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Get Four
|  | AUGUST 13, 2004
By Peter Burrows frog design's New Lily Pad [Page 2 of 2] "PERSONALIZED PRODUCTION." Esslinger can also help Flextronics land new customers. For example, frog has hooked up with Disney (DIS ) to design a line of consumer-electronics products for kids, including a phone, a walkie-talkie, and a PC with Mickey Mouse ears that was unveiled on Aug. 5. Disney thinks these products could be a $500 million business over time, says frog Chief Operating Officer Doreen Lorenzo -- and Flextronics could end up being the manufacturer of many of them. Esslinger says such integrated offers will be the wave of the future. Just as products like Apple's elegant iPod are outselling far cheaper copycat digital music players, he believes customers will gravitate to products that resonate with them beyond the pocket book. Indeed, collaboration between frog's designers and Flextronics' manufacturing specialists will help the company get a jump on what he says will be a future of "personalized production." Imagine going into your local cell-phone store. Instead of looking at a few shelves of existing models, none of which precisely match your needs, you would instead be able to design your product, with the color, features, and price you want (say, a simple $20 phone in purple, but with just one button to push). Or when you go shopping for a stereo, you could pick from a menu of offerings at a given price point. For $99, for example, you could get a feature-packed model with docking stations galore, or else a model designed to simply provide the best possible sound at that price. MIX AND MATCH. This is possible because factories have far more flexibility than most outfits are able to exploit, says Esslinger. Typically, original design manufacturers try to bring out as few products as possible to sell to the widest audience possible. Then armies of planes and trucks fill stores and distributor shelves around the world with inventory. The result, all too often, is reams of similar products that carry very low profit-margins, once the price wars have taken their toll. Instead, Esslinger wants to develop an infrastructure of components -- say, a few dozen keyboards, enclosures, and other parts -- that are designed to be easily mixed-and-matched on the factory floor at little added cost. Manufacturers could then charge a premium for the more customized product and bring more profit to the bottom line. "Today, it may only be cost-effective to make 10,000 units of a product. But that will go to 2000, and then to hundreds, and who knows, maybe then to 10," says Esslinger. "That's the challenge. It's not really about beauty or style. It's about uniqueness." BRAIN DRAIN? Certainly, he and Flextronics CEO Marks share big ambitions. "I think we can grow to $300 million to $400 million in three to four years," says Esslinger, from around $35 million in 2003. Combined with Flextronics' related design services, Marks says these activities "will be a $500 million business within two years." The plan may sound good on paper, but implementing it won't be easy. frog is as techno-hip as they come, staffed by black-clothed designers from eclectic professional backgrounds. Flextronics is a vast operation, which makes pinching pennies a religion in plants from Mexico to China. "I think the creative types will leave frog," says one recent departee. Pentagram's Brunner says that's what happened when Flextronics bought Palo Alto Design in 1999. "[Palo Alto] was an up-and-coming design firm. Selling was good for them financially, but they basically disappeared from a design point of view," Brunner says. Esslinger agrees that maintaining frog's culture once inside Flextronics is the toughest challenge. "We have to prove to ourselves that this makes us better. It will be hard work." But he thinks it will happen, because Flextronics seems to want frog to maintain its maverick ways. Marks says he will maintain the frog brand name, and Flextronics' handful of industrial designers will now report to Esslinger. Also, the composition of frog's board will be split: Esslinger and Roller from frog, and Marks and Flextronics design-services chief Duncan Robertson. Indeed, Marks says he chose not to buy all of frog, "because we want those guys to stay." ROOM WITH A VIEW. As for Esslinger, Marks figures he'll work another three or four years. Esslinger, who nearly quit in 2000 rather than slug it out through the downturn, won't give details, but insists he'll remain active. "This is the best job on earth, and I'm not good at golf." But what about that big payday? "This isn't about the money," says Roller. Esslinger already is able to satisfy his lust for sports cars. He owns a souped-up Audi that weighs more than a ton and can go 190 mph, as well as a new yellow Porsche 911. "Patricia has never been jealous of anyone but my Porsche dealer," he laughs. He has even convinced her to allow him to put a glass wall in the living room of their home, so he can see into the garage. He professes not even to know how much the firm pays him each year. Instead, he shrugs and nods toward his wife. "He has no idea," she laughs. "Unfortunately, he does have a credit card." So don't look for this tech industry legend to ride off into the sunset just yet. When the time comes, he says, "it won't be on horses. A Porsche, maybe."
 Burrows is computer editor for BusinessWeek in the Silicon Valley bureau Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
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