Case 5 iROBOT: Robots for the Home R obots have been around for a long time....

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Case 5 iROBOT: Robots for the Home R obots have been around for a long time. Detroit has used robots for four decades to build cars, and manufacturers of all kinds of goods use some form of robotics to achieve efficiencies and productivity. But until iRobot brought its battery-powered vacuum cleaner to the market, no one had successfully used robots in the home as an appliance. The issue was not whether it was possible to use robots in the home but whether they could be produced at a price customers would pay. Until the introduction of Roomba, iRobot's intelligent vacuum cleaner, robots for the home cost tens of thousands of dollars. Ar Roomba's price point of $199, it was now possible to afford to have a robot clean the house. That in itself is an interesting story, but even more interesting is the entrepreneurial jour ney of Colin Angle and his company, iRobot. Background Colin Angle was raised in Schenectady, New York, by his mother and stepfather. He and his three step brothers all became engineers, but Angle was the inventor/builder of the group. Beginning in his carliest years, he built pinball machines and con- structed complex pulley systems in the trees of his back yard. While attending MIT in the 1980s, he was drawn to the innovative work of Rodney Brooks, director of the university's artificial intelli gence lab. Brooks was a controversial figure in the robotics field, but he served as the inspiration for what would become some of Angle's most practical inventions. As a student, Angle was part of a group that succeeded in building insect-like robots that 432 could perform simple tasks on reflex. In fact, Angle's creation, Genghis, appeared on the cover of Popular Science. It was clear by then that his future lay in inventions. The Opportunity In 1990 Brooks and Angle, who by then had become close working partners, borrowed from their credit cards and used bank debt to found iRobot in a tiny apartment in Somerville, Massachusetts. The goal of the company was to build robots that would affect how people lived their lives. At that time, no one could conceive of a way to bring robots into domestic life in an affordable manner, and iRobot was still years away from discovering the one application that would launch it into the consumer market. To stay alive, the company sought government and corporate contracts for new product development. Over the next decade, iRobot designed and built a vast array of products from nuclear waste detectors to toy robots. Angle and his team believed that diversifying their producti development skills would insulate them from the risk of any one customer killing a project, something that happened frequently in their industry. Angle also had no idea which of the many products they developed would be the one that would propel the company into rapid growth, so he did not want to focus too narrowly too soon. Diversification in those first years enabled the company to stockpile a range of patents that would become the basis for the product for which they became most famous. Angle reasoned that he had to make certain that customers did not end up owning technology that his company might need in future product development. For example, in 1992 he sold the rights to the underlying technology on a robot called Grendel to separate it from technology that would be used to take the company in new directions. Prior to this, iRobot did not control the patents for products it developed for large cus tomers, as is typical with smaller businesses. How ever, after selling the Grendel rights, Angle decided that henceforth the company would retain all rights to the technologies it developed. As it turned out, a cleaning technology that iRobot had developed for Johnson Wax Professional and tiny processors developed for Hasbro, the toy company, were criti- cal components of Roomba. Shall We Dance? iRobot had secured two parts of the three compo- nents of its growth strategy. It had become a flexi- ble company that could develop products in a broad area, and it had built up a strong base of intellectual capital. Now, the only thing missing was a way to bring robots to the domestic market economically, and that was no easy task. Angle had already experi- enced the agony of defeat on a proposal for Hasbro. In 1996, iRobot developed a storytelling machine with characters that moved and gestured while they talked. It seemed to everyone at iRobot that this could be the next big toy until they showed Hasbro management what it looked like inside. It was a masterpiece of engineering, but the microproces sors cost $60 each, the flash card cost $400, and the parts all totaled ran about $3,000. Hardly a likely candidate for the next Christmas season! But Angle had learned a lot about the consumer products industry from this experience and now had a good idea what it would take to develop successful prod- ucts for the toy industry. It was all about cost- saving pennies so that the toy company could meet its competitive price point in the market. iRobot became an exclusive partner