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Kevin Mako: Hello, product innovators. Today we learn from the past head of design of an entire product division at Dell on best practices for your first overseas manufacturing run.

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Narrator: You're listening to the Product Startup Podcast, the show that helps bring your product idea to life by chatting with successful inventors, product developers,

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Narrator: and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves.

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Narrator: We're taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America's leading experts on hardware development for small product businesses.

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Narrator: Now, onto the show.

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Kevin Mako: Welcome back, everyone. Today I'm very excited to introduce Mike Morton to the show. Mike ran a design firm in Hong Kong back in the 90s, then was a senior design lead at Sunbeam, then a manager at Hewlett-Packard, and then spent 10 years with Dell running their entire,

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Kevin Mako: business desktops design division. He has made over 50 trips to China for manufacturing sourcing and has consulted dozens of hardware startups on overseas production. He's also a mentor at TechStars and Capital Factory. Today, Mike is going to share some valuable knowledge on how

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Kevin Mako: inventors, startups and small manufacturers can best plan for and best execute on their first overseas manufacturing run. Now on to the show.

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Kevin Mako: Mike, welcome to the show.

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Kevin Mako: How you doing, Kevin? Good to see you as well. You know, we've known each other for for many years now. Actually,

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Mike Morton: you knew my brother well before that. He used to work for you back at Dell. Yep. Your brother was one of my better interns I've had at Dell, probably one of the best ones I had

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Kevin Mako: at Dell. And he was a great find. I think he was at Art Center in, is that where he came?

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Mike Morton: Savannah. Savannah, Call the Card. Does that mean? That's right. And really amazing guy. And it's, it's amazing how similar you guys are too. Yeah, he's like,

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Kevin Mako: when I met you, it was like, well, that makes sense. Well, he went to crazy, you know, triple degree, master's in design, all that super, you know, academic, smart, you know, design side. And I kind of went the business side, but we're

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Kevin Mako: both in the, you know, in the design world. So I hope he's listening.

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Mike Morton: I'll tell him to anyways. So you can hear you say those kind words. Appreciate it, Mike. He was great. Really, really, really. And he was with me for a couple of years, too.

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Kevin Mako: So he kept bringing new, new stuff to the table. It was really good to happen. Great on. Yeah. And what a great place to work, Adele. We're very excited today to hear about your experience. both as a very senior design leader at Dell, but also you've worked with many startups too.

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Kevin Mako: So having the best and the best and biggest product firms in the world, as well as working with some great product startups. It's an incredible experience for our listeners to hear. Today, we're talking about manufacturing.

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Kevin Mako: And who better to talk about manufacturing than Mike Morton. So Mike, I really appreciate you giving us this insight. Let's kick it off. you know, when we're thinking about manufacturing our product, even in the early stages of

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Kevin Mako: ideation, you know, even if we've just got that invention and we're starting to think forward in terms of the end game, whether it's us or buyer or whatever else, somebody at some point

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Mike Morton: needs to produce this thing to create value. What do we start thinking about in terms of manufacturing first and early on in the process? Wow. I mean, there's there's tons of aspects of manufacturing

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Mike Morton: And you always run into new things, depending on your product. It very much depends on your product, what you've got to do.

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Mike Morton: But I think one of the most important things that a lot of people don't realize is thinking about, you know,

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Mike Morton: doing more work on the design up front with those manufacturing considerations in mind. What are the materials you're going to use? How is it going to be made? How many pieces do you have to mold to put it together?

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Mike Morton: Those types of things, as you're doing the design, you're working with the designers, is keeping them at least, you know, in mind will help you design a product that can be much more

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Mike Morton: reliable, tend to have lower quality problems, cost you a lot less tooling dollars possibly, depending on what you're doing.

