Lately I have been toying with the idea of coming up with a product (did I already mention that earlier? lol). Well, being a packaging designer and an entrepreneur by heart, I KNOW it's only a matter of time. I came across a great article that gives some great starting points... It's a really long podcast transcript with lots of "well's"
Podcast Interview Stephen Key (AllBusiness.com's Chris Bjorklund interviews Stephen Key.)
Chris Bjorklund: You're listening to the AllBusiness podcast. I'm Chris Bjorklund. If you're getting this through iTunes and RSS feed or an online streaming-media player, you can hear interviews with other experts at AllBusiness.com.
Bjorklund: Stephen Key, a successful inventor with a 20-year track record, has made millions licensing his ideas to corporations around the world. Several of his products have been endorsed by celebrities such as Michael Jordan and Alex Trebek. Steven teaches others his system for selling ideas with very little money through his company called InventRight. Stephen, I suppose when you meet people at parties or on planes and they learn what you do, you must find that they always want to tell you about some great idea they have but it never got off the ground, is that true?
Stephen Key: That's absolutely true, Chris. Everybody, I think, has an idea. Or they know somebody that has an idea. So it's a lot of fun, because I love talking about it.
Bjorklund: Do you find that people actually have a lot of unrealistic notions or fantasies about making millions on the next great thing?
Key: Absolutely. You know, you always read about these stories of someone making millions and millions of dollars from their ideas. It does happen but there's a lot of other stories that you don't hear about and it takes some work. It does take some work.
Bjorklund: Now, Oprah has the feature called Million Dollar Moms. I mean, this idea is really spread through the media.
Key: It's actually become very, very popular now. There's a lot of talk shows and TV shows about bringing your ideas to market so I think it's great. I'm excited about that. People are excited about it.
Bjorklund: Now you don't, you are an inventor but you really prefer to talk about ideas. Why is that?
Key: Well, everybody says, "Steve you're an inventor." You know, I'm just a guy with ideas and they're simple ideas and what I like to do is look at the marketplace and come up with ideas that aren't, let's say they aren't new. I'm not going to reinvent the wheel but I'm going to add value to this old idea.
Bjorklund: Can you give us an example of something that you were, a successful idea that you have marketed?
Key: Absolutely. Currently I'm in the musical-accessory business and we sell guitar picks and of course, people have been selling guitar picks for years. Although we just changed the shape and now we have guitar picks in the shape of like Mickey Mouse and skulls and things like that and we sell millions and we just took an order from Wal-Mart so we took an old idea and we just polished it up a little bit.
Bjorklund: That's amazing!
Key: I am a little surprised too. But I think it's--if you find something that's already working and you can bring some new technology to it or find maybe an old, tired idea and just polish it up a little bit. It's easier to get that to the marketplace.
Bjorklund: So let's say I have an idea now. Now what do I do?
Key: Well, you know, the first thing, well the first mistake a lot of people with ideas is that they go out and they file a patent or they call an attorney. And what we like to do, what I like to share with everybody is say like, "Slow down and let's study the marketplace first." And the first thing I have, people that want to get involved in this is that they go down to the local store that you think your product could sell, where it would be on a rack. Go down there, take a look around and visualize your idea there. And then look at all the other ideas that are close to it. That will give you, you know, a pretty good idea of do you have a good idea, number one, is it different? Does it have the benefits that the other ones don't have? But also that's also going to show you or tell you what you throw with the package. Who are the companies I need to call? So the first step is slow down, don't run out and file for a patent. Do your homework. It's going to save you a lot of heartache and a lot of money.
Bjorklund: I think some people get overwhelmed because they have too many ideas.
Key: Well, you know, that's very, very true. Because if you have one, you going to have more and once you get in this whole process, you're going to see a lot of opportunity or a lot of problems. But you have to be very careful. You have to be very, very selective and pick the idea that it's going to be a little easier to bring to the market.
Bjorklund: What are some of the ways to bring a product to the market that maybe people, they may be familiar with some of the ways, some may be obvious but maybe some aren't so obvious.
