Editor’s note: Jim Vorhaus is president of Product Connection (located in Chapel Hill, N.C.), a consulting practice focused on helping companies take the great idea that’s the kernel of any new start-up and turn it into the great product that will make that business a success. Jim can be reached at jvorhaus@productconnection.biz. This column is part of the Entrepreneurial Spirit series produced in partnership between the Council for Entrepreneurial Development and WRAL Local Tech Wire.

By JIM VORHAUS

CHAPEL HILL, N.C. – This is the story of a start-up company that did almost every conceivable thing wrong while trying to develop its first product. It is offered to you here in the hope that you can profit from their mistakes since they, unfortunately, did not.

Background

Right from the start, FizzBin Technologies (www.fizzbintech.com) had seemed poised for start-up stardom. It seemingly had everything going for it. The titanium-tantalum nickel carbide (TiTaNiC) material technology it had licensed from Whatsamatta University had already demonstrated extremely high efficiency producing almost twice as many fizzbins per watt as any other material available. The technical team was to be headed by TiTaNiC’s inventor, Professor Irwin Corey, who had taken a leave from WU to found FBT. He was confident that the fizzbin density could be increased still further.

Corey had done his homework. He knew what it would take to get funding. His business plan was a thing of beauty clearly showing how the telecommunications industry depended on devices that could produce lots of fizzbins and that demand was growing at more than 5x per year. Without question, FBT was looking at a market that was well north of $500M. Their only real competition was Fizzbins Unlimited (FU). But with its IP position, FBT effectively blocked FU from using anything but the older (and less efficient) rhenium-technetium hydride (ReTcH) material to make their devices. And to help him raise venture capital funding, Corey had recruited the well-known (and more importantly, well-connected) serial entrepreneur, I. Khan Singh.

With a great technology, a large market, weak competition and an experienced CEO in place, raising money was not much of an obstacle. FBT’s “A” round was oversubscribed and was headed by a first tier VC firm with a stellar track record, Raptor Partners. It seemed that there was nowhere they could go but up.

Sadly, FBT never lived up to its potential.

Part 1: Off On the Wrong Foot

FBT’s initial product was to be called, naturally, the Titanic. Aware of the unfortunate connotations, they immediately rebranded it the Hindenburg. Parts were ready for sampling to customers right on schedule exactly. True to his word, Corey had improved the technology to the point that the Hindenburg device was achieving more than three times the efficiency of the early prototypes. Expectations were high and when the feedback came in the customers were quite enthusiastic about those efficiency numbers. Unfortunately, they found that when they used the device in their systems, their oobleck performance was significantly worse than when they used the competing FU parts. This effectively negated any overall performance advantage that could be gained from the Hindenburg’s better efficiency.

FBT had been so focused on getting the most fizzbins per watt possible they had not even bothered to measure what effect their device optimization efforts might be having on oobleck performance. In fact, when they went back to analyze what they had done, they found that many of the changes they had made to improve efficiency had inadvertently been degrading oobleck levels.

The FBT team had committed one of the cardinal errors of product development. They had focused on optimizing their technology without considering carefully enough what the customer really needed.

Often, a start-up’s proprietary technology is the key to its value proposition. The tacit assumption is usually that if some is good (in this case fizzbins/watt), more is better. What truly matters is how that technology can be used to improve the end customer’s value proposition. Frequently this has more to do with how the technology can be utilized by the customer rather than how good it might be when compared to some arbitrary benchmark. It is critical for the product development team to understand all of the customer’s needs and requirements so that they can make the proper trade-offs when developing the product. The goal should not be to just make it “better”; it should be to make it right for the customer.

FBT blindly worked to optimize the Hindenburg’s fizzbins per watt value without even considering its potential impact on the equally important (from the customer’s point of view) oobleck level. The result was a product the customer could not use.

What, if anything, can FBT do to recover from this disastrous start? Find out in the next installment of “The Saga of FizzBin Tech.”