The Hardware Revolution — some would call “Phase 1” — kicked off in 2008 and gave life to many exciting new companies: nest, DropCam, FormLabs, and Ring to name a few. Companies like these, focusing on subscription rather than one-time product sales, have changed the consumer landscape and paved the way for a new generation of hardware innovators. As we’ve seen, over the last ten years, it’s been easier than ever before to go from an idea to a prototype. At Dragon Innovation, we’ve been fortunate to help many of these new hardware companies go from “one-to-many” (prototype to high volume production) by leveraging the experience we learned the hard way after 10 years at iRobot manufacturing the first 4 million Roombas.
We’re now entering what we think of as “Phase 2” of the Hardware Revolution. The bar is much higher for design, customer experience, quality, and overall usefulness of the product. We are seeing many more companies enter the B2B / Enterprise space (6 River Systems, Soft Robotics, Universal Robotics, etc). As a result, there is a growing demand for manufacturing more complex products in both low and high volumes. Companies like Avnet (our parent company) are providing complete bolt-on IoT solutions, enabling hardware companies to focus on what they do best: build amazing products that address their customers’ critical needs while avoiding the necessity to spend time in the weeds of IoT security and privacy. We are seeing the Hardware Revolution spread rapidly across Europe for both B2C and B2B. Even established companies who have never built hardware are aggressively getting started with IoT to open up new opportunities for their customers along with recurring revenue streams for their investors.
At Dragon Innovation, now with the full power of Avnet behind us, we’re excited to be at the forefront of Phase 2 of the Hardware Revolution. Below is a deeper dive into some of what we’re seeing.
Domestic manufacturing is more viable than ever before
Most hardware startups start with an initial low volume run (say, up to 5k units) to test the market and iterate on the design based on customer feedback. “You have to build it to build it,” as Jim Lynch, Lego and iRobot process engineer, is famous for saying. Nearby domestic manufacturing is often the best option for these companies to get started. During the initial launch when the design may not be fully baked, it’s much easier to work with a factory that is a short drive away and has a team that speaks the same language. As a result, we’re seeing a massive demand for great local contract manufacturers, such as Massachusetts-based Worthington Assembly, that play a key role in supporting early stage companies, and increasingly enterprise Hardware companies.
In the US, the factories tend to be less vertically integrated than in China. This means that you’ll need to spend more time stitching together your supply chain. For example, one factory may specialize in injection molding, another packaging, a third SMT and final assembly. But the advantages still outweigh going overseas — by going through this process of putting together the supply chain, you will truly understand what it takes to build your product from scratch, which will be invaluable information for when you are ready to scale.
There is a new and large Hardware Revolution happening in Europe
Like the American “Hardware Revolution” over the last 10 years, we’re seeing a similar trajectory in Europe. The domestic geography benefits and improved capabilities have opened up the door for some amazing companies and accelerators to begin popping up: Hardware Club (Paris), Techstars (Berlin), Buildit (Estonia), and Remarkable (Norway) just to name a few. These organizations will be the next big contributors in the hardware industry. And similar to the US, will help establish a domestic (and international) option for manufacturing. The benefits for low volume production and economic benefits definitely make this a viable option.
Because of this exciting opportunity in Europe, we’ve invested resources to open a Dragon Innovation European office, headquartered in Amsterdam. To support these new companies and accelerators, leveraging the global reach of Avnet, we are working to build out our Contract Manufacturer Database (already over 1,000 factories) to include Europe. Be on the lookout for how Dragon is helping these companies get started in manufacturing in Europe!
Consumer gadgets continue to grow, paving the way for established companies getting into B2B hardware development
Seeing the success of these smaller, leaner, and agile startups, established companies that may have never done hardware before are now actively getting into the space. Some are concerned about being disrupted by startups, and some are aggressively jumping in to open new value streams.
We describe the “Avocado Grower” as an example — they know everything about the mechanics of growing avocados, and have heard of IoT. They see an opportunity to use technology to ensure the avocados are delivered to the store so that they will be at peak ripeness when the consumer wants to eat them. However, the avocado growers don’t have a background in hardware, or a desire to set up an internal hardware team and climb the steep learning curve. This is where Dragon Innovation and Avnet can help them translate their napkin sketch into high volume finished products, delivered to their doorstep as one seamless process creating a true end-to-end solution. Dragon can empower them with modern tools, such as Product Planner, to move at “Entrepreneur Speed”.
Crowdfunding will continue to help small companies succeed
Even though giant companies are getting involved in the hardware space, that doesn’t mean they own every aspect of the industry. Crowdfunding is a great way for an up-and-coming company to validate one type of market before they spend a lot of money manufacturing an unproven product. Crowdfunding allows companies to get access to capital early and minimize product market fit risks.
Even though it is difficult to see the failure of major “successful” campaigns like Ossic headphones, this increased awareness showcases the pitfalls of failing to project potential shortcomings. This is also something that Kickstarter (in partnership with Avnet and Dragon Innovation), is working on with the creation of Hardware Studio — by helping companies prepare and understand these decisions and projections, so that they know how long it will take and how much capital to raise, the less number of failures that will occur.
Communication tools are more important than ever, especially with factories
Communication is the single most important (and difficult) component of building successful hardware products. Communicating building your prototype, communicating design for manufacturing, and of course communicating with a factory. Manufacturers still work almost exclusively with email and therefore have limited real time communication or historical context based off of important decisions being made. This is costing both sides time and capital. Having consistent and accurate data that can be communicated is one of the biggest challenges in manufacturing today.
Manufacturing is still difficult, complex, and not transparent
In the end, manufacturing a new product is one of the most challenging tasks a company can take on. Each decision casts a long shadow or could impact a decision that you don’t even know about down the line. Yes, there are improvements on collaborative cloud based CAD tools to help build prototypes, but it is still very difficult to build on the manufacturing triangle: cost, quality, and schedule. There are a lot of moving parts in a relationship between an engineer, designer, manufacturer and a factory that need to be synced up. Vast knowledge, understanding, and expertise is needed across the whole system. One thing going wrong could derail the entire process. With difficult lead-times (some capacitors have over a year lead-time, yikes!) and DFMA rules to follow, this can make the entire process overwhelming if you don’t have a proven process and modern tools.
Technology advancements are coming rapidly, and having major impacts on every industry. These benefits will be realized by products built in both low and in high volumes using modern manufacturing practices and tools that are also nimble and scalable. With improved communications and tools, hardware will continue to be more accessible to companies of all sizes. Our goal at Dragon Innovation is to be at the forefront of this revolution and serve as a leader in the industry, with support from our parent company, partners and of course dedicated customers. To get from one-to-many is a challenging road, but we aim to be there every step of the way.