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Mike Morton: And, you know, even things like the packaging, one of the big things, I'll tell you, Adele, the thing that always caught us, we're doing computers, and we'd be down the end of the line and someone forgot a label. And they didn't know where to put the label. And they forgot to put it

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Mike Morton: Right. And so now we're scrambling to figure out how do we stick a label on somewhere and not screw up the design? And, you know, there were hold up sometimes for that. It's

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Kevin Mako: those little things, those details that a lot of times designers don't think about or people, product managers don't think to get done early and account for early that can trip you up at the end.

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Kevin Mako: I mean, that's brilliant. We're obviously a big advocate of kind of smart manufacturing grade design early.

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Kevin Mako: But it's interesting to hear from you. And I imagine you've seen a bunch of different scenarios, right, from stuff that's really well designed, really well engineered, essentially ready for turnkey production.

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Kevin Mako: And then I'm sure you've also seen many of those situations where the product's been essentially kind of hacked together, designed together, may have great features and functions,

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Mike Morton: but they're really hoping that somebody on the manufacturing line is just going to magically figure out how to solve all of these kind of core problems at that point in time when it's

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Mike Morton: really it really it's too late right yeah and that's that's such a recipe for disaster i mean you might get lucky and have a fantastic manufacturer who just looks out for you and knows what they're doing

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Mike Morton: i've seen that about once in 400 times literally um and i'm not kidding it's that rare um but uh but yeah it can be if you don't have it defined really well going in um

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Kevin Mako: And if you don't, you know, if you don't have the ability to, to keep that monitors as it's being developed in a manufacturing standpoint, what comes out is not, you're not going to recognize it. It'll be different and things will change that you just didn't anticipate.

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Kevin Mako: I like that, Mike. That's great. And, you know, something you mentioned, as we were just talking before hopping on this call here, and I think it's very pertinent, especially to hardware development, consumer product development.

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Mike Morton: One of the big things that you said you noticed with working with startup. that are working towards going into production is essentially trying to do everything in regards to their product from end to end. Can you touch more on that insight? Because I thought that was very

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Mike Morton: interesting before the call. Yeah, definitely. And startup founders got so much going on. And they're trying to get funding. They're trying to develop the market. They've got the website, all the stuff. And they're the ones that can fall into that trap of, okay, we got a design and we think it's,

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Mike Morton: you know, we think it's developed, it looks good and everything. They may not know how much detail needs going to technology, so they think it's pretty well done, and they're ready to throw it over

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Mike Morton: the wall. When you do that, if you don't have trusted people, like what I call boots on the ground who you have relationships with or you have very close connections with and you know

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Mike Morton: will be your guys in the factory to help guide the factory development, there's two parts. There's the initial development. There's like design, there's engineering, and then there's a factory. One

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Mike Morton: example is, I don't know, I've ever had a database I sent to a factory that they didn't redo.

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Mike Morton: Like, just, they didn't have to. They've had some that went absolutely complete and they still redo it because they have their own ways of doing things. And the way the guys here, whether it's a great engineering firm or, you know, designers, the way you will design it here,

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Mike Morton: they won't like it. They'll want to design it to go together another way because of their manufacturing processes. They will redo it. And unless you know that kind of thing is going to happen and

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Kevin Mako: you have boots on the ground there who can kind of watch that process and feedback and all, you'll get surprises. Stuff will happen that you won't realize happened. And again, you'll be getting ready to ship and get some pre-production samples back.

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Kevin Mako: And there'll be something on there that you never anticipated. Well, you talked about two key things here. One is in really well, really smart preparation, like at a very high professional grade, make sure you're ready for production. And the second thing you're mentioning, too, is really keeping a close eye.

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Kevin Mako: from a professional standpoint, from an engineering standpoint, on physically on the ground, but also, of course, in the CAD files and whatever else. So let's talk about that first one and then jump into the second one as well. I want to dive a bit deeper onto that preparedness going into manufacturing.

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Kevin Mako: Something that I find very interesting when people who come to us with one or two of the skill sets in-house, let's say, for instance, we're doing a consumer electronic product design. And they have a great industrial designer and somewhat a bit of a mechanical,

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Kevin Mako: engineer and then they have no electrical engineering.

