Talking innovation at the launch of the Tribeca Film Festivals Innovation Week in New York City.
Innovation is the buzzword of buzzwords right now.
Everybody is innovating, or wants to be innovating, or tweeting about how they should be innovating, or Instagraming a picture of the innovative culinary concoction they had for breakfast. We are rethinking how we do what we do and who we are. And we are all sort of obsessed with the process.
At the launch of the Tribeca Film Festival’s Innovation Week, which is under way right now in New York City, a gaggle of leaders in innovation shared what they are most excited about in innovation right now. Their answers range from new technological gadgets to new ways to think about our own identities.
Here’s a rundown of what they had to say. Consider this your cheat sheet to innovative innovation, or the hottest of what’s hot right now.
Craig Hatkoff, co-founder ofTribeca Film Festival and Tribeca Disruptive Innovation Awards: “I just had a demo of the latest version of Oculus Rift and while I was somewhat skeptical of how impactful this would actually be…but when someone pays $2 billion for a company with no product ready for market, it sounds like a lot of money…For $2 billion, this may be the closest thing to the Louisiana Purchase that I have seen…when someone takes $2.5 million from Kickstarter, a pair of ski goggles and two iPhones and turns it into the most immersive experience you can possibly imagine, that feels pretty disruptive to me.”
Rabbi Irwin Kula, co-founder ofDisruptor Foundation: “The most interesting thing happening in innovation to me now is how people are innovating their identities. And what I call it is that people are mixing, bending, blending and switching in ways that are unprecedented in human history…It’s happening in the way people are putting together their identities, independent of anyone external’s coherence. It just has to be coherent to you. This is a radical way in which we are going to be living as human beings. Innovating identity.”
Mark Payne, co-founder of innovation consultancyFahrenheit 212: “We look at innovation and see there was this crazy bifurcation of capabilities for so long where there was the discipline of strategy and the discipline of creativity…and what excites me now is we are seeing this crazy convergence happening where the church and state separation is really disappearing. The young, creative people jumping into innovation, they want to see stuff happen, they don’t want to fill rooms with Post-it notes and say, ‘Wasn’t that fun?’ They really want to see an impact…It’s this giant mashup.”
Bre Pettis, CEO of 3D-printing companyMakerBot: “Before we started Makerbot, we started this website called Thingiverse.com. And, it doesn’t make us any money. In fact it costs us a lot of money. But it’s one of those things where you go to Thingiverse.com and if you are a designer, you share your ideas, you give them away for free, you let anybody download your designs. They can download them and make them on a Makerbot. And what ends up happening is when you give people a platform for sharing, they do wonderful and sometimes practical, sometimes completely absurd things. And there is something with innovation that is very close to the absurd. If you want to be more innovative, do stupid things. Do things that tickle your fancy — that make you feel like, ‘This is probably a bad idea, but I am going to do it anyway. Ok, yes, I am going to add explosives to this project’…whatever your passion is, add 3-D printing to it, and something interesting will happen.”
Tarah Feinberg, chief marketing officer of the innovation marketplaceKite: “For me it comes down to one word: it’s about accountability. For me it’s really about the fact that slowly but surely, on every level, of anyone touching innovation on a business level, it’s no longer about shiny objects or a little spike in business results or a story that you can get published in the news next week. It’s really becoming about outcomes.”
Jeff Meleski, chief global growth officer of the consumer collaboration consultancyCommunispace: “One of the most innovative things we see with the brands we work with is what we are calling the democratization of innovation. So it’s moving from the few to the many or at least to the more. And what that means is we are thinking about organization’s cultures and how they are embracing innovation to really be able to keep pace and be much more agile, as you think about their much more traditional software development companies, this idea of agility and innovating in an iterative, incremental manner that is really delivering against business needs, in real time, continuing to keep the brand current and relevant and moving ahead.”
