This presentation was given at Cambridge University as part of the Enterprise Tuesday programme run by the Centre for Entrepreneurial Learning. Smart use of product development best practice can help you to use demonstrators to address the tough questions that investors will ask.

1. Bathtub to Warehouse
Using demonstrators for business impact
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CfEL Enterprise Tuesday - 15 Feb 2011
Duncan Smith, Ruth Thomson, Rachel Harker and Edd Brunner
17 February 2011 S3908-P-139_Slidesha v1.1
We’re going to talk about demonstrators and models, when and why
to build them, and how they can help you raise money, get orders
and ultimately get to market faster.
Presented by…
Duncan Smith – Head of Products & Systems Division and
Commercial Director for the Consumer business
Ruth Thomson - Business Development Consultant for Consumer
Products and Authentication Systems
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2. Do you want to take your idea…
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We want to talk today about how you can take the idea that you had
in the bath / in the shower/talking to friends or colleagues… from
that inspiration point, to the point where you have a warehouse full
of product.
Clearly there is much to do between these points, much work to be
done and obstacles to overcome. Today we want to begin to
unpick this work into more manageable steps for you.
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3. No matter what market sector…
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It doesn’t matter what market sector you are targeting, if you want to
bring a product to market, you are going to have to convince
investors of the value.
Therefore demonstrators can help you whether you’re looking at the
consumer market…or something for the office environment… or
for the lab environment or for a hospital location.
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4. …or if your idea is for a product, a platform technology, or a service company…
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Using demonstrators and models is also relevant to B2B services or
platforms.
Many of the principles of good design that we will talk about are
relevant to services. Also many service companies use products
to tie their customers in to their services
For platform technologies it is important to focus on the
embodiment of your idea that will get you the biggest impact most
quickly.
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5. ‘Open Innovation’…
“[..] inflows and outflows of knowledge to accelerate internal innovation, and
expand the markets for external use of innovation [..].”
Chesborough et al. , 2006
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I want to talk for a moment about Open Innovation.
The phrase ‘Open Innovation’ was coined by Henry Chesborough of
Berkley University.
Large organisations tend to have a funnel for development projects
where projects move forward through stage gates. In Open
Innovation this funnel is effectively ‘leaky’ and ideas and
innovations can move in and out of the funnel.
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6. …if you’re a start-up…
…or within a large corporate…
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Using demonstrators and models to convince people of the value of
your idea and to address key technical questions is important if…
1) You’re a start-up looking to grow independently of a larger
organisation and looking to raise investment e.g. through VCs
2) You’re a start-up looking to licence your technology to a larger
organisation, or looking to exit by acquisition
3) You’re looking to a future career in a larger organisation – you
will need to ‘sell’ your ideas to progress your ideas and projects
through the organisation
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7. Cambridge Consultants – 50 years of Innovation
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So who are Cambridge Consultants and why are we doing this talk?
We are a product design and development company
For 50 years we have been developing products for companies
across a wide variety of market sectors
We work with both large blue chips and dynamic, fast growth
startups, either developing innovative parts of products or the
whole product through to manufacturing handover.
50% of my part of the business is working with fast-growing startup
companies.
Why are we doing this talk?
Lots of startups come to us needing help with the same issues, and
we always give similar advice to them while we are finding out
whether to work together.
So we wanted to try sharing some of this with a larger audience
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8. The investment ladder
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The product development cycle maps onto the funding ladder
To raise more money, you need to credibly answer the tough
questions your investors will ask
In other words, at each stage, you will need to demonstrate that you
have reduced the risks that are barriers to their investment.
This slide shows three different generic stages, and the key
questions that characterise each stage.
There are lots of other detailed questions beneath these. Your
potential investors will do due diligence on you and will send a
junior analyst with a shiny new MBA to crawl all over your
business and technology, looking for weaknesses and putting
them in a spreadsheet. Your investors will use this to ask lots of
awkward questions.
Good demonstrators and models can help you answer these.
Also they can help reduce upfront spend by answering questions in
the right order.
We’ll be concentrating at the front end – seed and round a funding – 8
Page
for this talk.