with Hasbro and, over the next two years, proposed dozens of new toy projects, most of which were turned down because they were too expensive to make. Finally, in 2000, iRobot saw one if its creations, My Real Baby, hit the store shelves. CASES IROBOT ROBOTS FOR THE HOME 433 It was, in fact, this new understanding of the consumer products business that inspired the idea for Roomba. Originally, iRobot had considered partnering with a large vacuum cleaner company such as Hoover, but one of the reasons why a smaller company partners with a large, established company is to take advantage of the latter's access to suppliers. The iRobot team had become experts in sourcing product components efficiently, so they chose to do it on their own. Developing Roomba The engineers at iRobot were unaccustomed to building mundane products for domestic use, so to avoid wasting the talents of his most brilliant engineers, Angle created a new division in the com- pany that would design and launch these domestic products. Technologies developed from contract work now found a home in Roomba. For example, the crop circle algorithm it uses came from a tech- nology used to sweep minefields. The company worked its way through 20 iterations of Roomba, bringing each version home to spouses and relatives to test. One thing was clear: This device had to be casy to use. Generally speaking, consumers won't tolerate a steep learning curve, so iRobot's engi- neers pictured something as simple as a large button labeled "clean." In fact, they ended up with a button that provided a choice of S, M, or L for small, medium or large room size. The cus tomer puts Roomba on the floor, turns it on, and presses the size button. Then the robot plays a tune and starts sweeping the floor in ever-widening circles. When it runs into something, it heads off in a different direction. The circle algorithm alter- nates with a wall-and-furniture-hugging algorithm and straight lines. Sometimes, at random, it simply goes in one direction until it runs into something. It runs on a nickel-metal-hydride battery that gets recharged on an overnight charger. It also comes with an invisible wall that projects an infrared beam if you need to keep the robot confined to a particu- lar area. It even has three different backup systems to keep it from falling down stairs. From its experience with Hasbro, iRobot had learned to be extremely stingy on costs, right down 434 CASES to the penny, so it knew that a price tag of $199 vacuum came from a robot company rather than would keep competitors at bay. a vacuum cleaner company. Market Entry iRobot's shrewd entry strategy saw Roomba hitting the market just in time for the Christmas season through such gift outlets as Sharper Image and Brookstone. These stores are willing to demonstrate products, something that is critical with a new product. Although Roomba was the first product from iRobot, it sold $15 million in 2002 and soared to $50 million in sales in 2003. This was accomplished on five rounds of venture funding totaling $27.5 million. IRobot also hired a Boston PR firm to conduct a media blitz to create customer awareness. Stories appeared in the Wall Street Journal and Time and on TV shows such as Live with Regis and Kelly. Women's magazines were another popular media venue. But not all advertising is good advertising. Angle had to be careful to ensure that Roomba would not be perceived as a novelty-a toy-but rather as an everyday appliance. Therefore, the company chose not to refer to Roomba as a robot in any of its advertising or promotional materials. Instead, it was described as an "intelligent floorvac system." These high-tech engineers left their techie egos at the door and resorted to consumer terms. But the market dictates what companies should do, and once iRobot found out that 60 percent of its customers were naming their Roombas, the company began using the term robot on its packag- ing. Angle knew that once competition entered the market and achieved a lower price point, it would be important to customers to know that their robot The Future iRobot continues to do contract research. The Fed eral Defense Advanced Research Projects Agency (DARPA) has funded its Robot's Swarm project, im which it is working on getting robots to coordinate among themselves. Angle can see a future for this technology in the home as well. Picture robot appli- ances deciding among themselves what should be cleaned first! But are consumers willing to go that far with domestic robots? Are they willing to give them decision-making power in the home? That remains to be seen. Discussion Questions 1. What are the unique challenges facing a new product development company? 