Strategy · Tech startups

How do you prevent product reverse engineering?

Armand Sepulveda Co-Founder & CEO at Dycap Media Solutions, Inc

December 14th, 2015

Is there a way to stop a competitor from just buying your product and reverse engineer it?
We're about to make our first sells but don't have the money for tooling costs of large scale manufacturing. So we're going to make them by hand with off the shelf parts and DIY molds, but not sure if that will lead to easier reverse engineering. Of course we want to use this strategy to get the cash flows necessary to shift to large scale manufacturing with optimized electrical components.

I understand from a legal stand point you can have patents and set-up a wall of legal defense. From a technical standpoint are all products (software or hardware) doomed to be copied one day?

If so does optimizing your product make it more difficult to copy and make cheaper?
Optimization for hardware meaning stuff like surface mount, ribbon cables, optimized electrical components, injection mold casing, etc...
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Chris Grayson Entrepreneur, Aesthete

December 14th, 2015

This is the trap of many founders -- they confuse the product for the business (many tech VCs do too, unfortunately). Everything you mention is about engineering and the product. The product is just one aspect of the business. There are so many others things that are vital.

The best protection against being "knocked off" is to have a strong BUSINESS.

You need solid distribution -- if you lock in the best distribution channels, and your competitors don't have as many points of distribution, then you have a huge strategic business advantage.

Discovery is at least equally as important as distribution -- If someone knocks you off, but nobody knows they exist, and you and your product are easy to discover, then who cares, you win. Even if they're cheaper, nobody has heard of them (this is where marketing matters: getting your signal above the noise). Good marketing gets your brand story above the noise of every other communication.

Support -- Someone could knock off your product, but have terrible customer support, miss delivery deadlines, outsourcetheir support to some other "support startup" which means they own your customer service experience (do not ever do that, then you're nothing but a product, not a business). 

Engineers often use Androids, and mock Apple users as dumb and just buying a name, and other such accusations. The fact is, Apple consistently is ranked Number 1 in customer service by every industry trade organization that measures such things, not just for a tech company, but any company of any kind. Engineers typically undervalue tech support because being an engineer, they rarely need tech support for a consumer tech product, they're likely more educated on the technology than any tech support personnel would be, so they think customer tech support is useless, or holds little value. This is dead wrong. For a consumer product, you should imagine your grandmother as the customer. Now how good does your support have to be to competently give your grandmother support in using it? If you have an easy product, maybe not so much. On the other hand, if you have a complex product ("complex" by your grandmother's standards, not your standards), then your tech support better be well trained and up to the challenge.

Product Design matters -- good design and good build quality = higher prices and higher margins, but possibly lower unit volume, as price sensitive customers won't pay. Conversely you can do cheaper price and lower build quality, but larger buying audience -- this is the route most naive hardware startups take. Notice all Android phone manufactures have razor thin margins? This is the death-spiral of competing on price.

Apple's iPhone makes up about 35% of the smartphone market but captures 92% of all industry profits. Don't sell on price, sell on quality, and command a higher margin (and by quality, I mean the entire customer experience, end-to-end).

Don't just be a product, stand for something. Find your brand's attitude, what you believe in as a founder. To use marketing speak: What are your core brand values? Make people fall in love with your brand. Brand is not just your company's logo mark. "BRAND" is a cumulation of how all the things listed above make a customer feel about your company. That feeling, that mass opinion, that is your brand -- not your mark -- Your logo is just the symbol used to associate your brand with your product.

Do all of these things well and if your competitor just knocks off your product, sells it for 10 bucks less, and thinks they're going to steal business, they will fail, and fail miserably. Nope, they will only capture the most price sensitive customers that happen to stumble across their offer, and they are the customers of least value. They're not even going to come back for their next product anyway, they're just going to look at who has the cheapest price tag, so you can forget repeat business. Don't just build a product, build a whole company. Don't compete on price, compete on quality, and you'll never have to worry about getting reverse engineered. Any good product will have knock-offs, but it is the great company with a great product and a great brand that will succeed.

Peter Johnston Businesses are composed of pixels, bytes & atoms. All 3 change constantly. I make that change +ve.

December 14th, 2015

If you stay stuck in the industrial age and believe product is king, then you deserve all you get.