Key: Well, you know, that's a great question. A lot of people think that, Gee, I'm just going to start to manufacture. I come up with an idea, file for a patent and I'm just going to start marketing this and sell it myself. Wow! That's hard work. That takes a lot of capital. That takes a lot of experience and you have to wear all these different hats. What I've done in the last 20 years is very, very simple. I come up with an idea. I study the marketplace first. I file up a provisional patent that allows me to put patent pending on my idea. And then I put together a sell sheet which really states the benefit of my idea and I start to show companies. Because, Chris, what I want to get, I want to get a green light from companies that I'm on track. And this is called licensing. Because what I want to do is I want to show a company this idea, show them how to make money, so if they like it they're going to license that idea from me and pay me royalties.
Bjorklund: So you don't need to be an inventor to license products?
Key: No! What you need to do is understand that you're really selling benefits. And if you can look at a marketplace and find some hold and show a company, "Gee, if you change this, you're going to make more money at the end of the day." And then what you're going to do is basically rent your idea to this company and they're going to pay you royalties. That's kind of simplified but that's about how easy it can be. I've had a couple of ideas. One of them was called the Michael Jordan Wall Ball, which is a very simple basketball game that I had shown to a toy company and within three days I had a contract. And I actually didn't have any protection whatsoever and it sold for 10 years at Wal-Mart.
Bjorklund: No!
Key: It was a very, very simple idea but I showed the company how they could leverage the Michael Jordan license that they did have and how they could reduce their packaging a little bit but I gave them something new. And it worked and it was quite successful.
Bjorklund: You can sell other people's ideas then, to a point?
Key: Well, you know, the toy company has a license of Michael Jordan and they also had this product on the market. I actually just freshened it up a little bit.
Bjorklund: Is this where you throw your laundry into the hoop?
Key: Well, you know what you do? You know what's fun about this? And I think, anybody that has an idea out there can play these games. And I play these games myself, you know, what if, or mix and match. These are creative games that I've learned along the way that you can look at a product and just dream and come out with different ways it could be used or maybe if I added this or maybe if I did this. And then come out with ideas and have fun. Find that child and they--you never know what happens, Chris. Because sometimes a good idea pops.
Bjorklund: You know, Stephen, you touched on this a little earlier about, you know, the kinds of things you need to say to a manufacturer to get them to want your idea. One is about the dollars here, right?
Key: Yes it is.
Bjorklund: The benefits.
Key: It's always about the dollars.
Bjorklund: Dollars, benefits, dollars, that's it.
Key: Yes, what you, you know, what I've learned over 20 years is that you need to--you're selling benefits and you need to realize who's going to be in that room that when your prototype or your sell sheet, whatever your idea is, lands on that room and they're looking at it. And you know who's in the room and you want to get all those people to say, "Yes, this is a good idea. Let's go for it."
Bjorklund: Do you find it's hard for people--in a minute by the way, we want to bring on a guest who has some ideas himself so we want to talk about that--but do you find that sometimes people getting back to the really the original, the first step, which is do your homework in the marketplace, do you find that people don't want to let go of their ideas either very easily, that they have gone out maybe not gotten the kind of feedback they had hoped for or they've looked around the marketplace and they realize maybe their competing with a big player and their product isn't that much better or different but they still can't let go.
Key: You know, exactly what happens is that they have so much time and money invested in their idea that once they hit a couple of roadblocks along the way, sometimes they don't know, this is maybe a sign for me to stop and do something else. That's why I think that if you just take a minute and really understand your product and understand the benefits and understand the marketplace, that you will not rush out and spend those dollars on protection and some of the other things or on a prototype. Instead, study the marketplace, understand the benefits and get some green lights first before you invest so heavily your emotions and dollars and the rest of the stuff.
Bjorklund: Let's bring on another guest right now. His name is Ray, he's from Santa Clara, California, and Ray, you have been coming up with some new product ideas, it's sort of a spare-time thing for you, and you're working full time at a major company but doing this kind of thing on the side. Welcome to the AllBusiness podcast.