9. Types of demonstrator
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We’ll cover these in more detail but types of demonstrator include….
Sketches and storyboards
Looks-like models that don’t work but help communicate your
message
Works-like models that don’t look like the real thing but prove
aspects of your technology
Looks-like works-like models that both work and look the part and
Made like models that are ready to start commercialisation
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10. 10 17 February 2011 S3908-P-139_Slidesha v1.1
Here is an example of an internet radio with a novel user interface.
Over a lunchtime discussion a couple of our engineers were discussing
internet radio which allows access to many thousands of radio stations,
but in reality people only actually ever listen to between 3-4 stations, and
access is very ‘techy’. They talked about how wouldn’t it be great to
have a radio that was incredibly easy to use to make internet radio far
more accessible.
One of the engineers put together the first model (on the left) of a cube
radio – the concept was that when you turned the cube over it played the
station that was programmed to the upfacing side.
A works-like (2nd model) and a looks-like (3rd model) model were created,
and on the back of these demonstrators and the story they allowed us to
tell, investment was secured to take this product to market.
Cambridge Consultants worked with Armour Group to bring the cube radio
to market. This was launched in Nov2010 under the brand name Q2
and they can be ordered at http://www.q2radio.co.uk/
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11. The investment ladder
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Different demonstrators are very powerful at different stages to
answer different investor questions.
Questions are all covered in more detail in the ‘Bathtub to
Warehouse’ booklet we are going to give you at the end.
We aren’t going through all of it , we have picked the ones directly
addressed by demonstrators.
Let’s talk in more detail about some of the challenging questions
you will face at the front end of this process…
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12. Early questions
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These are prerequisite questions that you must answer as part of
creating your business case
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13. Understand your customer
Steve
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A useful way of doing this is to create personas of your target
consumers.
Many inventors come up with an idea that is targeted at themselves,
if you are targeting yourself you will have a very small market! (i.e.
a market of 1!)
Don't describe yourself! Generate user insight and consider using
persona boards such as this to describe your target consumers.
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14. Understand your customer
Martha
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Make sure you know whether you are selling to Steve or Martha
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15. Understand your customer’s ecosystem
Available workspace
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You also need to consider your customer’s ecosystem, your
product/service will not be used in isolation. You need to consider
what else they will be doing at the same time, and any space and
usage restrictions.
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16. Types of demonstrator: works-like models
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What are some more of the typical early stage questions...
There will be tough technical questions that will need to be
addressed before the investment in the development stage can go
ahead. This will likely be about some key part of the
product/service design, the really difficult part that has investors
raising their eyebrows in disbelief!
Works-like rigs demonstrate the technical principles. Works like rigs
don’t necessarily look anything like the product but they help
answer the difficult questions. You should be able to put them in-
front of investors, but bear in mind they are good for a technical
audience NOT a marketing one
Ask yourself … what are the tough technical questions you will be
asked?
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17. Risk assessment
Level of Effort/Cost of Action
risk mitigation
High Low These are risks you should address in the first
phase – easy wins that will build credibility
Low High These are risks that will tend to get answered in
the development phase and should be included
in the plans for that phase
Low Low Consider whether to mitigate or not – however if
they are not important they may be a
distraction at this stage
High High These are the risks you cannot afford to address
at this stage, but that you will need to have
credible plans to address early in development
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There are several approaches to working out what the tough
questions will be.
One is to use a risk assessment. These are not just for health and
safety!
List all the risks you can think of and how you would ideally mitigate
them.
Try being devils advocate…… ask questions like:
how would your competitors dismiss your technology?
What will your investors disbelieve in your pitch? What will make
them raise their eyebrows?
You can then prioritise as shown here…
It could be easy to focus on the low risk level aspects that only
require a low effort to mitigate – but these likely to be a distraction
at the earlier stages. Use this process to help you focus where you
spend your precious funds to get maximum value
Ask yourself……. What are your key risks? What difficult technical
questions will investors ask you?
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18. Types of demonstrator: concept sketches and storyboards
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You don’t necessarily have to use works-like models for all the risks
– story boards or sketches can also help communicate the value of
your technology
….. One of the tough questions is often “what is the user
experience?”
