Tuesday, May 02, 2006

Adventures in Product Management

So, I've got the EX2 Off-Road Half Marathon coming up this Sunday and I'm trying to let a very nasty looking blister on my foot heal beforehand. So, while that happens, why not post about weird experiences I've had in my career...like the time I worked for a guy with a bad mustache who wanted me to "invent" a plastic case for an RFID tag. Long story that won't make sense until I explain it all.

I was a mid-level guy working for a government contractor who mostly handled task-based stuff. I didn't have any real managerial responsibilities of any kind, but I was very happy being a subject matter expert and the only guy who straddled the fence between techie and business type on the team. Usually, people expected me to be the "smart" about technologies we wanted to consider using in a solution. So, I had to know stuff about biometrics, RFID, wireless, etc. and I had to be able to explain it to other people. The guy who ran our group decided that there had to be a huge market for equipping arms rooms with RFID systems to help automate the inventory. Turns out he and a few others, who were no longer around of course, had developed a prototype and showed it off at some trade shows a few years before. But, they never sold anything and they didn't bother to put a lot of effort into it at the time. So, this guy who we can call Stash (as in very fucking ugly moustache), decided it was time to dust this piece of shit off and hand it to me for fixing. There was some sense in doing it since Stash had convinced a friend of his to buy two copies of the solution. But, there is a very basic set of logic when doing product development that at least suggests that you should track the costs versus the revenue so you can determine if you'll ever make money on the product. You know, if it costs more to make than you'll ever get back in sales, well, then it just isn't worth the effort. Stash should have thought about this. I did, but nobody wanted to hear what I had to say. It costs thousands and thousands of dollars to buy equipment, even cheap RFID equipment, and to have a few developers work on something for a few weeks. Those two sales didn't cover these costs, but worse was that Stash decided we should sell it to people for less than $1000 a copy. Ridiculous. At less than $1000 for a software product, you are effectively selling a commodity. To make a profit, you need to sell lots of copies, which requires all of the infrastructure to get there. You know, marketing and sales and a good customer support team...none of which we had nor planned to get. So, all of this effort was essentially a waste. But, the best part was how much of my time was thrown in the toilet on a wild goose chase to get this wacky plastic case made.

So, if you are going to automate the tracking of inventory, in an arms room or any place else, you need to find a way to afix the RFID tag to the item you want to track. With cartons in a warehouse, it isn't that difficult. But, with M9 pistols and SAW rifles, it is a bit more challenging. Where do you put the RFID tag? You can't just slap it on the outside because the metal would interfere with the RF signal too much. You can't lash it to the weapon like a baggage tag because soldiers will rip it off immediately. So, you have to find a place to apply it that will protect it and will allow it to work. The only place, at least as far as we could tell, was to stick it inside the pistol grips. We just expoxied it up inside the grip and it worked reasonably well. But, Stash decided we needed something fancier. So, for this product that we couldn't make any money on...I had to find a plastics manufacturer to make an enclosure for an RFID tag that could fit inside a pistol grip. I spent weeks, on the phone and in meetings, with a manufacturer in an effort to design a piece that would work. In the end, the molds for the piece were going to cost $20-30K. Then, we'd need to pay for a limited production run, employees to assemble the parts and package them up, and we'd have to find a place to store all this stuff. As a refresher, Stash wanted to sell the software for less than $1000 and he figured we could sell them bags of these enclosures for a few extra bucks.

Do you see the problem with this situation? When Stash really understood the costs of making the enclosures, he shut up about a lot of this. He periodically tried to revive the effort, but I purposefully dragged my feet so I could focus my efforts on projects that were actually making money. Moral of the story is that you better have a good sense for what you can sell something for before you go off and invest a lot of money in building it.

1 comment:

Jon said...

Does Stash read your blog? It seems like you could have sold a ton of these systems to police stations. Or, maybe you could have tweaked the system just a little and used it for tracking keys at car dealerships. I understand what you're saying about the initial investment, but once you had this built and once you got the team together, you'd have a whole business going around tracking guns, keys, or something else. I guess that's too much hassle and not enough profit margin for your old employer.