How to Collaborate on a New Product
Reposted from The Wall Street Journal | by Emily Maltby and Sarah E. Needleman
Some entrepreneurs hope they'll benefit by working together to collaborate on new products, in order to fast track production and branch into new markets.
But before you seek to co-develop a new product, there are some possible pitfalls to think about.
Dogfish Head founder Sam Calagione, left, spent a day alongside Brooklyn Brine founder Shamus Jones, right, to make their first large batch of beer-infused pickles.
Consider the case of the "Hop Pickle" now in development by Dogfish Head Brewery, of Milton, Del., known for the shark-in-shield on its bottles, and Brooklyn Brine, a nearly three-year-old pickle company in Brooklyn, N.Y.
In late May Dogfish founder Sam Calagione stood in the pickle company's production facility and pumped Dogfish beer from a keg into a plastic container. A few feet away, Shamus Jones, the Brooklyn Brine founder, stirred a hot vat of vinegar, water, onions and sea salt.
The beer and Cascade hop oil was added to the other ingredients and the alcohol flashed off in the heating process, leaving just the flavor of the beverage.
The pair plan to price the pickle at $10 to $12 a jar. Its logo will be a shark crashing into barrels, a play on each company's emblems.
Mr. Jones, 32, says he hopes the Hop Pickle will give his brand greater exposure. But Mr. Calagione, who founded Dogfish in 1995, acknowledges that the pickle company is "risking more of their production capacity to do it."
Even though you're sharing the work, remember that you also may need to stretch time and resources in order to make the joint products a success.
When Kelly & Jones, a New York City perfume company, teamed up with Sweet Revenge, a cupcake, beer and wine bar, also in New York City, to create a food-inspired fragrance last year, "our timeline was on shifting sands," according to Marlo Scott, the owner of Sweet Revenge.
Sweet Revenge provided food items to inspire fragrances and mix sample batches, while Kelly & Jones procured ingredients, filled 75 bottles and applied labels. Kelly & Jones was prohibited from recreating the Sweet Revenge fragrance for another client or sell it under another name, even if the two companies stopped working together.
The release date was set for November, 2011, but over the course of the project, alcohol costs doubled and unexpected interruptions slowed things down. Ms. Scott caught a cold that caused temporary loss of smell. And during the winter holidays, Kelly Jones, the perfumer, became fully consumed by her own line.
The product ultimately launched in April. "Managing the schedules was so frustrating," adds Ms. Jones. Still, the duo plan to work together again to make a line of soaps.
Craft entrepreneurs sometimes can lower their costs and broaden their distribution by teaming up. At Etsy.com, an online crafts marketplace that grossed more than $525 million in sales last year, for instance, about 238,000 sellers have come together to form 5,000 "Etsy teams." Many have collaborated on furniture, clothing and various other items, which they in turn sold on Etsy.com, according to Kimm Alfonso, manager of the teams program.
Pat Dickson, an entrepreneurship professor at Wake Forest University, says that "over the past few years it's become difficult for small businesses to get loans so they've had to find other ways to access the resources they need to grow." In 2004, a survey he worked on found that 64% of 761 U.S. small businesses had "formed an alliance" with another business within the prior three years, most frequently in product development.
Lawyers caution that entrepreneurs should be sure to have a signed contract that outlines in detail how the collaboration will work, from beginning to end.
You and your partner should revisit the terms of the contract throughout product development and make adjustments as needed, lawyers say.