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Kevin Mako: Well, at that level, I think that's where it's incredibly critical to understand your strengths and your weaknesses and understand that one doesn't transfer to the other. In fact, when I look back at product development now, you know, at a 30-person team,

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Kevin Mako: it takes us for a consumer electronic product, it takes us between anywhere between six or eight high caliber experts to get from sketch to production, right?

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Kevin Mako: concept design, industrial design, mechanical engineer, or materials engineer, firmware, embedded firmware, your electronics, PCB board designer, and your manufacturing engineer.

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Kevin Mako: And that's assuming only one of each of those categories, right? And there may be subcategories of that. So you've got six to eight different unique, high caliber experts, all needing to work very well together, all being very professional and manufacturing-minded before.

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Kevin Mako: I think that's what you said, key, Mike, there is before you're going into production.

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Mike Morton: Right. So then I want to now jump into the second point that you brought about boots on the ground. Can you go into more detail about that? Because I know you've done over 50 trips to China, countless days and months and arguably compounded to years over there,

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Mike Morton: working with hundreds of facilities on hundreds of products. So what are some of your best practices for boots on the ground development, making sure that you're manufacturing it right as a startup?

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Mike Morton: Sure. Yeah. Yeah. One thing. And I think I know, well, I forgot to mention before, but I actually had a design firm in Hong Kong back in the 90s.

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Mike Morton: And so that's kind of really where I kind of started there and in the factories and all and built a lot of relationships.

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Mike Morton: You got to have those, the people you can trust to watch over the whole process.

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Mike Morton: And so it's really finding, you know,

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Mike Morton: put it this way. Like you said, there's all these people. You may have some on this side. But the ones, on that side are going to end up doing your quality control. They're going to be signing off on the shipments and they're going to be watching that factory.

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Mike Morton: The people who do that, you've got to have that functionality. A lot of people think, oh, I can just, like, I'll fly over it, fly every once while or I'll trust the factory. You just can't do that. You got to have somebody who's independent to do the quality control.

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Mike Morton: Those people are best, those are some of the best people, be your boots on the ground and engage them very early. even as you're starting to develop the product, and it might be from an operational standpoint, because they'll start, if you have a factory,

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Mike Morton: they can start talking to the factory about it. If you don't, they can help you find a factory that's reliable. They can check them out. They go in and make sure there's no child labor and chain doors and stuff like that and inspect things first.

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Mike Morton: But then as the product is actually in production, they know about, they know some of the things about how it was developed and why you did the things you did. So when things start to go wrong, because they will on the line,

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Kevin Mako: I've gotten calls from some of the guys I work with who I've got a 20-year relationship with where they'll call me up one night and be like, oh, by the way, this started happening, but we went in and did this and now here's what's going on and we're done.

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Kevin Mako: And it's like we had a possible fatal problems that they just took care of because they knew what was going, they knew why we made the decisions we made at a high level. you can't bring them in on everything, of course.

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Kevin Mako: But at a high level, they knew what was supposed to be happening and could correct the factory on the fly. That type of dynamic and having that kind of people on the ground, super important. That's great. Yeah, two things I want to break down.

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Kevin Mako: First of all is in terms of that, the handoff we were talking about earlier, and you were mentioning actually getting them involved. One of the things that we're a big promotant of is when you're done, you're at the point where you've got a fairly decent prototype.

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Kevin Mako: maybe it's your second or third round of prototype. You're pretty comfortable with the concept with the design, with the engineering and that sort of stuff. Before you actually start finalizing your manufacturing spec documents and all that sort of stuff, actually engaging these facilities.

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Kevin Mako: Now, in order to do that, you know, brings to your second point you talk to, which can't be understated, but it's the power of relationships. Right?

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Mike Morton: And that's what you mentioned there. Like working obviously with somebody like you is very, very powerful in terms of the connections that you get. And I know for our clients, most of them don't have connections overseas.

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Mike Morton: So if it wasn't for us, there was no way that they would be working with these, you know, certain caliber facilities or whatnot because the relationship have to be curated over, essentially over years a lot of the time.

