Irobot: ROBOTS for the HOME

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CASE 5

iROBOT: ROBOTS FOR THE HOME

Robots have been around for a long time. Detroit has appeared on the cover of Popular Science. It was clear used robots for four decades to build cars, and manu- by then that his future lay in inventions. facturers of all kinds of goods use some form of robotics to achieve effi ciencies and productivity. But until The Opportunity iRobot brought its battery-powered vacuum cleaner to the market, no one had successfully used robots in In 1990, Brooks and Angle, who by then had be- the home as an appliance. The issue was not whether it come close working partners with their MIT col- was possible to use robots in the home, but could they league Helen Greiner, borrowed from their credit be produced at a price customers would pay. Until the cards and used bank debt to found iRobot in a tiny introduction of Roomba, iRobot’s intelligent vacuum apartment in Somerville, Massachusetts. The goal of cleaner, robots for the home cost tens of thousands of the company was to build robots that would affect dollars. At Roomba’s price point of $$199,199, it was now hhowow peoplepep ople livedlived theirtheir lives.livese . AtAt thatthaat time,t no one possiblee ffororor ttheheh aaveragevev rar gee consumerconsus meer too aaffordfford to hhaveava e a cocouldoulld conceiveconceie ve ofof a waywaw y tot bringbringn robotsroboto s into domes- robot cleanleaean the house.hoh usu e.. ThatThah t inn itselfitssele f is anan interestingini teerrests inng titicc lifelife inin aan aaffordableffforordad blle wwaway,y, aandndd iiRobotRoR bob t was still years story, bututt eveneveen moremom rer interestinginteresestitingg isis thethhe entrepreneurialenenttrepepreenen ururiiaal awawayayy ffromroom discoveringdisscoovverrini g thethe oneoone applicationaapppliccatiio that would journey of Colin Angle and his company, iRobot. launlaunchch it into tthehe consumer market.market. To stay alive, the company sought government and cocorporate con- Background tracts for new product development. Over the next decade, iRobot designed and built a vast array of Colin Angle grew up in Schenectady, New York, products, from nuclear waste detectors to toy robots. where he was raised by his mother and stepfather. He Angle and his team believed that diversifying their and his three stepbrothers all became engineers, but product development skills would insulate them Angle was the inventor/builder of the group. Begin- from the risk of any one customer killing a project, ning in his earliest years, he built pinball machines and something that happened frequently in their indus- constructed complex pulley systems in the trees of his try. Angle also had no idea which of the many prod- back yard. While attending MIT in the 1980s, he was ucts they developed would be the one that would drawn to the innovative work of Rodney Brooks, di- propel the company into rapid growth, so he did not rector of the university’s artifi cial intelligence lab. want to focus the company too narrowly too soon. Brooks was a controversial fi gure in the robotics fi eld, Diversifi cation in those fi rst years enabled the but he served as the inspiration for what would be- company to stockpile a range of patents that would come some of Angle’s most practical inventions. As a become the basis for the product for which they student, Angle was part of the group that succeeded became most famous. Angle reasoned that he had to in building insect-like robots that could perform sim- make certain that customers did not end up owning ple tasks on refl ex. In fact, Angle’s creation, Genghis, technology that his company might need in future

