I recently attended a spirited debate by a panel of robotics industry executives discussing the drivers and impediments to robotic startup success. The one thing they managed to agree on was that the failure rate is 99% for robotics startups. That’s a staggering percentage, even though it was the panel’s opinion and not a formal statistic.
Hardware is hard, and if there is a difficulty spectrum, robotics would be in the diamond hardness range. Robot development requires expertise and synergy across software, mechanical, electromechanical, electronics, and complex assembly. Fight the Startup Robocalypse by avoiding the following top 10 devastating operational missteps.
- Build it, and they will come
This clichéd business strategy often discredited yet still in use is even more destructive when applied to robotics. A robot design and marketing plan based solely on generalities like cost, safety, and user-friendliness is doomed. For a robot to be successful, it must be designed around a specific market need, perform specific tasks reliably and consistently, and have a total cost of ownership making it economically viable.
The value proposition, return on investment, and payback time should be so strong and well-documented that the decision to adopt the technology becomes a no-brainer strategic imperative. A chicken with its head cut off runs around but certainly doesn’t know where it’s going.
- DFI instead of DFM
Designing for investors (DFI) instead of designing for manufacturability (DFM) is a surefire and common startup killer. When the pressure is on to develop a working model, engineering teams focus on prototype production processes, frantically search the Web for parts, and use samples from unqualified suppliers. Selecting the optimal manufacturing partners takes a back seat to DFI, as if the two are mutually exclusive.
The result is a functioning demonstration model that is not manufacturable at projected volumes or targeted cost. In this scenario, stop-the-presses manufacturing problems are often not discovered until the production ramp deadlines loom. What a way to decelerate product commercialization!
- Contract manufacturer selection
Conventional wisdom whispers to robotics startups that top-tier contract manufacturers (CMs) provide unmatched purchasing power, engineering capability, and a halo of credibility. Substituting conventional wisdom for actual wisdom when selecting a CM is a recipe for disaster. It’s also not about being a big fish in a small pond.
Think Goldilocks’ not too hot, not too cold. A successful contract manufacturer selection process prioritizes alignment with the startups’ markets, technology, timelines, and production volumes. What is the contractor’s executive commitment to the startup’s long-term potential, its belief in your business plan, and specific core competencies to support product realization?
Contract manufacturers will fire customers not meeting revenue targets in the expected time frame. What keeps you up at night? Scrambling to find a new CM production partner while vital early adopter customers are expecting deliveries should be on the list. There’s no checkbox on the unemployment insurance application for “fired by my contract manufacturer”.
- Engineering attention surplus disorder
All robotics startups developing leading-edge technologies push the boundaries of process capabilities. The slow-motion methodology for resolving gating manufacturability issues is to focus on one possible solution at a time. This seems to make sense on the surface. Don’t spread the engineering team too thin, do one thing at a time, multi-tasking causes multi-inefficiencies, etc.
In the meantime, competitors are catching up and obsolescing your new technology. The opportunity for first-mover advantage withers on the vine. To speedily solve the unsolvable requires following parallel-path solution development until the unsolvable is solved. Try saying that ten times quickly! In this race, the hare, not the tortoise, wins.
- The China Syndrome
There is a pervasive assumption among hardware startups that China is the lowest-cost sourcing market. Add this to the fact that startups’ engineering teams are often choosing suppliers without a total cost of ownership analysis and proper supplier qualification. Un-strategic sourcing leads to disastrous outcomes every time.
Add up the freight, duty, insurance, shipping lead-time, quality problems, travel, language, and time-zone challenges. Then consider unenforceable intellectual property protection putting at risk a startups’ most valuable asset. The FOB (free on board) China cost typically needs to be at least 30% less just to break even. Under the parental blocking controls, can you add Asia sourcing websites?
- Building teams from the top down
The theory goes that experienced vice presidents are experts who know how to design their organizations and choose the right job candidates. With each functional VP (marketing, engineering, supply chain, etc.) building his or her department, the startup will accelerate organizational development. Problems occur when the VPs are expecting to manage teams and not perform day-to-day tasks. This can lead to politicking, pushing for resources to add unnecessary headcount, and stacking the deck with former associates who may not be the best match for the startup.
If the startup needs some big, experienced guns, hire consultants. Prematurely adding an executive buffering layer also disconnects founders from their organizations. Top-heavy designs capsize ships.
- Design for perfection
Design for perfection (DFP) is the deadliest rung in the ladder towards product launch delays and failures. Three common ingredients in DFP toxic stews include the following: engineering teams hyper-focusing exclusively on the exact specifications needed for +/- 0 tolerance, custom part designs pushing the limits of manufacturability, ignorance of the need to collaborate early with suppliers regarding process capabilities, and no design of experiments to understand acceptable tolerance ranges. This mirror image and evil twin of DFM will drive a stake through the heart of product realization.
- Burn rate, baby burn
When more attention is paid to the capital burn rate than how money is spent and for what results, the startup is going to quickly be immolated. Robotics startups that are starved for engineering resources, but seem to have the funds to hire abundant administrative assistants and rent fancy offices, are headed for a fall.
At the other extreme, raising gobs of money and throwing it at a problem by reactively hiring a boatload of additional employees and rushing tooling for production without a design freeze is just as damaging. If the startup doesn’t have a high ratio of engineers to administrative assistants, it is going to be a bonfire of the vanities once the investor gravy train stops.
- ‘Uberizing’ supplier development
Contract manufacturers, broad-line sales reps, design engineering firms, importers with offshore buying offices, and the proverbial friend of a friend’s uncle will all offer budding robotics startups their one-stop shopping, all-inclusive, we-do-it-all global sourcing services. Identifying, qualifying, and selecting optimal suppliers is highly complex and a critical factor for success or failure.
Abdicate strategic sourcing, and the startup loses independence, control, transparency, cost savings, an opportunity to build relationships, sourcing markets knowledge, and valuable learnings from DFM supplier partnering. Like it or not, supplier selection and relationship management are core to every hardware startup’s success. Outsourcing sourcing is just one more leak in the dam holding back the flood of failure.
- Board member fire drills
Board members who view their role as judges at an inquisition can cause resource-eating distractions. “Why aren’t you talking to Big Cheese Contract Manufacturer?” Fire alarm pulled. “Why haven’t you implemented an ERP system yet?” Fire Alarm pulled. “Your production costs are too high.” Fire alarm pulled. “Why aren’t you sourcing from China and Mexico?” Fire alarm pulled. “Why did you only send RFQ’s to 5 sources instead of 10?” Fire alarm pulled.
On and on and on, round and round goes the wheel, and where it stops, nobody knows. Each line of questioning requires pulling resources from developing a successful product. Too bad the laws about false alarms don’t apply to startup boards.
Failure is not inevitable for robotics startups
The high failure rate of robotics startups is not inevitable, nor are the challenges insurmountable. Leave Groundhog Day to the groundhogs, and stop the insanity by avoiding the top 10 common failure drivers. Robotics startup founders who know what they don’t know and selectively turn a deaf ear to conventional wisdom are the most likely to succeed.
About the Author:
Adam Shayevitz, M.B.A., is the president of Strategic Sourcing Dynamics LLC. He has 30 years’ experience in the field of strategic sourcing. His consulting firm works with technology companies ranging from startups to Fortune 500s, setting up and optimizing supply bases. Shayevitz focuses on accelerating product realization, lowering cost, and improving quality through early-stage design for manufacturing and assembly (DFMA) supplier partnering.