2. What role did patents play in iRobot's strategic plan? 3. Evaluate iRobot's approach to the consumer market. Was it effective? Would you have done anything differently? References Buchanan, L. (July 2003). "Death to Cool." Inc. Maga- zine, www.inc.com. Pennington, A.Y. (2003). "Mechanically Inclined: These Entrepreneurial Robophiles Take Their Business Where No Man Has Gone Before." Entrepreneur Media www.finarticles.com. Garfinkel, S. (October 9, 2002), "iRobot Roomba." MIT Technology Review, www.technologyreview.com. Case 5 iROBOT: Robots for the Home R obots have been around for a long time. Detroit has used robots for four decades to build cars, and manufacturers of all kinds of goods use some form of robotics to achieve efficiencies and productivity. But until iRobot brought its battery-powered vacuum cleaner to the market, no one had successfully used robots in the home as an appliance. The issue was not whether it was possible to use robots in the home but whether they could be produced at a price customers would pay. Until the introduction of Roomba, iRobot's intelligent vacuum cleaner, robots for the home cost tens of thousands of dollars. Ar Roomba's price point of $199, it was now possible to afford to have a robot clean the house. That in itself is an interesting story, but even more interesting is the entrepreneurial jour ney of Colin Angle and his company, iRobot. Background Colin Angle was raised in Schenectady, New York, by his mother and stepfather. He and his three step brothers all became engineers, but Angle was the inventor/builder of the group. Beginning in his carliest years, he built pinball machines and con- structed complex pulley systems in the trees of his back yard. While attending MIT in the 1980s, he was drawn to the innovative work of Rodney Brooks, director of the university's artificial intelli gence lab. Brooks was a controversial figure in the robotics field, but he served as the inspiration for what would become some of Angle's most practical inventions. As a student, Angle was part of a group that succeeded in building insect-like robots that 432 could perform simple tasks on reflex. In fact, Angle's creation, Genghis, appeared on the cover of Popular Science. It was clear by then that his future lay in inventions. The Opportunity In 1990 Brooks and Angle, who by then had become close working partners, borrowed from their credit cards and used bank debt to found iRobot in a tiny apartment in Somerville, Massachusetts. The goal of the company was to build robots that would affect how people lived their lives. At that time, no one could conceive of a way to bring robots into domestic life in an affordable manner, and iRobot was still years away from discovering the one application that would launch it into the consumer market. To stay alive, the company sought government and corporate contracts for new product development. Over the next decade, iRobot designed and built a vast array of products from nuclear waste detectors to toy robots. Angle and his team believed that diversifying their producti development skills would insulate them from the risk of any one customer killing a project, something that happened frequently in their industry. Angle also had no idea which of the many products they developed would be the one that would propel the company into rapid growth, so he did not want to focus too narrowly too soon. Diversification in those first years enabled the company to stockpile a range of patents that would become the basis for the product for which they became most famous. Angle reasoned that he had to make certain that customers did not end up owning technology that his company might need in future product development. For example, in 1992 he sold the rights to the underlying technology on a robot called Grendel to separate it from technology that would be used to take the company in new directions. Prior to this, iRobot did not control the patents for products it developed for large cus tomers, as is typical with smaller businesses. How ever, after selling the Grendel rights, Angle decided that henceforth the company would retain all rights to the technologies it developed. As it turned out, a cleaning technology that iRobot had developed for Johnson Wax Professional and tiny processors developed for Hasbro, the toy company, were criti- cal components of Roomba. Shall We Dance? iRobot had secured two parts of the three compo- nents of its growth strategy. It had become a flexi- ble company that could develop products in a broad area, and it had built up a strong base of intellectual capital. Now, the only thing missing was a way to bring robots to the domestic market economically, and that was no easy task. Angle had already experi- enced the agony of defeat on a proposal for Hasbro. In 1996, iRobot developed a storytelling machine with characters that moved and gestured while they talked. It seemed to everyone at iRobot that this could be the next big toy until they showed Hasbro management what it looked like inside. It was a masterpiece of engineering, but the microproces sors cost $60 each, the flash card cost $400, and the parts all totaled ran about $3,000. Hardly a likely candidate for the next Christmas season! But Angle had learned a lot about the consumer products industry from this experience and now had a good idea what it would take to develop successful prod- ucts for the toy industry. It was all about cost- saving pennies so that the toy company could meet its competitive price point in the market. iRobot became an exclusive partner with Hasbro and, over the next two years, proposed dozens of new toy projects, most of which