whatever it might be. That was their problem along the way. We said, “This isn’t the right client base for us. We want one that’s going to allow us to embed in their organization for as long as it takes.” Sometimes it’s a year, eighteen months, embed in an organization and take this thing all the way to market for them and with them. In the process, sometimes we build up their team for them because they didn’t have it before. It has happened.
We built up sample shops in Asia or built quality control systems for them. I’ve even built sample requests database libraries. They don’t have any processes to handle this because they end up with a great product. The next thing they know, they’re a $100 million company, but they have no systems in place. We embed ourselves and do all of that. We require fee plus royalty so that they understand that we’re both in it together.
It makes everybody have skin in the game. When you think back to the clients before you changed your process, are there 2 or 3 common mistakes that these companies were making that you said, “We’re going to solve those?”
There are quite a few, but the most common ones were they would come in and they’d say, “I’ve got this great invention or this patented idea. It’s so great. I love it. There’s going to be a market for it.” Often, there isn’t a market for it or it’s a market that’s very difficult to reach. It’s way more difficult and requiring way more money than they had gotten in terms of financing or funding. That’s where it would fail in its market connection to the product. They would come in with the flip side of that. They’d get so in love with their product that they weren’t open to any adjustments or changes. They got so wrapped up in it. The reality was that their product wasn’t the best thing since sliced bread. It wasn’t ever going to make it. It’s usually a market product fit that was always the most common problem we found.
It’s interesting because it’s usually the first thing that any entrepreneur or any innovator should be focused on. It’s not the fact that you got an idea. Passion doesn’t get you to success. We all get emotionally attached to the idea. The question comes down to is how do you translate that to something that’s going to be ultimately successful? I get it all the time. I got a guy who sent me an email, a listener of the show who has two different ideas and is passionate about it.
He started asking some questions. They haven’t sat back and thought, so I’m like, “Here are the five questions. You need to go find 100 customers, ask these five questions and then let’s come back and have a conversation.” You haven’t validated the idea. You validate the idea in your head, but you haven’t validated the idea with that target market to even know, is this worth even spending your time on? In this case, this person already has patents and processes. He has already dropped $20,000 or $30,000 in the patenting efforts ahead of knowing or understanding if this is a real problem that needs to be solved.
I agree that’s the biggest problem I see from the small startup and inventor side of things is that there’s too much money dropped before they even have any market proof. Our process puts that first before you patent it. We have a seven-step process that we use and the patent is fit.
Walk us through. What’s the process you use with your clients? What’s the first thing you would do? Someone called you up and reached out to you and said, “I slipped in the shower, banged my head, and now I’ve got this great killer idea.”In retail, you can't make a mistake. You won't get back on the shelf again. #KillerInnovationsPodcast #PhilMcKinney #podcastinterview Click To Tweet
Our very first step is to prove it. We check that market and product. It’s usually the product concept. We’re testing the concept. We don’t need to have a prototype. We don’t need to have any of that. We’re testing the market fit for that. We’re also testing the reach for that market. Sometimes the market’s hard to access and that kills the idea. It’s not possible. We check that at the very beginning and it is almost a litmus test for whether or not they’re going to be our clients as well. That’s why we do that first.
The next stage we do is we plan it. We sit down and we look and say, “What are all the steps that are going to take it to market?” We price it. We haven’t made anything yet. We then prototype it and then we protect it with patents or other things. We do that after we prototype because you can always make it better. We then predict it. This is where a lot of companies go wrong. They don’t have enough financing to get them through the amount of inventory they need and other things. We predict it before we start producing it. That’s our last. Promote it is a whole another thing. It’s a whole another chart.
I think your process of getting through, at least through the prototype stage, before you worry about protecting it because many innovators are worried about someone stealing their idea, “I got to hurry up and get a patent before you talk to anybody. I’m going to make you sign a nondisclosure before we discuss it. My policy is I can’t sign a nondisclosure. If I talked to way too many companies, I’d get myself all tangled up. The key there is that the competitive advantage is not in the protection. It’s in your execution. Can you execute it, get out and establish either your leadership position? It’s not about waving some document five years from now that you get from the patent office because five years from now, you better be on to the next thing. That becomes part of that drag that’s happening.
Tracy and I were talking around our own little individual observations of some of the challenges on Kickstarter, where those companies that went on to Kickstarter raised a bunch of money for hardware products but didn’t have the experience of what it takes. It’s not something that you can crank out in 30 and 60 days. Tracy, you and I are both coming from different backgrounds but similar perspectives in that you can look at some of those plans in the early days of Kickstarter with a harder project and you’re like, “That one is not going to make it.”
It’s so true. I could see all the indicators right there. Usually, it’s a problem with a resource. A lot of inventors and innovators, this is the problem that they think, “It’s okay for me to use somebody who’s never done this before.” That’s the biggest mistake you can make when you don’t have a lot of runways. That’s what I call it when you don’t have a lot of money and a lot of time to get off the ground. When you don’t have a lot of runways, you better have the best.
