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Hardwired: #products, the tactics and strategy of product development

Posted on June 10th, 2015

HardwiredNYC

06/09/2015 @WeWork, 115 W 18th St, NY

The four speakers were

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Joerg @Avegant talked about their product which is a near-eye video projector with a 4k resolution. Joerg left Logitech a year ago to become CEO of Avegant, which was founded in Michigan and then relocated to the Bay Area. Avegant has developed a superior way to view video using 2 million micro-mirrors to reflect an image on the retina.

The device is compatible with current variable products and contains a head tracker.

They raised initial capital of $1.5mm in Feb 2014 using Kickstarter. They just closed a $20mm round of series B funding.

Their products are concentrating on 3 target applications: Immersion video, first person viewing, augmented/virtual reality. Their initial product is Glyph which superficially looks like headphones, but contains the projectors on the “headband”. They plan to go into production by fall 2015. Follow-on products include 1. Drone first person view. 2. VR/AR devices.

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The second speaker, Danielle is the CEO of @OtherMachineCo which builds a milling machine guided by 3-d files. She concentrated on the lessons learned running the company. Danielle started by outlining how to assess the financial viability of an idea.

  1. Be very specific about the market
  2. Determine if the market is big enough to support a company
  3. Consider where you will be in 3 years – how much will you earn in 3 years
  4. How much does it cost to run the company

You should assess the following

  1. Describe buyer
  2. Identify the friction – the reason the buyer would buy the item
  3. Identify the value of the product

The cost of production should look at an initial 3 year period. The following are cost considerations

  1. A person costs $150k/year
  2. A company with heavy R&D will be 25% of all expenses.
  3. Software is a lot cheaper.
  4. Cash neutrality matters more for hardware companies because we are more risky
  5. Need to earn 3 years of operating income in the first 2 years of sales.
  6. You can only expect 5% market penetration. => your market needs to be 20x your operating costs.

If this cost analysis shows that the market is not sufficiently big you have some options:

  1. Add more markets – but this dilutes your focus
  2. Get fewer people – but this slows development
  3. Build a different product

There also adjustments you can make to the manufacturing plan

  1. Flexibility – don’t want to lock yourself in to early
  2. Speed – how long can you wait to go into market
  3. Cost – should sell for 3x cost to give you some cushion
  4. Quality

Danielle proposed some manufacturing guidelines as production grows

  1. Build first 1000 yourself to learn about to develop it
  2. 1-5k build in-house and nearby outsourced parts
  3. 5-10k local outsourcing – no ocean plane rides
  4. 10k+ fully outsourced, global

She emphasized the importance of collecting daily data from the start of manufacturing – they have a web app that tracks the parts and entire assembly process. Data should include

  1. product data – how long does it take, what it costs,
  2. product history – which parts when into which products (makes it easy to detect defects and improvements)
  3. support tracking – know when to scale support

The last two speakers talked about their view on generating ideas for new products and strategic positioning these products.

Niall emphasized how to build a business based on a forward looking assessment of where technology will be and the products consumers will use. His market view arises from thinking backward from the future environment : what are the inevitable consequences of technologies (e.g. what services and requirements will arise due to Moore’s Law).

For instance, when he lived in Europe he founded a mobile internet in Europe which provided wi-fi over the cloud as he saw the infrastructure and devices creating a demand for mobile computing.

  1. open, global tech & spectrum
  2. devices & experience
  3. indoor access.

He considered the technology allies for developing the product (telecom carriers) and the retail outlets that could become key customers (e.g. McDonald’s)

Now his emphasis is on developing hardware or retail products that take advantage of the following trends:

  1. no product exists in isolation
  2. the web is the global platform
  3. products become part of the web – products need to exist natively in the web

idealistic vision -> clarity of execution strategy -> rational irrational allies

stick to the vision, vary the implementation strategy.

A physical object is no longer static if it is part of the internet of things.

Competitors he faces

  1. large software companies
  2. specific vertical providers

so he differentiates his products by

  1. being native to the web
  2. data management- who owns the data
  3. able to handle issues of scale – how to connect 100mm lightbulbs.

Adam @Leeo talked about his experience as a product developer based on 10 years experience in industrial design, mechanical engineering, systems resulting in more than 125 issued and pending patents.

He started by talking about the traditional view that hardware is expensive to develop; expensive to distribute; cannot be vertically integrated; low marginal cost of production; scares investors.

He then talked about how this view is changing: hardware is cheaper to developer (online CAD); distribution is cheaper with ecommerce and kickstarting; components are rapidly commoditized; marginal costs can be decreased with scale with a small team; investors are now interested in IoT and have crowd funding

But

  1. you still need to have a passion to build hardware
  2. Would you give it to a friend?
  3. Build it only if you are proud of it
  4. focus on early adopters
  5. launch lots of products
  6. build partnerships
  7. pick something that is important to you

To highlight these ideas, he talked about his experiences creating RoboteX, which makes robots to break down doors and defuse bombs

  1. first build non-functional prototypes
  2. iterate for 2 years
  3. raise money and build the solution
  4. shipped the product

He has also applied this approach at Leeo which builds consumer products. Their first product is a night light that looks pretty and connected as a smoke alarm.

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