Ninety-five percent of my friends who are entrepreneurs are in the software space, and though it seems exciting, I never really thought it was for me.
The digital landscape is changing constantly. Software businesses can achieve really great success really quickly, but the same things that allow them to launch and scale relatively fast on a lean budget also mean that they’re vulnerable to disruption.
The idea of creating a physical, real-world good that can stand the test of time has always been incredibly appealing to me.
And I’d always felt pretty let down by my own experiences with water filtration products—I knew there had to be a better way. Market research revealed a real opportunity to create a product with legitimate staying power.
So when the opportunity arose to co-found Hydros, a modern water filtration company, I was all in.
But I knew building and developing a physical, real-world product would come with its own unique challenges.
To name a few:
1. It’s incredibly difficult and costly to recall an entire wave of faulty physical products.
So consumer goods companies must focus intensely on quality control, design, and engineering before sending a product to market.
Unlike a software company, we don’t have the luxury of letting our users find flaws in a buggy, beta version of our product that can be expeditiously patched by a team of engineers. In other words, fixing issues with physical products—which are subject to gravity, breaking, and needing repair or replacement—is much more challenging than fixing software.
Despite rigorous quality control checks, we once ran into an issue where a particular color of one of our products was degrading. But we didn’t catch the problem until we began experiencing a high rate of returns of the item. So we pulled the product, ran some tests, and identified the source of the issue. Ultimately, we had to trash that entire batch because it cost half as much to replace it than it would to fix them.
2. With physical products, the pay cycle is much more complicated.
You have to front-load a ton of capital and gradually see returns as you sell product over time, and you’re paying for inventory upfront in a way software companies aren’t. In software, on the other hand, you can sometimes receive payment before even delivering the product.
3. It’s harder to break out with a new physical product at a competitive price—especially when you’re entering an existing market.
For example, even if people don’t love their Brita, they probably won’t spend $25 on a better water filtration pitcher if the one in their fridge does the job. Our approach to competing with Brita is creating a substantially better product and developing an ecosystem our consumers become immersed in when they first purchase one of our products.
Despite the challenges, there are a number of major advantages to developing a physical product.
1. Once you get it right—i.e. execute from a design, engineering, and licensing standpoint—you gain substantial competitive insulation.
It’s unlikely that a new, better product comes along and immediately makes yours obsolete, as happens often in the software space.
Even Uber and Lyft could see another competitor join the ridesharing race and begin to edge out a considerable market share tomorrow. Consumers simply aren’t loyal to tech companies in the way they are to physical product companies.
2. I always knew I wanted to create a truly great product and approach it with genuine intentions.
In order to do that, creating a physical product was my best bet. Because with physical products, your timeline allows for ample research and development. In software, on the other hand, many companies knowingly push and overhype imperfect products because they want to sell, sell, sell right away.
3. People will connect—sometimes even on an emotional level—with a truly exceptional physical product.
When you touch, use, and engage with a product multiple times every day, it becomes an intimate part of your life. Through this connection, you can establish brand loyalty. From a business standpoint, creating this type of connection with the consumer is advantageous because they get locked into your ecosystem. And that’s something the cloud will never be able to accomplish.
There are always two sides to the equation. In the business of physical products, we face a number of challenges—and benefit from many advantages—folks in the software space don’t. For me, the decision to venture into the physical product industry came down to a burning desire to create an exceptional physical product that would live on over time and improve our consumers’ quality of life in some small way.