Ray: Well, thank you very much.
Bjorklund: What are you working on right now? Tell us about it.
Ray: Well, right now, like you said, I do come up with a lot of ideas. I like to invent things in the office organizers and stuff like that and I have a product right, that I'm working on that I'm really excited about. I'm just kind of not sure of what I should do next because, you know, I do have limited time and money but I do feel very optimistic about this product. I'm just not sure, you know, whether to do the licensing route or the venturing-it-myself route but what are some things I should consider when trying to make that decision?
Bjorklund: Stephen, this is for you, you got some free advice for Ray?
Key: That's a great question, Ray. I think at the very beginning, you're right, there's a path. There's actually two roads you could take. And one would be licensing and one would be, you know, manufacturing it yourself. I think if you do your homework first and understand where your idea is going to be placed, how big the market is, how much competition there is, you know, what is it going to cost the manufacturers, some of the real basic stuff up front, that's going to paint the picture for you to decide, Gee, you know, do I want to go ahead and manufacture it myself? Do I have the money to do that or would I rather license? Something that's a little bit less risky? You can always go down the road of licensing first and see what the experts say about your idea and you can use that information then decide if you want to license it or manufacture it yourself. So basically, either road that you take, Ray, the first thing I would suggest is really understand the marketplace and, you know, go to the trade shows that are available out there. Understand everything you can about your idea and how it is sold and who is selling it so you can make some smart decisions at the very beginning.
Bjorklund: Ray, I'm wondering if you have set aside a certain amount of money for this to budget or for your invention or you're just going to sort of see where this takes you?
Ray: Well, that's a good question. I mean, the product, I mean, kind of becomes your baby and you know, you keep throwing at it, trying to hope that something will happen and I'm just in that stage right now where I, you know, I keep refining my prototype and spending more and more money on it. When do know when it's good enough? When should I stop or, you know.
Key: That's a, you know, that's an also wonderful question because what happens is that because you don't have some of the information a lot of inventors or people's ideas just keep refining their prototype. I believe you can actually--you're your idea, or license your idea without even a prototype. Now sometimes you have to build one just to test it out to make sure, yes, it's right. But your prototype or your idea should have the benefits that you should be able to describe your idea in one sentence and that one sentence should describe the benefits. And so you should be able to get some green lights out there, Ray, just try describing your idea to people and see if that wow factor comes up. "Wow, I like that!" And work on that part of it. A lot of it comes down to selling. I know prototypes. I like making prototypes but at the end of the day, sometimes you spend too much time there and you need to concentrate on other areas.
Bjorklund: I'm Chris Bjorklund and this is an AllBusiness podcast with inventor Stephen Key from a company called InventRight and Ray, who is trying to get one of his inventions to market. Ray?
Ray: OK.
Bjorklund: I'm wondering if you can tell us if you've thought of any of the benefits of this product that you could share with us or you don't want to give this kind of thing away?
Ray: Well, yeah, I've thought about it a little bit. It's probably not as developed as it should be but it does help people save time by increasing, you know, how organized they are and that's probably the basic fundamental benefit.
Key: Well, that's a huge benefit and whenever you're saving someone time, energy and effort, right away, it starts to paint the picture for people. "Here, my product will save you time and money." Or, "My product will save you the frustration." Those are, you know, things that are very easy to explain to someone and show them the benefits of your idea. Absolutely.
Bjorklund: Ray, do you find that you have to be, you know, that you want to talk to people about this but you really can't?
Ray: Yeah, that's the classic inventor problem is that I have all these ideas but I don't know, you know, who I can talk to because I'm afraid people, you know, like taking the idea and running with it. I understand that, you know, you shouldn't go into the patent stuff because it's very expensive right off but what about provisional patents?