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Mike Morton: And I know you've seen it because you mentioned it when we talked earlier about kind of the Alibaba sourcing for manufacturing. Can you just touch on that? Sure. Sure, yeah.

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Mike Morton: I've had guys I've worked at startups who, you know, they're looking for a factory and they get on Alibaba and they try to find somebody and, you know, they think they found someone.

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Mike Morton: They start working and then they end up, you know, realizing that they don't have control over their IP. For instance, the software, the firmware and the product, that their partner, whoever was supposed

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Mike Morton: to be their manufacturer or their partner over there, they didn't know them well enough. And again, they haven't done this before. they don't know how to make an MRD, a manufacturing requirements document.

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Kevin Mako: They don't know how to make a MSA and manufacturing services agreement, all that stuff to guarantee as best as you can, you know, and what's going to happen and what your rights are. That stuff falls through the cracks.

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Kevin Mako: The Chinese basically, I heard a great quote,

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Kevin Mako: love them,

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Kevin Mako: live there, but a lot of times they view contracts as a framework for litigation versus is actually something they've got to do, right? Right.

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Kevin Mako: And so having, you know, having someone who knows the right things to do and you can rely on versus someone who's just trying to get the job done and push product out for it, you know, that that's a real different dynamic.

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Mike Morton: Well, and especially we're talking startups, right? So you have one shot. You're going to market. This is your big splash. You've either funded on Indiegogo or Kickstarter or, you know, you're doing your first production run, which then you're going to sell to wholesalers or retail or whatever else. You've got one shot.

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Mike Morton: And you need great reviews. In 2021, there's no room for a half-quality product. It won't survive, right? It's all about quality. And that's why when it comes to manufacturing, these are the goods that you're going to be selling.

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Mike Morton: So you've got to make sure that you are doing absolutely everything in your power to manage, monitor, and ensure that when those units land here, your clients are going to love them and appreciate the merit of the invention as opposed to a couple of defects of your invention.

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Mike Morton: Well, and one of the things is they start finding to so much, getting to that point, I think a lot of, and because they haven't necessarily done it and have the scars that you and I have in this, they don't realize that they can get down to the end

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Kevin Mako: and something can go wrong that they, that wasn't accounted for and blow their business completely. You know, they could be ready to ship 10,000 units and all of a sudden, as they're doing

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Kevin Mako: inspections, they just, they're not working. The prototype worked. The initial one worked. You know, the one of the engineers put together, it's an overworked, but now the stuff coming off the line's not working and they're out of money, you know, and I run into companies like that who I've

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Kevin Mako: been advising and saying, you better go get more money fast because you don't have any cushion

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Kevin Mako: and they didn't, you know, and we've worked on a project like that too, that really great, had some great manufacturing, amazing product, but they ran out of money. And, you know, it's just

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Kevin Mako: tough. It's tough to see stuff like that. I'm a big fan of, and we kind of coach our clients as well into looking at the first production run is an investment, not a moneymaker. I totally overspend on your production.

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Kevin Mako: If you're planning to test one out of every 100 units, do one out of every 10. And yeah, it's going to build up, your costs are going to increase. It's a shorter run. It's going to cost you more. You're probably pushing to have less units and more because it's your first one.

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Mike Morton: That's going to cost you more per unit. All these things add up. If you've done a crowdfunding campaign, they take fees. If you're working with wholesalers, distributors on some of your first product, Sometimes there's, you know, baked in upfront fees or fixed costs.

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Mike Morton: It is expensive, but the reality is it's also the greatest opportunity, I believe, in the potentially 20, 30, 50 year future of a product. Because if you can get those products, who cares about making money?

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Mike Morton: You can get them on the ground, get them into users' hands, and have users say, I love this thing. Now you can start talking to the big players. Now you can start thinking about big deals and what you're going to do

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Mike Morton: because you can use that to leverage off to exponentially larger and larger buyer groups. But it really comes down to that first, the quality of that first production run. So look at it as an investment. Yeah. Yeah, you're believable.