were turned down because they were too expensive to make. Finally, in 2000, iRobot saw one if its creations, My Real Baby, hit the store shelves. CASES IROBOT ROBOTS FOR THE HOME 433 It was, in fact, this new understanding of the consumer products business that inspired the idea for Roomba. Originally, iRobot had considered partnering with a large vacuum cleaner company such as Hoover, but one of the reasons why a smaller company partners with a large, established company is to take advantage of the latter's access to suppliers. The iRobot team had become experts in sourcing product components efficiently, so they chose to do it on their own. Developing Roomba The engineers at iRobot were unaccustomed to building mundane products for domestic use, so to avoid wasting the talents of his most brilliant engineers, Angle created a new division in the com- pany that would design and launch these domestic products. Technologies developed from contract work now found a home in Roomba. For example, the crop circle algorithm it uses came from a tech- nology used to sweep minefields. The company worked its way through 20 iterations of Roomba, bringing each version home to spouses and relatives to test. One thing was clear: This device had to be casy to use. Generally speaking, consumers won't tolerate a steep learning curve, so iRobot's engi- neers pictured something as simple as a large button labeled "clean." In fact, they ended up with a button that provided a choice of S, M, or L for small, medium or large room size. The cus tomer puts Roomba on the floor, turns it on, and presses the size button. Then the robot plays a tune and starts sweeping the floor in ever-widening circles. When it runs into something, it heads off in a different direction. The circle algorithm alter- nates with a wall-and-furniture-hugging algorithm and straight lines. Sometimes, at random, it simply goes in one direction until it runs into something. It runs on a nickel-metal-hydride battery that gets recharged on an overnight charger. It also comes with an invisible wall that projects an infrared beam if you need to keep the robot confined to a particu- lar area. It even has three different backup systems to keep it from falling down stairs. From its experience with Hasbro, iRobot had learned to be extremely stingy on costs, right down 434 CASES to the penny, so it knew that a price tag of $199 vacuum came from a robot company rather than would keep competitors at bay. a vacuum cleaner company. Market Entry iRobot's shrewd entry strategy saw Roomba hitting the market just in time for the Christmas season through such gift outlets as Sharper Image and Brookstone. These stores are willing to demonstrate products, something that is critical with a new product. Although Roomba was the first product from iRobot, it sold $15 million in 2002 and soared to $50 million in sales in 2003. This was accomplished on five rounds of venture funding totaling $27.5 million. IRobot also hired a Boston PR firm to conduct a media blitz to create customer awareness. Stories appeared in the Wall Street Journal and Time and on TV shows such as Live with Regis and Kelly. Women's magazines were another popular media venue. But not all advertising is good advertising. Angle had to be careful to ensure that Roomba would not be perceived as a novelty-a toy-but rather as an everyday appliance. Therefore, the company chose not to refer to Roomba as a robot in any of its advertising or promotional materials. Instead, it was described as an "intelligent floorvac system." These high-tech engineers left their techie egos at the door and resorted to consumer terms. But the market dictates what companies should do, and once iRobot found out that 60 percent of its customers were naming their Roombas, the company began using the term robot on its packag- ing. Angle knew that once competition entered the market and achieved a lower price point, it would be important to customers to know that their robot The Future iRobot continues to do contract research. The Fed eral Defense Advanced Research Projects Agency (DARPA) has funded its Robot's Swarm project, im which it is working on getting robots to coordinate among themselves. Angle can see a future for this technology in the home as well. Picture robot appli- ances deciding among themselves what should be cleaned first! But are consumers willing to go that far with domestic robots? Are they willing to give them decision-making power in the home? That remains to be seen. Discussion Questions 1. What are the unique challenges facing a new product development company? 2. What role did patents play in iRobot's strategic plan? 3. Evaluate iRobot's approach to the consumer market. Was it effective? Would you have done anything differently? References Buchanan, L. (July 2003). "Death to Cool." Inc. Maga- zine, www.inc.com. Pennington, A.Y. (2003). "Mechanically Inclined: These Entrepreneurial Robophiles Take Their Business Where No Man Has Gone Before." Entrepreneur Media www.finarticles.com. Garfinkel, S. (October 9, 2002), "iRobot Roomba." MIT Technology Review, www.technologyreview.com.

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