You can often use storyboards and sketches to explain how your
technology is going to work for your target customer in a real-
world situation
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19. Types of demonstrator: looks-like model
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Looks-like models are not just “smoke and mirrors”
They help you answer the question “what will it look like”?
They communicate your value proposition AND it is very powerful
being able to put it in the hands of a stakeholder.
In some cases you make something look DIFFERENT to get your
message across. In the case of our radio being small enough to be
portable instantly communicated that this technology was low
power and small compared to the competition.
In other case it may be important that the appearance is familiar –
the target customer might reject something that looked out of the
ordinary and made them think they’d have to learn a new process.
Ask yourself what you need to communicate with your model
Beware of making them look too real as your investors might think it
is finished!
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20. Types of demonstrator: assembly sketches
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Assembly sketches –
If you are going to make a looks like model often it’s important that
you can credibly show how all the bits will fit in the box!
Ask yourself how much effort you need to go to to show how it is
going to integrate into the final product
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21. 21 17 February 2011 S3908-P-139_Slidesha v1.1
If you are starting to work our what all the bits are, you can start to
work out how much is it going to cost
You might be thinking it is far too early, we don’t know what all the
parts are yet.
It is never too early to do a back of an envelope costing
You can ask yourself how much the market can afford it to cost,
given the competition.
If nothing else you will find out where there are gaps in your
knowledge that need to be filled in the next stage.
This will help support your business case as well as the product
development
Ask yourself what your market can afford it to cost
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22. The investment ladder
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All these questions are at the front end concept stage….
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23. Types of demonstrator: looks-like works-like models
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By the end of that first stage you might even have made a looks-like
works like demonstrator, to help answer the critical question:
Can you show me it working?
It may not be beautiful, not ready for mass manufacture, not even
complete, but we’ve reduced the risk in the key areas, both
business case and technical for an investor to see that this can be
a real product….
Ask yourself what do you need to show working? It’s not going to be
complete but remember the risk assessment and try to show that
you’ve reduced the KEY risks with this demo. It may even need to
be different from a final product for you to do the market testing
you need.
You might want an all singing all dancing machine but it wasn’t the
right thing to do with your budget.
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24. It works!
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For the radio – the investment was received to develop it into CSR’s
RadioPro platform.
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25. It works!
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Following on from the radio platform development, the platform
technology was used to design the Cube radio for our client
Armour. This product was launched Nov2011 to rave reviews.
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26. Summary
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So to summarise the product development cycle maps onto the
funding cycle
To raise more money, you need to credibly answer the tough
questions your investors will ask
(or at least anticipate them and explain when and how they are going
to be answered)
This means demonstrating that you have reduced the risks that are
barriers to their investment
Smart use of Good Demonstrators and models can help you be
successful
Every single one of our startup clients has had to address these
questions – think about how you are going to answer them.
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27. 27 17 February 2011 S3908-P-139_Slidesha v1.1
When we gave this presentation in April 2010 we were joined by
Krishna from Encore Ventures.
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28. 28 17 February 2011 S3908-P-139_Slidesha v1.1
Krishna talked about the key questions that VCs are looking for
companies to address at the different funding stages. It was clear
how demonstrators could be used to address these questions.
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29. What next?
• Q&A
• Read the ‘Bathtub to Warehouse’ booklet
• Contact us with questions
• If you need support on product
development at any stage in the funding
process, contact us
• If you are at the University…
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30. Who we are
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31. Contact details:
Cambridge Consultants Ltd Cambridge Consultants Inc
Science Park, Milton Road 101 Main Street
Cambridge, CB4 0DW Cambridge MA 02142
England USA
Tel: +44(0)1223 420024 Tel: +1 617 532 4700
Fax: +44(0)1223 423373 Fax: +1 617 737 9889
Registered No. 1036298 England
Duncan.Smith@CambridgeConsultants.com
Ruth.Thomson@CambridgeConsultants.com
www.CambridgeConsultants.com
© 2010 Cambridge Consultants Ltd, Cambridge Consultants Inc. All rights reserved.
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