Disrupting Procter & Gamble

Procter & Gamble, the $185 billion market-cap consumer products juggernaut, has a tried and true method for developing new products: extensive consumer research, including surveys and focus groups, product testing, name testing, ad/slogan/copy testing, iterate product design, line up manufacturing capacity and then, finally, concluding with in-store merchandising, final branding and ad buys for launch. Their “big bang” approach shoots out a new product globally with the hopes of propelling it to over $1 billion in sales in the first few years. This process usually takes about 18 to 24 months and results in about a 50 percent success rate for new products. That said, for every smashing success like Swiffer and Febreze, there are an equal number of expensive, high profile flameouts. Does anyone remember Dryel, the at-home dry cleaning solution? How about the Fit Fruit and Vegetable Wash? They were just some of the multi-million dollar write-offs.

P&G’s development process actually reminds me of how we used to develop on-premise enterprise software: long 18- to 24-month cycles, a handful of beta testers—almost like a focus group—and then a big launch to manufacturing and worldwide sales channels. The hit products were huge, but there were also many high-profile flops—for example, Groove Networks.

But things have changed so dramatically in software development… The rise of open source has ramped up productivity as thousands of people contribute features and bug fixes. Short, agile development cycles incorporate customer feedback and allow developers to iterate in weeks versus months. Finally, SaaS distribution models allow for more direct feedback as developers can now see every interaction the end users have with the software. Taken together, software is getting to market sooner, at a lower cost and with a much higher success rate at launch.

Is it possible that many of these learnings from software development can be applied to real-world consumer product development?

That’s exactly what Quirky has figured out and why they have the potential to disrupt the entire P&G business model. Ben Kaufman, Quirky’s founder and CEO, had the vision to democratize product development. He assembled a team of professionals across design, merchandising, legal, manufacturing and marketing to work with a worldwide community of participants who collaborate on every aspect of product development. The community contributes ideas, names and slogans, pricing input, marketing tips, manufacturability suggestions and will soon be able to offer in-store merchandising help.

So why do thousands of people help Quirky make products? They get paid! One of the more popular products, Pivot Power, a completely redesigned, flexible power strip, will pay nearly $500,000 to its inventor and another $500,000-600,000 to the more than 700 contributors who helped bring the product to life, including the person who came up with the “Flex Your Power” slogan. And that’s just this year’s expected earnings for one product! The inventor and influencers will make significantly more in the future: 10 percent of wholesale revenue and 30 percent of online/direct revenue. Now that’s a real incentive!

Is it possible that the collective brainpower of thousands of people can be more successful than the experts at P&G? We believe that Quirky has cracked this code and that’s why we are announcing today that Andreessen Horowitz has led Quirky’s $68 million expansion round. Here’s why we’ve invested:

• Ben Kaufman is the epitome of what we call “founder-market fit”. At his previous company, Mophie, a maker of iPhone accessories, Ben ran into all of the problems small inventors have getting their ideas to market. It was through his real-world struggle with prototyping, manufacturing and merchandising through retailers that Ben decided there had to be a better way for everyone.
• The vast majority of Quirky products require an investment of less than $50,000 along with one to four designers/engineers working with the community. As such, every single product that Quirky has launched to date is profitable—there have been no duds.
• The average time from when a Quirky product idea is submitted to when the product appears on a store shelf is a remarkable 120 days. Quirky develops prototypes with a 3-D printer to quickly iterate designs and the crowd-sourced feedback de-risks the products before they hit the retail shelves.
• References with Quirky’s network of major retailers (e.g. Target, Fab.com, Bed Bath and Beyond, etc.) were absolutely glowing. They love the newness, speed and innovation that allow Quirky products to command price premiums and more favorable in-store displays.
• Quirky’s fast-paced culture attracts the world’s best consumer product designers. Each designer is typically working on five to 10 projects at a time, across a wide range of product types. If you want to build a large portfolio in a short time, you wouldn’t want to work anywhere else.
• Quirky is testing a unique scan-based trading model that would leverage the community to manage in-store displays, merchandising and inventory management. This is a completely new innovation that has their retail partners excited: “Quirky is moving 10 times faster than their competition.”

Offline retail and product development are well overdue for innovation and Quirky is the most exciting new retail concept we’ve seen since the Apple store opened over a decade ago! I’m thrilled to be joining Quirky’s board of directors and look forward to helping Ben and the company expand dramatically.

I’d like to thank my partner, Connie Chan, for being such a passionate advocate for Quirky. If not for her early interest and dogged pursuit, we surely would have missed the innovative magic happening under the hood.