Overview
HandsOnToys Inc. are the inventors of Toober&Zots, a soft-foam, large-scale construction toy for children ages 3 to 99 years. In a show of tireless effort, virtual organizing and unique creativity, HandsOnToys brought their flagship product from concept to market in one year’s time, and successfully generated six figure sales during the 1994 Christmas Season, the busiest for the $20 Billion dollar toy industry, and forecasts of over $3 Million dollars in revenues for all of 1995.
The following story profiles the foundation of HandsOnToys Inc. from its kitchen table beginnings in early 1993, to its Holiday season and Toy Fair successes today. Read on to learn first hand about the efforts, hurdles, and strategies the founders of this successful toy company experienced as they described it to EM.
Founders
HandsOnToys Inc. is located in Woburn, Massachusetts and was founded as the result of a partnership that was formed between Andrew Farrar, Rustam Booz, and Arthur Ganson, all of Massachusetts, in March of 1993.
Andy Farrar is a graduate of Amherst College and has a background in sales and marketing, and product development and production consulting. Rustam Booz worked as a consultant in marketing communications to Fortune 500 companies, and is a graduate of Brown University. Arthur Ganson has worked for 15 years as a self-employed kinetic sculptor and inventor, and has developed a renowned national reputation.
The three friends had known each other for some time, and during that month of March decided to formally create a partnership in order to go into business with each other. At that time, their efforts were confined to evenings and weekends as product concepts were evaluated and modified for potential development. The loose partnership eventually gained direction to begin new business activities through the concept of a mechanical toy aimed at stimulating the creativity of children through animation. For six months they researched the viability of this product concept and became very familiar with the toy industry to asist them in entering that arena. As time went on and the business evolved, that original concept took a step aside as the founders conceived and brought a new idea to market that turned out to be a huge success.
Industry Direction – The Toy Industry
As the trio began in-depth investigation into the toy industry they were cautious not to jump in with both feet until they felt they were prepared to build a company and raise the resources necessary to successfully launch a product. Thus they all kept their jobs while they pursued information about the toy industry to support their start-up activities. In August of 1993 Arthur Ganson, described as the creative rce and the engineering genious of the group, came up with the concept of the Toobers&Zots product. In just two days the oup had developed a rough prototype of the product, literally with a coat hanger and some household foam, and came to the nclusion that this was a product concept that was strong enough to form a company around. In November of 1993 the company was incorporated as a C corporation in Massachusetts, and Andrew Farrar and Rustam Booz quit their successful corporate jobs to work full time on the development and launch of this new product concept. “To launch a company requires full-time participation,” Mr. Farrar said, “Many, many companies with good ideas do not get off the ground because they cannot put a business plan together. They can’t do the planning and thinking and the organization that is necessary. It is not a part-time job.”
Andrew Farrar assumed the tasks of strategic and business planning and sales, while Rustam Booz was responsible for operations, management, and marketing. Arthur Ganson was principally responsible for product ideation, engineering, and prototype development, and was the only one of the three to not be working full-time on the project once the company began to be established. During that next whirlwind year, the HandsOnToys team assembled a business plan, further developed the Toobers&Zots concept, sought seed capital, developed a new manufacturing technology to create the most important component of the product, went into production, shopped the toy to retailers, and began taking orders by August of 1994, and shipping product in October 1994. All this, from product concept to market in 12 months. Their efforts have been very fruitful with strong sales for the portion of 1994 they were in business, the forecasts of over $3 Million dollars in revenue for 1995, and the growth of the company in size to twenty employees.
Toobers&Zots
Concept Development and Manufacturing
The central idea that Toobers&Zots is based on is the theme of what HandsOnToys centers all its product concepts on, “…the design, development, and marketing of imaginative toys which stimulate interactive play and learning.” Because the members of HandsOnToys knew they were a small company and new player in the toy industry, they decided to pursue the market in the toy industry described as the Specialty Toy Market. According to Mr. Farrar this segment accounts for 5% of the $20 billion dollar toy industry, and is very entrepreneurial lending itself to a slower pace of product development and marketing than the mass market. It was this company strategy and market positioning that HandsOnToys conceived with which to pursue the development of their first product release.
It was less than 48 hours from when the Toobers&Zots concept was conceived to when a rough prototype was made. This was done to get a more in-depth look at the concept. The prototype development went through several iterations from August of 1993 to February of 1994. It was in February when they had a prototype that looked similar to the product that eventually went to market. All work done on the concept prototyping was done by hand with simple materials and rudimentary technology, no industrial or industry specific manufacturing technology was employed at that time. During that same window of time the company was assembling its business plan with which to solicit seed-capital to fund the more sophisticated product development and scale-up activities. February was when the plan was at a point of being ready to be shopped out to potential investors with which to accumulate funds. All solicitations were done on a private level, no VC’s were employed and the company is a privately held company. Estimates of $1 MM were made for the amount of money the company would need to develop and bring the product to market.
It was during this same time of prototype development and business plan writing that the company had employed a professional testing laboratory to test their product under ASTM regulations. This was done to ensure it was a safe product to market, and that it adhered to all established safety codes created by appropriate regulatory bodies. These test results were included in the business plan as a testament to the product safety and further reinforcement of the thoroughness of the founders business development activities.
As the product concept solidified and the company was ready to pursue the efforts for production scale-up, they conducted extensive efforts necessary to support such mass production. Mr. Farrar said, “A lot of R&D went into finding the right materials and the right configuration. We went through a lot of materials to find the right cost point, the right handling, how to make the product, and figuring out how to get it assembled. We went to top level graphics designers to put the packaging together.” When it came to addressing the various needs that exist to manufacture and develop a product such as this, the founders demonstrated extensive prudence in determining the most cost effective way to get their product to market, and to have it done by the right technical expertise. They had maintained a business model for the company of being a nearly completely virtual organization. All the manufacturing was to take place outside the company by being contracted out. The same is true for the package printing and manufacturing, the assembly of the product into its deliverable form, and the shipping. An adult rehabilitation house is used to employ handicapped workers to assemble the product and to handle all the shipping. “We know what we know and we know what we don’t know. We have no problem paying for the right kind of service and we went out after the best talent we could afford,” said Mr. Farrar.
The flagship product would consist of a kit containing 100 pieces of various shapes and colors of the Toobers and Zots and sell for $29.99 retail. Preliminary market testing was done by testing the appeal of the product in informal focus groups that were held with several pre-schools, as well as with the founders’ children and the children of the founders’ friends. At that time the feedback was used to modify the product to a small degree, however the company now employs more formal feedback procedures and uses that information to a greater extent to modify the product.