Key: You know, Ray, provisional patents are a wonderful tool especially if you're starting out and you have to do some more work and more homework and you want to test the waters with your ideas. And you can file a provisional patent yourself or I think under $150 or so. It's very, very affordable. There's some great books and software out there that you can follow. You can actually do it yourself and you'll learn a lot by doing it. But you're right, that's a great tool and it will allow you to share your idea and get the feedback that you need and feel like you've got some protection. And that actually, when you file a provisional, you can actually put patent pending on your idea. So it is powerful and it does give you the protection or the security that you need. But you're right. Every inventor is a little scared that someone's going to, you know, take my idea. And I think this will help.
Bjorklund: Now, Stephen, I've heard that 97 percent of all patents never make more money than the inventor spent on the patent?
Key: Yes. And so something is very, very wrong and that's why I think it's important to get this information out to people and say, look, the old method of filing a patent doesn't just work. You have to do some work up front and that's studying the marketplace, do your homework first, file a provisional, get the green lights. But everybody, you know, there's this fear thing that, no, I need the protection. And that's, you know to bring the product to market, the protection part of it is such a small part but most people really get hung up there. And you know, that costs a lot of money.
Bjorklund: Ray, have you been to an attorney yet with any of your previous inventions or have you had to put money out for a lawyer yet?
Ray: No, I haven't gotten to that stage yet.
Bjorklund: And is that necessary, Stephen, that when do you involve an attorney because you can do this patent stuff yourself, right? File patents?
Key: You know, I'm not an attorney and you know, connective legal advice, I stay away from some of those questions. But I can tell everybody this: learn as much as you can about patents and provisional patents. All the things are available to you for protection from trademarks to copyrights before you call an attorney. It will save you so much time. Educate yourself. There's some great books out there. So no, I would say, don't just pick up a phone and call an attorney. Half the stuff that he'll be telling you will sound like it's a different language and he's trying to sell you on his services so like anything else, do your homework up front. Find an attorney that if you want to hire one, find one that can work within your budget and ask them, you know, how do they work? Working with attorneys, that's a whole other topic that you need to manage like you would manage any other part of the process.
Bjorklund: Well, let's pretend that Ray's idea is getting some interest. Can we take it to the next level? Stephen, someone is interested now.
Key: OK.
Bjorklund: I mean, let's play out this fantasy.
Key: That's great. OK. You do all your work. You send it into a company. They call you back and say, "Ray, we like what you have." Now Ray, maybe he's done some of the correct steps. He has filed for a provisional himself but now he's got a big company that's interested. You know, what I have done, once I get those green lights. I have some attorneys now that I do call and say, "Look, I've got someone on the hook and they're interested. Please look at my provisional. What do I need to do to take that provisional and possibly turn that into a regular application?" That's how I use the system. So I can get some green lights from somebody first.
Bjorklund: I would imagine if you're negotiating with a really large company, you're at a huge disadvantage if you don't have that kind of backup.
Key: No, you know, you are in that, if you filed a provisional, that's still a great tool. I never tell the companies that I have a provisional. I share with them that I am developing my intellectual property protection and then I get my attorneys online and we start developing that. The last thing you want to do is show a company your patent application and the claims. So you always are holding things back from them to play this game and that's a very interesting topic of how to cut those deals and how to play that game because it's a big game.
Bjorklund: It's a dance.
Key: It is a dance and it's--you don't want to step on anybody's toes but it's a long dance so you just need to be careful. You need to find someone out there that you can trust. You need to get some good information. You need to find someone who has done it before.
Bjorklund: What about licensing agreements, let's say, you're approaching that kind of thing with a company. Are there typical terms for licensing agreements?
Key: You know, yes, yes. The most important to an inventor is a royalty right. That's one of the terms. There is a list of terms such as minimum guarantees, royalty rates, territory, length of contract, all these things are very, very standard. But at the end of the day, you have to think, What do I want from this? What's going to satisfy me? And so, that's where it becomes a business decision to like give them an exclusive where they're the only ones that can use my product or then give them a nonexclusive. Or what is the royalty rate? Or is that that important? Maybe the minimum guarantees that guaranteed incomes, that's more important to me than a higher royalty rate. These are questions you're going to ask yourself and this is the time you need to find someone that has done the dance. Because they're going to share with you some of the pitfalls, some of the things to be aware of. And it doesn't have to be complicated but it's going to seem like a whole new world that you just live it so you need some help.