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464 Case Studies

product development. For example, in 1992, he sold with a large established company is to take advantage the rights to the underlying technology on a robot of their access to suppliers. The iRobot team had called Grendel to separate it from technology that become experts in sourcing product components would be used to take the company in new directions. effi ciently, so they chose to do it on their own. Prior to this, iRobot did not control the patents for products it developed for large customers, as is typical Developing Roomba with smaller businesses. However, after selling the Grendel rights, Angle decided that henceforth the The engineers at iRobot were unaccustomed to build- company would retain all rights to the technologies it ing mundane products for domestic use, so to avoid developed. As it turned out, a cleaning technology wasting the talents of his most brilliant engineers, Angle that iRobot had developed for Johnson Wax Profes- created a new division in the company that would de- sional and tiny processors developed for Hasbro, the sign and launch these domestic products. Technologies toy company, were critical components of Roomba. developed from contract work now found a home in Roomba. For example, the crop circle algorithm it uses Shall We Dance? came from a technology used to sweep minefi elds. The company worked its way through 20 iterations of iRobot had secured two parts of the three components Roomba, bringing each version home to spouses and of its growth strategy. It had become a fl exible com- relatives to test. One thing was clear: this device had to pany that could develop products in a broad area, and be easy to use. In general, consumers won’t tolerate a it had built a strong base of intellectual capital. Now, steep learning curve, so iRobot’s engineers pictured the only thing missing was a way to bring robots to the something as simple as a large button labeled “clean.” domestic market economically, and that was no easy In fact, they ended up with a button that provided a task. Angle had already experienced the agony of de-de choice of “S,”S, “M,”M, or “L,”L, for small, medmedium, or feat on a proposaloposal forfor Hasbro.Hasbro. In 1996, iRobotiRobot hadhad llargearge (d(denoting ennoto ing tthehe room sizesize).). ThThehe cuccustomersttomo puts developed a storytellingsttororyttele lingn machinemacchih nee withwith characterschchara acteers thatthaat RoRRoombaoomombab oonn ththee fl oor,oor,r tturnsurrnsn iitt onoon,n, anandnd prpressesessses s the size moved and gesturedgeesstured whilewhiile theytheh y talked.taalkede . It seemedseeemed likeliikke bubbutton.tttton. TThThenen tthehe rrobotobboot pplayslaayss a ttuneuune anandd sststartsarrt sweep- this could be thethhe nextneextx bigbigg toytoyy untilunttilil ttheyheey shsshowedhowo edd HHasbroasa brbro iingng tththee fl ooroorr inin ever-evvere - wideningwwideeniing ccircles.irrccless. WWhWhenhenn it rruns into managementt what it looked like inside. It was a mas-mas- ssomething,omething, it heads off in a different directiondirection.. The cir- terpiece of engineering,ngineering but the microprocessors cost cle algorithm alternates with a wallwall-and-furniture-hug- and furnitu $60 each, the fl ash card cost $400, and the parts all to- ging algorithm and straight lines. Sometimes at random taled ran about $3,000. Hardly a likely candidate for it will simply go in one direction until it runs into the next Christmas season! But Angle had learned a lot something. It runs on a nickel-metal-hydride battery about the consumer products industry from this expe- that gets recharged on an overnight charger. It also rience and what it would take to develop successful comes with an invisible wall that projects an infrared products for the toy industry. It was all about cost— beam if you need to keep the robot confi ned to a par- saving pennies so that the toy company could meet its ticular area. It even has three different backup systems competitive price point in the market. iRobot became to keep it from falling down stairs. an exclusive partner to Hasbro, and over the next two From its experience with Hasbro, iRobot had years, it proposed dozens of new toy projects, most of learned to be extremely stingy on costs, down to the which were turned down because they were too expen- penny; they knew that a price tag of $199 would sive to make. Finally, in 2000, iRobot saw one if its keep competitors at bay for awhile. creations, My Real Baby, hit the store shelves. It was, in fact, this new understanding of the con- Market Entry sumer products business that inspired the idea for Roomba. Originally, they had considered partnering iRobot’s shrewd entry strategy saw Roomba hitting with a large vacuum cleaner company like Hoover, the market just in time for the Christmas season but one of the reasons a smaller company partners through such gift outlets as Sharper Image and

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Case 5 iROBOT: ROBOTS FOR THE HOME 465