For me, that’s someone who’s been there and done that. We’ve been burned by it. We learned the lesson the hard way. We had batteries explode on something. You think about what’s going on with the hoverboards then. We have batteries that were leaking all over Staples Store simply because we hired an engineer who didn’t understand rechargeable batteries. We outsourced to them, and then we didn’t have somebody double-checking their work. It’s a dumb mistake. It could have been saved by $800 of a consultant reviewing somebody else’s work. We thought, “These guys will be fine. They know what they’re doing. They’ve been engineering a long time,” but they had not been there done that for what we needed.
It does take up a whole set of different kinds of skillsets. You can easily find the people out there that do it. It’s the old analogy that says, “An expert is expensive but an amateur will cost you everything.” You’re not getting away with cheap. Don’t even try to play the cheap game. Experts are expensive. Pay for the expertise because, in the long haul, it’ll save you a lot of money. Hiring that amateur or hiring somebody maybe has AA degree, the nephew of somebody you know, who can come over and you think might be able to do the job but has never worked like in this case, with rechargeable batteries.
Particularly, all of the issues we see with lithium-ion batteries and why the airlines are so sensitive. You cannot put a lithium-ion battery, even your spare battery in your bag. Check it in the cargo hold. It has to go into the main cabin with you because of the temperature issues that lithium-ion experiences. In my days of building at HP with 40 million laptops, you make darn sure every lithium-ion battery is not going to have an issue.
There are so many problems that come up. I see it as much with people choosing manufacturing sources. It happens as frequently. Sometimes even more with US manufacturing than it does with Asia manufacturing. The reason why that is, it’s because you think, “They’re right next door so I can see them. I can go there,” but if they have not done this before, things go wrong. We made that mistake early in our careers. It should have been a simple ballpoint pen. It was a stylus pen, but the threads weren’t done right because they didn’t understand the manufacturing of pens and they broke apart.
It was a dumb mistake that wouldn’t have happened from a manufacturer that knew the category you are already in. The thing about Asia is that typically they don’t like to do something that’s outside their box. You end up at a manufacturer more likely to do the type of category or product. You also usually have a third-party trading company in the process a lot of times or quality control. They stop it when you have someone who doesn’t have enough experience, and they stop you from it. That’s why I see it more from US manufacturing than I do from Asia.
In the case of what you do for your clients, do you take it all the way through and helping them qualify the manufacturing process all the way through to that end of it?
We do more than that. I will be there on the first run and sign off on the design samples that come off. Sometimes before they even pack the full container, we’ll go in and assemble a product if it needs assembly and make sure that everything is right. The very first one never leaves China or wherever it’s coming from and get on a boat before I signed off on it. That’s the way we do it. It has caught so many things that you can head off so many problems. In retail, you can’t make a mistake. You won’t get back on the shelf again.
If you clog up a retailer with a bad product where they started seeing the returns, you’re absolutely done. Your point is what I call the Ronald Reagan approach, trust but verify. Verifying isn’t waiting for it to ship across, even air shipping it across, because you lose so much time and you want to catch it early in the process. It’s those things where you got the eyeballs on the thing through the whole process.In the mass retail world and consumer retail, product patents are sometimes the only thing that keeps you, the vendor, of choice. #KillerInnovationsPodcast #PhilMcKinney #podcastinterview Click To Tweet
I find that our relationships get stronger with the manufacturers that we’ve used because of it. What happens is they want to do the right thing. They want to make it right. They want the next order. If you’re giving them that criteria and feedback, while they can still do something about it, instead of you screwed up, it builds this great level of trust. When things do go wrong, you hear about it first.
It’s one of those things when people think about somebody that’s outsourced that’s arm’s length away. If something goes wrong, they assume that they’re bad. They don’t know something or whatever. Even now in my job, I spent a lot of time in China and Taiwan. The key there is you have to assume positive intent. The best way to resolve it is don’t let an email be the thing that determines your communication style. It doesn’t work very well with those manufacturing. It’s interesting that you’ve had a different experience with US manufacturing. Is it because they don’t do the scale here? They may do prototype work here, but they don’t do scale work here?
It’s not my personal experience with the US manufacturers. We’ve worked with them and they do great jobs. There’s no problem there, but a lot of times we get someone who’s already had a failure. It’s usually happened in a US manufacturer. They chose it because this company was in their town or down the street, and they felt that they could go there. It was a choice of the manufacturer that was their mistake. They were creating something new and they chose someone who didn’t have a core competency in that category of product.
In fact, I listened to a podcast where a guy was on. He was one of the guys that designed this whole segment of the population around shaving. I have a beard, not an issue for me. Their whole focus was it had to be manufactured in the US. They went through so many US manufacturers because they couldn’t find one who could do it to scale the like they needed it to do. It was interesting. I don’t have a lot of experience with the US manufacturing side. Most of my experiences are offshore. That’s interesting.