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Mike Morton: The customers, the best buyers, where you want to sell to, they're going to, when they see that and they see you sold a bunch,

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Mike Morton: then they'll believe in you. There's so many guys doing this. And everybody's trying real hard, but so few can actually get to it. And I won't discourage people. But it's, it's tough. You don't have the right people around you and all that, like we were saying.

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Mike Morton: but if you can do that like you said don't worry about if you made any money you'll if you can show it to those guys and get that next big order because they believe in you now that's that's huge

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Mike Morton: absolutely yeah one thing i was going to say about the people is find those other people um even if they're local you know advisors or something you just there's so much that a startup doesn't know

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Kevin Mako: and they don't know they don't know there's the don't know you don't know stuff is what really kills you. Absolutely. And just, just over, over connect with people. Um, because like I said, a little bit ago,

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Kevin Mako: maybe you have all the financing that seemed like it would work. Um, I tell people, by the way, once you sit out your schedule on your budget, if you're not able somehow to double both of those, you shouldn't start. That's sort of the rule of thumb.

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Kevin Mako: I tell me, I just say, just, just plan it like that. And you know, that's, you'll have that cushion you need but uh but yeah once you once you do that then then you'll be okay but you got to have

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Mike Morton: that preparation you got to have the right people who can tell you here's something you didn't even know you were going to have to deal with you know have you thought about how much your shipping will be because you want to make this kind of package some people never thought about that or whatever

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Mike Morton: and uh and they'll help you find the other people you need absolutely and of course that's you know it's it's a a linear relationship the more qualified highly experienced experts in each of the relative fields of your business in general,

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Mike Morton: not just product development, not just manufacturing, but this comes around to your holistic business approach, more experts that you can bring on board, whether it's an advisor or a consultant's or an employee or a firm you're hiring or whatever else. It doesn't matter.

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Mike Morton: The key is to get those experts on board with your vision one way or another

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Kevin Mako: so that that smooths out, exponentially smooths out, so many of those bumps that are going to occur down the road to make it kind of an express route as opposed to, you know, the long haul. Right. I've literally had meetings with startups

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Kevin Mako: where I'll do these half-hour mentoring sessions at Capital Factory here and others where I've looked at what their designs were and how they were doing it. And after the meeting, I was able to say,

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Kevin Mako: look, if you if you do it this way and this way and use this other technology, then they walked away saving $100,000. I had a startup I did that with, $100,000 of cost that they were going to, they were planning on spending, had it under budget. And it was like, no, do these.

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Kevin Mako: sorts of things that you didn't have experience to know you could do.

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Kevin Mako: And you just got, it's like getting $100,000 of extra funding that they didn't have to get, you know. And you just can't know everything. So you got to find those people and talk to them. And you'll see those insights that'll surprise you. Yeah. Again, that comes up to the model. You know,

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Kevin Mako: you're going to spend a little bit more up front, but it's going to save you not only a bunch of money down the road, but also you've always got to factor in. One big thing when it's coming to manufacturing, especially at that phase is, what's your opportunity loss? So some people look at

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Kevin Mako: a kind of rough first production run and say, hey, you know what? We're able to, we're able to weather that storm. We didn't, you know, we didn't lose too much. It cost us, you know, 20% returns or whatever else. Yeah, but what did it cost you in the opportunity loss? The reputation, the lost

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Kevin Mako: steam, the everything from your own internal team to your users, your customers, your investors, your partners, you could have lost 10 times that without ever knowing or seeing that.

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Kevin Mako: And that's really why, you know, I harp so much on focusing on getting to that, that first production around ensuring that's done in good quality and making sure that you're spending right to get there. And one of the big things that, obviously, is always a

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Kevin Mako: rhetorical question to that, that I just want to at least touch on briefly in terms of financing.

