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The CE Start-Up: Opportunities and Pitfalls

Moving from innovation to execution is tricky. Learn three factors that prove market success isn't based on technology innovation alone.

For start-ups across the Consumer Electronics landscape, moving from innovation to execution is tricky. There are three factors that–if understood and addressed– will make the odds of a breakthrough greater, but only if you can get beyond the notion that market success is based on technology innovation alone.

Of all the sights and sounds at January’s CES show, perhaps the most meaningful for the future of the consumer technology business was this: about 800 exhibitors at the show didn’t exist three years ago. That accounts for 20 percent of total exhibitors at CES. These companies launched products in categories that did not exist three years earlier – such as Smart Home, Health and Wellness, Baby Tech, Beauty Tech, 3D Printing and Robotics. 

Most of these 800 new exhibitors gathered at Eureka Park, the flagship CE startup destination, a clear sign that innovation is on the rise. When Eureka Park debuted at CES in 2012, it only had 94 exhibitors. Today, these forward-thinking companies, showcasing their innovation and hopeful of gaining attention, represent the explosion in technologies and product categories that create an unprecedented opportunity for inventive and imaginative entrepreneurs. 

The opportunities for the next Apple, Oculus or DJI to emerge have never been greater than it seems today. Yet, regardless of how clever or innovative their ideas are, most of these start-ups are unlikely to survive business challenges and the competitive marketplace as they attempt to ramp up sales.

Entrepreneurial Pitfalls:

Most of these budding entrepreneurs have a firm grasp of the unique nature of the technologies they’ve developed and an unshakeable belief in the products they’ve created. But as experienced CE company executives know, moving from innovation to execution is tricky. There are three factors that make the odds of a breakthrough longer than these hopefuls would like.

First, breaking through in a world ruled by established, well-funded brands and products is an enormous challenge. According to the CTA, just seven product types– smartphones, tablets, laptops, TV, digital cameras, PCs and wearables – the most recent addition to this “Magnificent Seven” – will represent 81 percent of all consumer tech products sold this year. As you can imagine, the established companies behind these brands guard their turf aggressively.

Second, many start-ups fall into a technology trap as old as the industry: you may have built a better mousetrap, but just because you can do something doesn’t mean you should, or that anyone will want to buy your creation, regardless of how advanced, clever or revolutionary it may be. The technological landscape is full of promising products that no one actually wanted.

Even if the product is exactly what consumers want, there is still a third and critical pitfall that entrepreneurs overlook: a solid business and financing plan. Engineering a new product takes a certain set of skills. But setting up the systems to mass produce, price, market, and sell it requires a completely different set of skills that most engineering entrepreneurs lack, and very often underestimate. Once you get past that obstacle, and after the initial burst of sales, there is more to contend with–managing working capital, credit risk, customer payments and so many other financial and operational matters.

There are, of course, resources to help entrepreneurs establish a functioning business, such as the CTA’s Small Business Council, as well as receivables management companies like CIT. Drawing upon these resources could help increase the odds of a start-up turning a great idea into a great company. Remember, even if your CE company is not a start-up, advances in technologies force almost everyone to act like a start-up to keep pace with competition. More on that in my next blog.

Click here to see more information on consumer electronics industry operational finance best practices on the CE Financial Strategies Center

Joel is a business development officer at CIT Commercial Services. With over 18 years’ experience, Joel has structured many financing arrangements for companies in the consumer products space, including consumer electronics, apparel, textiles, and housewares. Joel has a deep understanding of the retail supply chain, as well as the retailers to whom his clients sell.