Brookstone. These stores are willing to demonstrate But are consumers willing to go that far with do- products, something that is critical with a new prod- mestic robots? Are they willing to give them deci- uct. Although Roomba was the fi rst product from sion power in the home? That remains to be seen. iRobot, sales were $15 million in 2002 and soared to In November 2005, iRobot’s PackBot robots $50 million in 2003. This was accomplished on fi ve opened trading on the NASDAQ exchange, mark- rounds of venture funding totaling $27.5 million. ing the fi rst ever opening by a robot and the fi rst iRobot also hired a Boston public relations fi rm profi ts (in 2004) for a company in business for to conduct a media blitz to create customer aware- 15 years. ness. Stories appeared in the Wall Street Journal and iRobot is now facing an emerging challenge from Time and on TV shows like Live with Regis and conventional vacuum manufacturers, who have Kelly. Women’s magazines were another popular started teaming with robotics researchers to develop media venue. But all advertising is not good adver- competing machines. The company is rapidly turn- tising. Angle had to be careful that Roomba would ing out new products based on its core technology not be perceived as a novelty—a toy—but rather as to stay ahead of what will surely be fi erce competi- an everyday appliance. Therefore, the company tion. In 2005, the year the company went public, it chose not to refer to Roomba as a robot in any of its released Scooba, a fl oor-washing robot. In 2006, a advertising or promotional materials. Instead it was workshop robot designed to pick up small objects described as an “intelligent fl oorvac system.” These such as nuts and bolts was released. And in 2007 the high-tech engineers left their techie egos at the door company offered iRobot Create, a hobby robot; and resorted to consumer terms, but the market dic- Verro, a pool-cleaning robot; and a new line of tates what companies should do. Once iRobot found vacuum robots. But is this enough to grow the com- out that 60 percent of its customers were naming pany to a level where it can withstand the onslaught their Roombas,oombas, the company began using the term of intense competition that is just at hand? With robot onn its packaging.packaging. AngleAngle rearealizedlized tthathat once consumerconssumer robotsrobots accountingaccountingn forfor atat leastl half the competitiontitioon enteredene tereed theththe marketmam rkketet andand waswas ableablble tot company’scoommpanny’y s revenues,rer veenun ess, thisthhis isis a seriousseerious concerncoc for the achieve a lower priceprp ici e point,ppooini t,, itit wouldwooulu d be importantimpporrtantn founders.founndeers. Inn 200620006 withwiitht 3713717 employees,empm looyeees, the company to customersomem rss toto knowkknowo thatthat theirththeiir robotrorobob t vacuumvvacuuumm camecamme sawsaw revenuesreveennuees ofof aboutabbouut $189$$1898 millionmilliionn andannd net income from a robot company and not a vacuum cleaner of $3.56$3.56 million. But competitors likelik Electrolux company.ny and Samsung Electronics are weighing in with re- sources that total $16 billion and $79 billion, respec- The Future tively. Is iRobot doing what it needs to do to grow its markets and prevent being commoditized by the iRobot continues to do contract research. The fed- competition? eral Defense Advanced Research Projects Agency (DARPA) has funded its Robot’s Swarm project, Sources: Ulanoff, L. (May 16, 2007). “Robots Embed- where it is working on getting robots to coordinate ded in Warfare and Our Lives.” PC Magazine, http:// with each other. Called “PackBots,” they are used www.pcmag.com; Storrs, F. (May 2007). “Heavy by bomb squads for unmanned reconnaissance and Mettle.” Boston Magazine, http://www.bostonmagazine bomb disposal. By 2006, iRobot had over 900 of .com; Jewell, M. (November 10, 2005). “Investors these rugged bomb-busters spotting landmines Buy into Consumer Robotics as iRobot Shares Debut.” and searching caves in Iraq and Afghanistan. Al- Associated Press; Buchanan, L. (July 2003). “Death to Cool.” Inc. Magazine, http://www.inc.com; though weighing only 68 pounds, the robot has an “Mechanically Inclined: These Entrepreneurial Robo- arm that can stretch more than six feet, and it can philes Take Their Business Where No Man Has Gone lift 30-pound objects in its “hand.” Angle can see a Before,” Entrepreneur Media, Inc., http://www future for this technology in the home as well. Pic- .fi ndarticles.com; Garfi nkel, S. (October 9, 2002), ture a scenario where robot appliances decide “ iRobot Roomba,” MIT Technology Review, http:// among themselves what should be cleaned fi rst. www.technologyreview.com

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Discussion Questions 3. Evaluate iRobot’s approach to the consumer market. Was it effective? Would you have done 1. What are the unique challenges facing a new anything differently? product development company? 4. How will iRobot maintain its lead in the 2. What role did patents play in iRobot’s strategic consumer market? plan?

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