Talk a little bit when you’re working with a client, you said before you get a fee, plus you get a royalty on the back end. You also help them protect it. How does patent ownership work? I have a lot of experience in IP and that tends to be a sticky wicket. We’re not going to be able to get into this. In fact, Tracy, if you’re up for it, I’m going to blow off the fourth segment. I want you to stay on for the fourth segment so that we can continue this conversation on the IP piece. I wanted to tee this up a little bit on the IP piece. Do you own the patents? Do you co-own them? Do they own them and you get a royalty for it? What does that model typically look like?
It’s always a part of our process. They would own the patents if it’s a fee-plus royalty situation. We have licensed patents before that we had already created and then partnered with a company to bring it out. It goes the other way as well. Typically, they own them. We are the named inventors. That’s why we have an 86% commercialization. We already know there’s a market and a channel for our patents as they’re coming out.
I want to talk specifically about intellectual property. I’m running a large industry R&D lab. I spend a lot of time on IP issues. IP is one of the most common questions I get. It’s about, “Should I patent? Where should I patent? US patents versus international patents. How do I license patents? Should I license patents? If we co-own a patent, who should own it,” all of those kinds of issues. You’re already named on a whole bunch of patents already. You were talking a little bit about some cases where the client owns it. In some cases, you create intellectual property and you license it out. Are those the two models that you focus on?
We have what we call an intentional invention process that we use with our clients. We are encouraged through the process to invent and create patented intellectual property for our clients. That has to do with the fee plus royalty structure. It’s a part of it. There’s always a boost in our royalty if the patent issues at some point. We usually get an extra 1% on top of everything. It encourages us to give them something valuable and make sure it will issue. The whole thing is incentivized to make us do the best we can.
We have set up the process to encourage it, but we also understand the value of it. In the mass retail world and consumer retail products, patent sometimes is the only thing that keeps you the vendor of choice. It happens so often that a Target or a Walmart will go and direct source around someone and say, “That sounded like a great idea, but there’s nothing proprietary or patented about it. We’re going to go around it.”
We work hard not to create something that’s stylistically designed patents that they can easily get around, but that there is something very unique about it at the core so, at the end of the day, that can’t happen to you. That’s critical for our clients to create a product that will last in the program for a long time. We’ve had an office chair at Costco, for instance, that’s been there for four and a half years. That never happens. That one isn’t patented, but the proprietary-ness of what we did with it is so difficult to imitate.
In this case, the patents you’re talking about, because maybe some people don’t understand, there’s the utility patent and the design patent. A lot of people get thinking that if I get a design patent, it’s as valuable. It’s not. Design patents can easily be designed around. You change the look a little bit. The courts haven’t been clear on enforcements around design patents versus utility patents. Utility patents are the ones that take longer to issue and are harder to get issued because of what’s called prior art, anything that’s been done before in a similar space. The work you’re doing is focusing on the utility patents, not the design patents side.
Sometimes we do both and we have a special process that we do for design patents. For instance, in an office chair where we’re going to do it, we do the back separate from the arm, separate from the base. We design patent each component separately, which gives you greater protection overall. We’ve developed a system to help our clients with that. Sometimes a stylist’s design is all that they have to go with. There is no other choice. It’s going to be what it is. There is a lot of prior art, but we try to work hard. For instance, we had a client who had bean bags and they had a CPSC recall.
It got recalled by the Consumer Product Safety Commission because two children had died getting zipped up inside them. We said, “I don’t want to even design the bean bags if that’s the problem.” They had come to us and said, “We have this problem. We’re going to lose a $20 million business for us when this recall happens. They don’t put us back on the shelf. What can we do?” We came up in two weeks with the safest zipper you can possibly imagine, then that got filed. That was our 36th patent. It’s critically important that it can solve a problem that makes you the vendor of choice. Nobody else is doing that. Nobody else can guarantee that unable to open zipper. Now, they’re the vendor of value.
The question that then gets into is patent litigation. The cost to defend, plus then you have what’s referred to as non-practicing entities who are law firms who own patents that go out to sue to see what they can get. Do you run into a situation or is it more of the negotiation from the standpoint of getting Target not to pick you up because they don’t want to fight that battle? They’re going to take it because you’ve got the patent issue.
Typically, we start with a provisional, and then we go to the full issue and all of that. The process is we let it be slow. It is almost always issues. We’ve already set it up that way. We let it be so because it’s a deterrent enough in the retail product cycle that it even exists there. It keeps those buyers at bay from doing direct sourcing against you. It keeps the other vendors at bay, and that helps the process there. Chances are good that by the time it issues, your product was already discontinued and off the shelf anyway. It’s more important that you get on the shelf, and we almost use it as a deterrent. Normally, there isn’t a lot of litigation because of that, although I have learned my litigation lessons over the years and being infringed on and then having to sue Palm computing and IDEO. Also, the other way of being claimed that you are infringing on them.
At some point, you and I will have to have the conversation since I did the Palm acquisition at HP about Palm litigation. I’m assuming it was before the HP acquisition.
I have to thank you. That’s why we settled with IDEO because the acquisition was happening.
That’s a good one. You can buy me dinner the next time you come to Colorado. Tracy, if people want to follow up and get more information about you, where can they find you?
Thank you very much. Check us out over at KillerInnovations.com.