Smart idea taps global sales force
As many an inventor has discovered, having a bright idea is not the hard part, selling it is.
That's why the team behind the Smart Water wireless monitoring system did a distribution deal with a partner who had an existing footprint globally rather than try to go it alone.
Tim Stone and Chris Harris from electronics distributor Ivent Solutions came up with the idea of a product that could monitor how much water was left in a tank using pressure-sensing technology back in 2009. Last month the company they set up, Smart Water Technology, won startup company of the year at the annual Hi Tech awards.
Their prototype was put together with No 8 wire on Harris' Mangatawhiri farm and tested on farmers at the 2010 national Fieldays. It got a good reception but Harris and Stone wanted to ensure their product was completely different to anything else on the market. They then developed the system so it could remotely monitor the water usage in the tank and alert the farmer when it was too low. Given water is often the lifeblood on any farm, this additional feature was also welcomed by farmers who often find their tanks leaking because of damage by cows.
The product was launched in 2011 in New Zealand and Australia. Sales hit $850,000 last year, and are expected to reach $2 million this year and $3.5m by 2015. Already profitable, the firm is about to launch in the United States and is also scoping out South Africa and South America.
Stone hit on the idea of approaching existing agricultural manufacturer Gallagher to distribute its product. He'd dealt with the company in the past and knew it had a global sales network targeting farmers. It also didn't have a water-monitoring product in its product range. Within three months, he had scored a $3.5m, five-year global distribution deal for Smart Water's product to be sold under the Gallagher brand. He retained the right to sell Smart Water branded product to lifestyle rural blocks and those city fringe dwellers on tank water. He also retained the intellectual property for the product which is still made by Smart Water. The deal includes a clause that any new systems it produces in the water-monitoring area would also be considered by its much bigger partner.
Stone said the small company didn't have the staff or capital to set up the distribution network it would have needed, so partnering with Gallagher made financial sense. He thinks ego might often get in the way of small business owners doing similar deals.
"When I look at the factory now it's really orange [Gallagher brand colour] rather than blue and white [Smart Water branding], and there's a bit of ego there around your brand. You lose a bit of control and Smart Waterism of the product but, at the same time, you gain an immense sales and marketing network."
Gallagher's head of the animal management division Stephen Hoffman says the company has done similar branded product deals with other small companies.
"We've long recognised that the difficult part of selling a great idea to market is about distribution and the relationship between the distribution channel and the end user."
The products it distributes in these sort of partnership deals have to meet stringent quality checks to ensure they live up to their claimed benefits, are synergistic with its existing agricultural offering, and meet a market need.
Hoffman says his division spends up to $8m annually on research and development but shareholders will never provide sufficient funds to bring all bright ideas to market so it makes financial sense to partner with another company that has already done the hard yards on the development front.
"For me, it's about moving faster with the dollars we have to spend."
Hoffman said some of the partnership deals had worked brilliantly and some not so well. The key difference was ensuring they were branded under the Gallagher name because otherwise it was difficult to get buy-in from the distribution channel. The risk under this model though was that, if the product didn't live up to the quality customers expected from the brand, it would hurt Gallagher's reputation. The deals, therefore, were not done lightly.
One of the other smart deals Stone and Harris did was bring in outside engineering hardware and software experience. They had already had significant experience themselves working on electronics products for other companies, including the likes of Navman. But they recognised they needed outside help to get the product to market - they just couldn't afford to pay for it.
So they teamed up with Mark Fletcher and David Dobbs from Invision Enterprises who took a 25 per cent holding in Smart Water in exchange for their services. That's starting to pay off now the company's ramping up its sales effort overseas and it has moved into a new 500-square-metre factory in Auckland to help cope with demand.
It already has a new add-on to market - a solar-powered repeater that gets around the problem of a property with several tanks and physical barriers such as big hills in the way.
Stone said the monitoring system was not just being used for its original design - it had also been used to monitor molasses and liquid fertiliser. He also recently got an email from an Australian customer who had a pig trap located some distance from the homestead. The owner didn't want to have to drive out every second day to check the trap so rigged up a tube of water that emptied when a pig was caught in the trap. This water, in turn, set off the electronic alert on the Smart Water monitoring system so the farmer knew a pig was there.
Sunday Star Times