Nicholas Kinports

@nickatnight

Who Has Permission to Create? America’s Lucky and Precarious Position in the Global Economy

It’s 10:40pm as I sit in New York. I’m on WeChat, talking to a product design team in Guangzhou at 10:40am local time. Today we’re designing a new wearable health device.

It’s going to be better than anything Apple or the other tech giants are selling because it will have twice as many sensors, use some of the latest chipsets Apple didn’t want to spend on, and it won’t look like a wrist watch from 2001: A Space Odyssey.

I think the Apple Watch is a great generalist device that does a lot of things well, but nothing incredibly well. I think FitBit and the hundreds of FitBit clone companies are very expensive step counters. I think an aging American population wants to be more health conscious, awake or asleep.

I remember when you could get analog step counters at the drug store for about five bucks. You could shake them in your hand and create fake steps. Come to think of it, those analog step counters probably cost ten cents to make, so even back then they were a rip off.

Conducting real time market research

If I’m unsure about market demand for my idea I can confirm — using our many cheap SaaS analysis tools — that tens of thousands of people in the US are Googling terms around passive wearable health devices, and that the playing field is wide open, and that the current average price point for all competing devices is about $198.

It will be a year or two before a major brand comes to market with a worthy and affordable health wearable. They need consensus from a group of senior-somethings sitting in a suburban office park. Kids’ soccer games will cause scheduling conflicts, and vacations will push back key decisions on color and name. A creative agency will be hired to do an analysis, with hints from the client marketing team on how to skew the presentation so that the CMO’s favorite color is accepted as most likely to sell.

Engineers will tell the group things can’t be done, and animosity will build between the makers and the strategists. There are always more strategists than makers, so the strategists will win out. And even then, they’ll pull punches and save up ammo for future editions, so they can charge you more for each incremental improvement.

The makers will move slowly because they aren’t being treated as equals, even though they are the only ones truly qualified to execute the idea. Everyone in this scenario is being paid at the bare minimum US$125,000 per year plus benefits, no matter how quickly or slowly they move.

Assuming 10 people are involved, this equates to about US$7,000 per working day, rain or shine, before anything is even made or marketed.

This process is guarded and enforced to maintain an unspoken pact. But the mask is starting to slip. Every time a customer buys a competing product, that office park gets a little smaller, and a little more restrictive. And what we define as a competitor is increasingly whatever is in front of the consumer in the moment of need. Growing competition, shrinking office park.

Now that I think about it, it will probably take longer than a year or two.

The Chinese have a lot of employment issues in mainland factories these days. Things are getting too prosperous, and opportunities to advance from the factory floor to white collar jobs are growing at a breakneck pace.

The Pearl River Delta, which includes about 16 major cities including Shenzhen and Guangzhou, is quickly merging into a 60,000,000 person megalopolis centered around tech.

The real median income for skilled tech workers in the Pearl River Delta is now about US$43,500 per year. That’s creeping up on US real median household income of US$59,100. The fact that it costs about 60% less for a family of four to live there should also be considered.

Kids’ soccer practice in Shenzhen, China. Image credit: lonelybrand

A lot of factories are starting creative shops to help keep talent in house. Full stack development too. Many factories are also offering incentives. If you come up with a new design, innovation, improvement, or marketing idea you can own it, and often share in some of the profits or even the patent rights.

The factories are proud of this, and will show you a wall of patents with individual employees’ names on them when you visit.

My career in marketing taught me you need a few million dollars to do market research, go through a proper product development process, and a bunch of other things reserved for the board room bigwigs. And for most of my career it was true, but not anymore.

We’re almost to a place where my Chinese design and engineering teams understand the US consumer aesthetic. I suggest a few tweaks to the cosmetics of the soon to be created wearable, and about an hour later I get back some really nice renderings that capture my feedback.

The software engineers at the factory in Guangzhou have made a spec app for the yet to be finished wearable. It displays a lot of data about your body, almost too much. That’s fine because we can always dial back features. It’s harder to make new ones.

The device design process and the software are a free exercise as part of the collaboration to make something together. The software will also be included, but we’ll need to pay for some development time later to dial back the readouts and adjust the user experience. There will also be some licensing fees to pay for Bluetooth and a few other OEM chipsets we’re using.

A business conversation on WeChat

The factory invoices me on the spot through WeChat. I pay for the initial prototype and we adjourn. In four weeks I’ll get a package in the mail with the new device and some spec packaging. The factory will throw packaging design in, but we’ll still have to redesign it with a relatively expensive American creative director so that it works for the market.

We probably won’t have to pay that expensive creative director to work on the packaging for the next product though. The Chinese creatives are really good, and will have a much better understand of what plays in America by then.

We’ll sell every unit of our smaller initial run on our own e-commerce websites at a 70% margin. We could go to a big box retailer, but that would mean setting up a meeting with someone on a high horse, and then traveling to Minneapolis or Cleveland or Chicago to be told that our product is worth half of what we know customers will pay. Eventually, they will want to meet with us anyway, and we can afford to wait until then, if we take the meeting.

Pretty soon, China won’t need me to come up with new product ideas. In fact, they won’t need me for anything at all…

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