The always interesting Rafe Needleman writes at the Always On network about a digital picture frame company that started with the equivalent of eBay bargain hunting: Wallflower's Wi-Fi-enabled digital picture frames were originally reassembled components from cheap, unused, underpowered laptops bought from eBay. The company switched to commodity parts and assembly once they hit the scale. But they were creating something between a prototype and a finished production model for their early sales.
Where this backfires? Every one of the first 150 units is handmade, and if it fails, there's no way to know precisely what went wrong. Eventually, even with a lot of care, they'll eat their first 150 sales by replacing them with production-line units, unless they already ate the sales by overengineering them.