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CASE StUdY 1-The Rise And Fall OF FRIENDLY Robotics By Yoram Koren (November 2002) FriendlyRobotics (FR) was an Israeli start-up company, formed in 1995 and worth $120M at its peak, which invented a lawn mower robot. Time magazine selected its lawn mower robot as one of the 10 innovative products of the decade. In November 2002, it was sold to the vacuum cleaner company, Hoover, for about a tenth of its former value (\$1.5M), before its complete collapse. FR had run out of money to pay the salaries of its employees. How did its promise become such a marketing failure? The Product The product concept was that instead of using a hand-driven lawn mower, you turn on your mowing robot and watch it do the work for you. The mowing robot was equipped with sensors to avoid obstacles and a sophisticated navigation system. The robot first scanned the lawn area and selfprogrammed its path to be optimal while avoiding obstacles The Strategy The company's strategy was to develop an automatic lawn mower machine and then sell it to a large U.S., or European company, which would do the marketing and delivery. Venture capital funds invested in FR grew to $30 million. The estimated market for the product is 110 million households in the Western world. The product cost was initially $1000 and dropped later to $600 (as sales declined). In 2000, FR announced that it signed an agreement with Toro, the largest lawn mower producer in the United States. According to the press, Toro was committed to purchase 100,000 FR mowers within 5 years. The expectations were skyrocketing. FR built large warehouses in the United States, which was a big investment for the company, and it took a loan of $5.5 million from the International Bank. The bank did not hesitate-the contract with Toro was convincing. Nobody paid attention to a small detail in the contract: "The only sanction that Toro will suffer, if it does not fulfill its commitment to purchase and sell 100,000 machines, it would lose its status as a sole distributor." Case Study - Strategy Toro tried to sell the product through Home Depot, and other store chains, but failed to sell a reasonable number of products. Cindy Love, the U.S. FR president was proud of the fact that FR had been exposed over 70 times on U.S. television-from morning shows to science news. She was confident that the product was "sexy" enough to put on the shelves and that people would buy it. However, that did not happen. The Drawbacks The FR mower was more technologically advanced than most consumer products. Its operation was not simple and required considerable knowledge and explanation. The sales clerks of Home Depot were not trained properly and did not have the knowledge or the motivation to learn how to operate this relatively complex product. In addition, the expectation that pressing a button and the machine will do the work for you was not realistic. The user had to encircle the lawn area with a buried electric cable, which was inserted into the ground to define the lawn's boundaries for the robot. Furthermore, if the robot stopped for some reason, the user had to manually move the 70lb machine by hand. In addition, the machine's battery had to be charged year round, even when the robot was not in use. Finally, the robot worked only on flat surfaces and could not negotiate stairs or uneven ground. Assignment: Analyze the reasons for the failure of Friendly Robotics and elaborate on the following points: - Was this product viable? - Was its price reasonable? - Is having a "sexy" product enough to enhance its sales? - Was the marketing/advertisement method through television shows adequate? - How would you suggest educating the consumer about this product? - Was the investment in large storehouses and inventory timely and justified? - What were the strategic resources of FR? - If you were the CEO of the company, what would your first steps be in selling this product