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The Myo controller, invented by Stephen Lake and two other classmates at the University of Waterloo, senses movements of hand and finger muscles and wirelessly transmits signals that can control games and apps on a computer or smartphone. (Tim Fraser For The Globe and Mail)
The Myo controller, invented by Stephen Lake and two other classmates at the University of Waterloo, senses movements of hand and finger muscles and wirelessly transmits signals that can control games and apps on a computer or smartphone. (Tim Fraser For The Globe and Mail)

THE CHALLENGE

30,000 orders for a gadget not yet built Add to ...

Each week, we seek out expert advice to help a small or medium-sized firm overcome a key issue.

The wires and bulky gear needed to control video games always struck Stephen Lake and his friends as cumbersome. As undergrads at the University of Waterloo in Waterloo, Ont., they started tinkering with wearable wireless alternatives. A year’s worth of research has resulted in the Myo wristband, which is worn on the forearm. It senses movements of hand and finger muscles and wirelessly transmits signals that can control games and apps on a computer or smartphone.

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Since announcing Myo last February, Mr. Lake and his co-founders – Matthew Bailey and Aaron Grant – have received overwhelming response. Their Kitchener, Ont.-based company, Thalmic Labs Inc., already has more than 30,000 orders for the devices, which are priced at $149.

More than $4-million in presales would be many a startup company’s dream. But Thalmic Labs hasn’t yet lined up a company to make the devices. That means the soonest it can start shipping products and get revenue flowing is the end of this year.

In the meantime, the company has been fortunate to have venture capital investors ready to cover costs, including the payroll for the 20 software engineers who have joined the staff to develop apps for the device. They’re also hiring business managers including a controller and vice-president of finance.

Mr. Lake says his team is taking its time going to production to ensure the quality of the product. They’re looking for a manufacturer in Asia.

But they realize that if they choose a big company that also makes products for electronics giants they might be considered a low priority. If they go to a smaller manufacturer, it might not be able to handle the demand.

Mr. Lake acknowledges there’s a risk that a competitor who studies how the wristband works could rush a copycat onto the market.

The Challenge: With such a big gap between concept and delivery, how can Thalmic Labs maintain its momentum with customers and backers while protecting its interests in the meantime?

THE EXPERTS WEIGH IN

Paul Tobey, founder and chief executive officer of Training Business Pros in Toronto

Preselling is often risky, especially when there are promises being made about delivery. But I would always encourage taking advance orders and building a list of qualified purchasers who are eagerly anticipating the product. However, there can’t be any hype in Thalmic Labs’s messaging. What they’re offering has to be sexy, but also real. Above all else, it’s vital not to overpromise and underdeliver.

A company launching a new technology definitely needs to be in control of the conversation. They need to create curiosity, anticipation and continue to enroll and engage their target market until they can deliver the product. Like most marketers, I am a student of the strategies Apple Inc. uses. They understand the value of creating curiosity and they don’t give away all the details of the product until they do an anticipated product unveiling.

The top lesson we can learn from Apple is that people are not going to remember every detail about the product, but they will remember how the company made them feel good about making the right choice of product during the lead up and the launch. So my advice is to focus on the strengths your product has and reinforce them regularly. This will create a strong brand presence that won’t give any energy to copycats.

Chris Griffiths, director of Toronto-based management consulting practice Fine Tune Consulting

With a few million dollars of orders on the hook, they have some of the heaviest lifting already done. Their problem is one of manufacturing and logistics, which is comparatively easy to solve. If they haven’t found a vendor yet, the timeline is tight. They have to short list and visit vendors, create functional samples, agree on pricing, build tooling, do a pilot run, build a quality control model and mass produce. That’s a lot, but it is doable if they take action now.

They are on the right track in considering a smaller vendor. My preference is to avoid getting lost at a big manufacturer. Even a small electronics factory in Asia would not consider 10,000 to 100,000 unit orders that large.

They need to make sure they are dealing directly with the primary factory, not a broker or sales agent or trading company – if there are too many mouths to feed the margins will get diluted and the supply chain will get noisy.

Eric Migicovsky, University of Waterloo entrepreneur whose Pebble smart watch set a sales record when it launched on Kickstarter.com last year

While you have to worry about protecting the intellectual property from piracy during the gap, I’ve learned that no one in the world cares as much about your project as you do. You can spend all your time worrying about what other people may or may not do, but at the end of the day you are really the only one who cares about your idea.

The most important thing is being able to deliver what you promise. One of the things we did before starting our Kickstarter campaign was to work with suppliers to make sure we could physically buy enough of the components we needed to manufacture the watches. (We learned from another startup that after their project became successful on Kickstarter, they learned that the world was sold out of some of the components they had incorporated in their product.)

With a long gap before delivery, we had to keep the momentum going. One of the beautiful things about Kickstarter is the connection we had to our backers. Every two weeks we published updates on the Kickstarter page about the progress we were making. It’s a really cool way to let people follow the progress of the manufacturing and keep up interest in the product.

The watches are being made in China and we had not arranged the manufacturing beforehand. We were planning on making just 1,000 of them at a local factory in California and we had to rush to find a maker in China that could produce the 85,000 we’ve sold.

You need to go with someone who has references and a good track record. You will also want to know the actual team that will be working on your project at the factory. When you’re manufacturing remotely, it’s important to have a physical presence to be ready to handle any problems or questions that come up so they don’t turn into delays. Our team was constantly travelling to China over a span of six months.

THREE THINGS THE COMPANY CAN DO NOW

Keep customers in the loop

To avoid the risk of customers being turned off by the long wait, issue updates on production including pictures and anecdotes.

Keep the organization lean

Find an expert in Asia to manage the supply chain, but avoid enlisting too many middle men who can confuse the distribution process and erode profits.

Be personally present

Having company management at the site can avoid misunderstandings and delays, and the personal presence will help keep you top of mind with suppliers.

Interviews have been edited and condensed.

Editor's Note: An earlier version of this article incorrectly said Thalmic Labs used Kickstarter.com to launch its product.

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