Bjorklund: Ray, have you thought about any of this part yet or you're still focused on that prototype?
Ray: I'm still focused on my prototype.
Bjorklund: Alright. Well, and Stephen, in your 20 years, you've done a lot of dancing here?
Key: I like, this is the part I enjoy the most because what I've realized with the experience I have with licensing that most of the companies I'm dealing with don't have that type of experience and so I understand how to reduce the risk for them to get them to say yes even when it comes to a contract. Because at the end of the day, you need for someone to take your product, champion your idea and bring it to market. So you have understand the dance and you have to be able to reduce the risk.
Bjorklund: Where does good faith enter into all this? I mean, you know, you want to keep them honest and you want to act in good faith, does that play into--I mean, there's got to be a relationship here too. I mean, it is business but...
Key: Well, it's very--you know, they're not your friends, OK? Let's make that a lot clear.
Bjorklund: OK, that's true.
Key: OK, a good business deal is good for both parties and so I think the attitude that I always have when I walk into a situation like this is: "Look, we've got to make this work for all of us." And the question you always want to ask them is that, "What are your needs? What are you looking for?" And that's the best way to start that conversation up. That way, you're getting the clear picture of what their needs are and you try to make that fit. And my attitude is always we will find a way to make this work.
Bjorklund: So Stephen, what is your next best idea coming up? Can you share that or you don't want to say?
Key: No, you know, I think what's interesting about it. I am very open to sharing my ideas because I've realized that, you know, ideas, it takes more than just an idea to bring it to market. So I'm very open with my ideas and sharing them because I know how hard it is to bring it to market. What's my next idea? We're just very excited. We've just landed our product in Wal-Mart. That's for the learning curve. I'm a Disney licensee, so now I'm on the other side of the fence. So there's always new things to learn. I love bringing a product to market. If it's either my product or even somebody else's, just to watch it. It's exciting. It's an art and it's a wonderful dance if it works. It's beautiful music if it works.
Bjorklund: Ray, do you have any last questions for Stephen?
Key: Yeah, I do, I mean, the information here has been like really, really helpful and how can I learn more about, you know, the dance and the art of getting the product to market and dealing with these vendors?
Bjorklund: The first thing I would suggest for anybody that has an idea: go on the internet and find people that are in the business of bringing products to market but be careful because as everybody knows there's companies out there that I don't think they're really helping. So like anything else, kick the tires, do the research but don't this alone. You don't have to and, you know, go out and join an inventor's group. They're in just about every city. If not, if you cannot find one, Google some information on the internet and find people that are doing it and ask a lot of questions.
Ray: OK.
Bjorklund: I can see why inventors need support groups. That's for sure.
Key: You know, they really do.
Bjorklund: They do!
Key: But they--I think, my father gave me some advice many, many years ago. He said, "Look, whatever you want to do in life, find something that you love but also find someone that's doing it and get as close as you can to them. That will help you on your road because they've already traveled it." So don't travel down this road by yourself. You need a road map and you need a travel guide and find one. They're out there. They're out there.
Bjorklund: And your company website?
Key: My company website's called inventright.com and we do have programs where we educate people with ideas and how to do it and how to avoid the pitfalls. Yes, and it's a site that will help people with ideas.
Bjorklund: inventright.com. Thanks, Stephen and Ray for talking to us and especially good luck to Ray.
Ray: Thank you so much.
Bjorklund: Alright.
Key: Thank you very much.
Bjorklund: You've been listening to an AllBusiness podcast with Stephen Key, an experienced product developer who teaches others his system for selling ideas through his company, InventRight. If you have comments on this show or want to recommend guests for future podcasts, send your emails to podcasts@allbusiness.com. I'm Chris Bjorklund, thanks for listening.
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