TopsyTail Incorporated

TopsyTail was founded in 1991 by Ms. Tomima Edmark, an ex-IBM marketing rep. In 1989, She invented the companyÕs flagship product, the TopsyTail. a hair accessory that flips a ponytail inside out. At first, mail-order sales brought in about $2500 a month. In 1992, though, following a description of the product in a Glamour magazine article, sales hit $100,000 in three weeks. Over the past six years, TopsyTail has sold to Americans $100 million of its only product.

In general, entrepreneurs recognize opportunities and then develop a product/service to cater to that opportunity. In the TopsyTail case, it seems that Ms. Edmark first had an idea, and then developed an opportunity for that idea. Was she lucky? Would TopsyTail have succeeded without advertising, albeit small-scale? Can the company continue to live on one product? Can she repeat this success with another product?

TopsyTailÕs Strategy and Value Proposition

The CompanyÕs successful strategy and profitable value proposition are neither complex nor unique. TopsyTailÕs strategy is to identify a good idea, either generated internally or observed in some external environment, protect that idea through a patent or other legal means, and develop that idea into a product. The product development and marketing cycles maximize the use of outsourcing, an approach Ms. Edmark learned while at IBM, thereby keeping the organization very small in size. The importance of property rights protection and outsourcing to TopsyTail are evidenced by Ms. EdmarkÕs role as CEO and overseer of production and litigation. Ms. Edmark retains a slew of high-powered lawyers to fend off imitators.

The company has succeeded in extracting economic rents because of a unique business model. Relying on outsourcing for all functions, the company eliminates considerable SG&A expenses. Since the TopsyTail is a product company and not a service organization, there is no need for a customer service group, usually the Achilles Heel of companies that chooses to outsource. By focusing on one product that is nothing more than a molded piece of plastic, TopsyTail can keep its cost-of-goods at a bare minimum. Because of protected intellectual property, the company owns the pricing equation and can set price points at consumersÕ reservation price (e.g., in 1991, TopsyTail sold for $15, today the product sells for $5). Best of all, Ms. EdmarkÕs product benefits from positive network externalities: as more people purchase and use the product, even more will be motivated to buy it.

Ms. Edmark believes that her proposition of identifying a good idea and subsequently creating a market opportunity for that idea is a winning model. TopsyTail is currently developing a type of hat that Ms. Edmark stumbled upon while visiting the Seychelles. By customizing the original product to fit with local needs, Ms. Edmark believes she has another killer product. She has adopted the same production process used to develop the TopsyTail: outsourcing, outsourcing, outsourcing. For another product, the Kissing Machine, TopsyTail is relying on intellectual property protection to defend against imitators.

Another important piece of Ms. EdmarkÕs future success is brand recognition. She has been able to brand herself as a successful entrepreneur and eccentric individual. She is recognized and lauded as one of AmericaÕs successful inventors by a variety of magazines, organizations, and media. At this point, anything she does will be catchy just because it is done by her. She has crossed the threshold from normal entrepreneur to visionary and innovator. Her books on kissing and cigar-smoking have thrust her and TopsyTail into the spotlight. LetÕs see what she does next.

Conclusions

TopsyTail is an interesting organization. It is virtual, retains little capital in-house, was started on a shoe-string budget, had one product, and is commandeered by an eccentric personality. Are these the ingredients for a successful business? Perhaps. It seems that in the U.S., individuals can capitalize on certain personal characteristics as well as on the gullibility of the market to create lucrative business opportunities. Just think of people like Deepak Chopra, Susan Powter, and Oprah Winfrey. Each of these individuals, like Ms. Edmark, tied their identity to a certain cause celèbre. Their initial success was based on one product/service. Where they excelled, however, is that they were able to carry that success further by adopting a new persona. Today, Ms. Edmark is like King (or Queen) Midas...any product she touches (introduces) will turn into gold because the market will create an opportunity for that branded product. Should and can large organizations such as Boeing, Kodak, and IBM operate in this way? Arguably, Microsoft does. Anything that the Seattle Sage develops is absorbed by the market. Lets hope that TopsyTail doesnÕt go Topsy Turvy.