Much stronger than product is having a tribe - people who like what you do, align with your goals and wish you well. And the best thing is no-one can take them away.

80% of your startup funds should be spent on generating your tribe, not on creating your product. If you don't believe me look at Apple who make the sixth best smartphone, yet get the best price for it - and whose customers won't change, however much people reverse engineer their products.

Steve Owens

December 14th, 2015

Company give us products to reverse engineer all the time.  Sometimes it is easy, and sometimes it is not.  Here are a few things to try:
- Patents  - this is by far the best method
- Put "Patent Pending" on the product - always have a filling that is not published
- Blow the code protect bit on any uC
- Put No-Reverse engineer in any contract
- Make sure you are the low cost producer
- Scrub all IC identification numbers.
- Put "fake" parts/layout on the PCBA
- Pot the PCBA in epoxy
- Use a custom ASIC

If you think this is a serious threat, get someone on our team who has dealt with this kind of stuff before.

Jonathan Lu Product Innovation Entrepreneur

December 14th, 2015

Unless you have the resources to be overtly litigious (which I will assume as a startup you do not), the biggest value you'll get from patents will be more for freedom to practice and trade claims than "protection".

There is a reason why Apple's iphone is broadly copied, yet still retains dominance.  Ok, a few reasons, and IP protection is one but probably one of the least important ones. Their branding, innovation pipeline, and portfolio strategy are much more critical to success.  If you can create strong loyalty (as they say, it's better to have 100 fanatical consumers vs. 10,000 passe ones), high consumer engagement, and a strategic pipeline of lifecycle upgrades, you'll be more likely to withstand the inevitable copycats. Consider yourself with the innovator's benefit of a 6-12month headstart - don't let it go to waste!

Gray Holland founder / director at UX-FLO

December 14th, 2015

No one will be copying your product or idea until you are very successful. And stealing ideas is often more expensive than developing an original idea because they didn't have that idea themselves, and more that often they will create an inferior product because of that. 

Like all the good advice above -- focus more on your business and channel than the competition - the rest will take care of itself. 

Michael Burack

December 14th, 2015

If a competitor changes one molecule, so to speak, they are safe....The key is to capture early market share that you can live on and move on to other products....sorry

Daniel-Flavius Lucica

December 14th, 2015

You don't prevent it, you render it more or less useless. There are three aspects to this:

1) Be a "hard to crack target" - the higher the cost of reverse engineering, the less the chance someone would bother. To make an analogy is similar to cyber security. Any password can be broken but the key is how long it takes. If it takes too long a hacker would give up and move to an easier target. Always remember that.

2) Continuously innovate - not only that this would discourage your competition, but it will earn you customer loyalty. This can reach a stage in which your copycats will be put to shame by the very market that use your products. Nobody likes cheaters. Apple is a good example in this regard.

3) Build a brand and dedicate to high quality. Your target market will appreciate and reward that. Apple and the Beats headphones are a good example for this point.

Now to take it up a notch: there are some few people like the Elon Musks of the world that are not only fear free of the reverse engineering, but they are so confident that they give the competition their patents freely (Tesla Electric Car). Because they try to make for a better world, a pollution free world. And that is something worth thinking about.

Michael Collins Head of Products, Strategy & Operations

December 14th, 2015

The short answer is no. There's little you can do unless you have patents. However the flip side of reproduction is greater market validation. Depending on who the reproducer is you can negotiate with them.

Sam Hermans Information Security | Risk Management | Founder at Lumturio.com

December 14th, 2015

I'm no expert in hardware but in general I would assume that the following is true for any market:

Ultimately, a good idea, design or concept can be executed by seasoned entrepreneurs with impressive results or by poor executers with more of an “aftermath” effect. The best ideas and most creative concepts are nothing more than hot air if you have no idea how to transform them into reality.

Therefore I'm part of the camp that believes in spending time researching your target market to take advantage of competitor weaknesses in terms of service pricing and customer satisfaction instead of focusing hard trying to protect your idea.

Scott McGregor Advisor, co-founder, consultant and part time executive to Tech Start-ups. Based in Silicon Valley.

December 14th, 2015

You can't stop some one motivated from reverse engineering anything. But you can make it more or less complicated and expensive to do so. And you can use terms of service, patents, trade secrets and NDAs to make it uneconomic to do so, but ultimately controlling channels is usually more effective.