James Dyson had to deal with a different number of problems when the Dyson brand started. First, he dealt with competing with the biggest manufacturers in the world; brands that were known by everyone like Electrolux, Bosch, etc.
Dyson also learned from previous experiences that ensuring patents applications before negotiating with anybody was crucial. This is essential if you wish to ensure that large multi-national companies are not going to steal your intellectual property. From Dyson’s experience, he would argue that they would probably try to steal it regardless of any protection one held.
Second, Dyson had all kinds of problems when he and his company tried to enter the UK market. With a small amount of revenue starting to trickle in Dyson decided that it was time to start in the UK. The existing appliance manufacturers had expressed no interest hence, Dyson planned to manufacture the product in the UK by offering the product to existing contract manufacturers. Unfortunately, the companies selected by Dyson caused further problems.
One problem would be the quality of the products-completed was not acceptable to Dyson. Another problem with these companies was that they would try to ‘squeeze’ Dyson work in between existing long-standing contracts. Dyson, however, encountered further difficulties.
Firstly, he found that it is extremely difficult to borrow money- even with a proven successful product. Dyson explored the possibility of setting up a factory in an area where Government development grants are available. For example, he tried South Wales but David Hunt, the then Welsh Office Minister, refused his application for a grant. After months of negotiations, Dyson’s local bank manager agreed to lend Dyson some more money and he was able to set up his manufacturing factory in Wiltshire.
Soon Dyson was producing his own product in his own factory and the first Dyson bagless vacuum cleaner rolled off the production line in 1992. Manufacturing the product has turned out to be hugely profitable, yet this was not the original plan; why not? The original plan that Dyson had was to license his patent to larger, established companies in return for an initial payout plus royalties for every unit sold. He thought it would be much easier to license his patent to manufacturers who already had established a large market of the vacuum sales rather than trying to compete with these companies. Dyson figured that these companies would accept his offer, but quickly found out that it was hard to come to an agreement with them.
Many companies doubted that this new technology was worthwhile. Dyson finally decided to outsource production to manufacturing companies and sell his vacuums by himself. He soon realized that the only way he could get the desired quality of vacuums that was to his standards, he would have to manufacture them himself. Why is negotiating a license for a new product so difficult? Licenses are difficult to initiate because no trust has been established between the parties. This situation is stacked against the innovator since they must get a license before beginning their work with another company to ensure intellectual property protection and payment. This leaves them no opportunity to develop any type of relationship before they look to enter a fair agreement. This lack of trust shines through in multiple ways and dissolves most possible partnerships before they have a chance to develop a trusting relationship; ultimately hindering innovation.
Dyson was rightfully tentative while pitching to potential partners who needed more detail to be sold on this new technology. In addition, most of the potential partners were scared of a bagless model since they profited substantially on the recurring bag purchases; this model that doesn’t need a bag could steal a large portion of their market share. These companies also didn’t realize the superiority of his creation and felt that his asking price was much too high.
Many unknown innovators are unable to succeed despite the grandeur of their ideas, because of the obstacles in bringing an innovative product to market. How can businesses try to ensure that their senior managers (both buyers and new business development managers) do not dismiss exciting technology and with it potentially profitable business? senior managers and the business must do a good job of balancing exploring and exploitation. Large corporations face an issue of trying to exploit their already current business model while staying ahead of the market by looking for new ways to innovate. This is especially true with senior managers who are using to running a business a certain way for a period.
As shown in the previous case with kodak the senior managers were reluctant to the new rapid changes the company tried to undertake and were ill-equipped which ultimately contributed to its downfall. Senior managers must be able to collaborate with their new younger employees in order facilitate this growth. lower level employees can give valuable insight to what consumers want/ need because they tend to be the closest demographic to consumers within a company.
Several companies implement a buddy system in which a senior manager is assigned an entry level or new staff employee to partner with and learn about possible consumer demands. This almost acts as a reverse mentorship that allows senior management to learn more effectively about possible ideas and ways to utilize technology within the company. Not all firms invest in R&D. What should be the level of expenditure on R&D for a firm? The amount of research and development that a firm should allocate is highly variable depending on the nature of the company and the nature of the product(s) that it offers.
For companies like Dyson, that rely heavily on their unique products and high level of innovation, expenditures for R&D should be relatively high. Without significant commitment to their research and innovation, a company can easily fall behind their competitors and can even fall out of the market altogether. For companies that offer very mainstream products and services, expenditures toward R&D can be less than previously mentioned. The savings from R&D would be better suited toward advertising, marketing, and further improvements of their logistics and production chain.
Putting an emphasis on those expenditures rather than R&D will be far more worthwhile, because companies that produce simpler products such as toilet paper, silverware, door knobs, and other similar products inherently have a very low amount of innovation with their products. Therefore, innovation is not a key focus for them.