Conventional wisdom for a new startup is to get it done and don’t break the bank.
✅Get the best MVP
✅Acquire customers
✅Leverage your traction to raise capital
When you’re bootstrapping, the impulse is to get all this on the cheap. “Better, Cheaper, Faster” is the mantra. Outsourcing development to cheaper options overseas is the way to go.
When you choose to outsource to China, India, or the Philippines, what are the risks involved? Where do these ideas end up? Do these solutions put you in the right position for long-term success?
In his article When Cheap Has A Price, In this month’s issue of Inc. Magazine, Carey Smith shares the following gem ????????????
“And there’s one more big problem with going overseas: If you’re selling something that can be easily copied, a manufacturer will know exactly how many you’re selling, how much it costs to make, and how to make it. Its employees have access to your intellectual property–they know your product even better than you–and there’s no way to guarantee it won’t launch a competing product at a lower price because it doesn’t have the other expenses you do.”
“One of our own partner companies woke up one morning to discover its electronic gadget for sale on Alibaba, with the same name and packaging.
Yes, there’s a long history of American retailers knocking off a supplier’s product and undercutting that supplier. But at least you have access to U.S. courts, as Sonos did when it prevailed over Google for infringing on its IP for wireless speakers.
And let’s not forget the geopolitical issues. Relations between the U.S. and China could hardly be called warm these days, which has led to tariffs and heightened concerns about tech security.”
Whew! That’s a lot to consider.
❌Knock-offs on Alibaba
❌Geopolitics disrupting supply chain timelines canceling out any cost savings
❌Privacy, security and data protection issues
For your startup, ideally the goal of outsourcing is to save money while avoiding disaster.
When it comes to intellectual property, you want to avoid an IP disaster.
Because a lot of us make stupid mistakes in our business and then look back thinking…
“I wish I hadn’t done that.”
But when you’re in the moment, it’s hard to know whether you’re making a silly mistake or not.
Ask yourself :
“The price is cheap, but does it serve our long-term goals?”
“What happens if they copy our product and put it on Alibaba?”
“What if war or geopolitics gums up our supply chain and we get pushed months behind schedule?”
“What if our back-end system is compromised and all of our user personal information is hacked?”
“Do I have a plan for that?”
Five things to make sure you consider when outsourcing are:
- Don’t make it all about the price.
- Conduct a risk/reward analysis or cost/benefit exercise to evaluate the overall decision on the merits.
- Don’t expect a bag of magic beans. There are pros and cons to outsourcing, but its not a magic wand that solves all problems.
- Things are bound to happen. Adapt and make the best decision. Make sure you’re eyes are wide open to it all.
- You can’t undo any decision. Learn from it. Make the best of it.
Thinking through these things helps you avoid the stupid mistakes you might end up making.
Contact us for your IP Strategy Session, we can help make sure you’re prepared.
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