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Mike Morton: We always get the question, well, yeah, doubling the budget sounds great, but that's a very difficult thing to do. My argument to that is, you know, first of all, the further you push development, the exponentially more valuable your product becomes, the better investors you'll

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Mike Morton: get on board, whatever else, especially if you can get to a good first production run. But even if it's before that, it's a lot easier to raise a little bit more financing than it is to

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Kevin Mako: recover from a botched first run or a botched first bunch of users out there. Like in multiples, right? In fact, right now, there's tons of money out there.

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Kevin Mako: There's the highest personal wealth rate, the highest household savings in human history has occurred right now. Yeah. Yeah. You know, there is a bit of a silver lining occurring in some areas. So it's really

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Kevin Mako: important to know that like the money is out there. What is not out there is a recovery from failure. So focus first on quality, which may require money, money or funding that you don't have. That's fine. Go get it. Find it. And then at least create a great product from there.

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Kevin Mako: And you know, you'll be way better off. Right. Well, and your funding sources, are going to know, especially if they've got experience with not, if they've got experience with this stuff, they'll know if you're underfunding yourself. They'll, they'll be like, they don't,

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Kevin Mako: these guys aren't experienced enough. And if you can go in and say, here's what we're doing it,

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Mike Morton: here's why, you know, and they've got any experience with this kind of stuff or have had been burned, which everybody in the industry has been burned. So, you know, at some point. So, you know, they'll, they'll respect that. And you know what I've seen dozens of times, Mike?

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Kevin Mako: dozens of times people they'll have that call with our strategy folks or myself and I say look I'm I'm looking to raise you know I've I've got it to this point right at a prototype I need to raise money for the production run and marketing whatever else and I think I need 100 grand I look at it I say you

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Kevin Mako: know what I think you need 200 yeah probably similar to your model right I'm like yeah you

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Mike Morton: maybe squeeze by with one but two if you're lucky you know what happens so often they ask for two instead of one and they just get two yeah they get because a lot of these times of these investors, it's not a huge difference. Keep in mind, these are, these are angel investors or early

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Mike Morton: venture stage investors. They're, they're looking for products, which are going to be multi-million

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Kevin Mako: dollar selling products down the road. So whether it costs them 100 or 200 to get in, it's a new proprietor. You've already developed it a bunch. You've proven the technology. It's a good deal, especially right now with how present hardware is. Everything's getting redesigned. They want you to

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Mike Morton: invest in IP. They want you to invest in people. They want it reliable, you know, and if you're not investing in reliable, like you said, high quality people like Mako brings in and, you know,

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Mike Morton: the right team and all, if you're not doing that, then you're risking and they want to be de-risk.

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Mike Morton: I appreciate the note there, Mike. And to return the favor back to you, just out of curiosity, if people want to get in touch with you, find out about more working with you, because I know

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Mike Morton: you work directly with a lot of startups. What's the easiest way for them to find you? Probably the best way is an email.

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Mike Morton: And I don't know if I, you know, my email is Michael at Mortoncg.com. It's sort of short from Morton Consulting Group.

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Mike Morton: And, but Michael at Mortoncg.com, that's probably the best way to get a hold of me.

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Mike Morton: And I've also got a website, Mortoncg.com, and you can find me there. Okay. The background in all numbers, but yeah. Well, Mike, I really appreciate all the insights. There's a ton of information there. Very, very action-packed for manufacturing. Great to hear it from you.

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Mike Morton: Um, much appreciated for being on the show. We'll hope to have you, hope to have you on again. Sounds great. I enjoyed it a lot. I'd love to do this again. All right. Take care, Mike. Bye bye. Bye.

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Narrator: Thanks for tuning in to this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it into a big success.

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Narrator: This podcast series is brought to you by Mako Design + Invent, the original and leading firm in North America to provide global caliber in-to-end physical consumer.

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Narrator: product development to startups, inventors, and small product business clients. If you're looking for product development help on your invention, head over to Mako

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Narrator: design.com. That's ma-k-o-design.com for a free consultation from one of Mako-designs for design studios from coast to coast. Thanks for listening and see you next time.