Judith E. Glaser, chairman of theCreating WE Institute, author of Conversational Intelligence: “The idea of identities and new identities: there are actually places in the brain — every time you chose a new name, you get a new title, you learn something new or you can actually see yourself in a new way — you are creating a new identity inside of yourself. So the fact that human beings are now co-creating new identities, we are able to give new definition to each identity and release ourselves from the past. Most of our identities, we bring all that stuff from the past, right? So we are who everybody said we were or we weren’t. But now with new identities, we are able to put new memories, it frees up our brain to give ourselves a boost to become something else that we never thought we could become before. So I highly recommend you think of yourself in new identities. Who do I want to be with other people and co-create in a completely frees your brain from the past, dis-attaches some of the things that are back here — the amygdala hijacking that we get that stops us from doing things — and actually frees us to garner new insights from others.”
Hutch Carpenter, director at innovation management software companyHype Innovation: “Employees are starting to trust their employers a whole lot more around this innovation ‘thing.’…Employees are starting to be asked their opinion, their ideas. Their insight…what I am seeing over the last year, two years, three years, four years, now is a real movement to get a lot more from your employees, get them a lot more involved than you historically ever have. And it’s healthy. It’s healthy for companies because you are going to get cognitive diversity…we have different ways of thinking about things.”
That’s what my friends asked me any time I mentioned that I’d be meeting with Nezare Chafni and Shaun Moore, co-founders of 214 Technologies. They’ve developed a product called Chui, which they describe as “the world’s most intelligent doorbell.”
Chafni and Moore brought a Chui prototype by the TechCrunch office in New York, and you can see it in action in the video above. Basically, it scans visitors’ faces, tells you who’s at your door, and can deliver a personalized, prerecorded message. You can also set up a “do not disturb” list of people you don’t want to see at all.
Obviously, there’s a bit of acting in the video, but the core demonstration, where the camera correctly identified each visitor, was real.
Chui might eventually be connected to other smart home devices, for example automatically letting people in if they’re on your friend list, or turning on your TV as soon as you arrive home.
The company is currently taking $199 preorders through a crowdfunding campaign, with plans to ship the device this fall.
Few sectors have received as much buzz as the wearables market. From fitness bands and anklet baby monitors, to smartwatches and Google Glass, wearables are fun, cool, and cutting-edge.
The rise of mobile broadband, commodity sensors, smartphone-based companion apps, virtualized manufacturing and supply chain, crowdfunding, and nimble design have converged to make wearables mainstream. With the category now validated as a strategic hotspot for all major corporations and platforms, investors are clamoring to fund wearable tech startups.
In 2013, investors poured $458 million into 49 wearable company deals, according to CB Insights. Year-over-year, deal activity in wearable startups rose 158 percent, while funding grew 80 percent. Companies like Thalmic Labs, InteraXon, Soundhawk, Misfit Wearables, Fitbit, Jawbone and Rest Devices have recently raised significant rounds.
ABI Research predicts wearable devices will exceed 537 million annual shipments by 2018, with smartwatches and glasses being the fastest-growing categories. Not only are major tech companies like Apple, Google, Samsung and Intel investing heavily in wearables, but non-tech giants like Nike, Under Armour, Adidas, lululemon, and others now view the category as strategically critical to future profits. Credit Suisse is extremely bullish on wearables; the research firm believes the market could be worth $50 billion by 2017.
But what does it really take to build a viable, lasting wearables company, and can these high-tech gadgets generate solid returns for investors?
As an early investor in Basis (acquired by Intel last month) before there was a formal category name, I’ll continue to bet on the sector. But I won’t invest in just any wearables company based on slick industrial design or even an oversubscribed Kickstarter campaign. I actually fear that despite all the rosy predictions, most of the startups in the space will end up in the dustbin of history because of the immense challenges in building standalone companies.
Here are some lessons I’ve learned that I hope will help wearables entrepreneurs in this field avoid common pitfalls along their journey — lessons that are also well-suited for connected devices startups in general:
Assembling a killer team
Telling a story, building a community and leveraging crowdfunding
Figuring out manufacturing, pricing, ongoing demand-gen and distribution
Understanding the role of data, users and metrics
Predictions on the future of wearables
Assemble A Team of “Avengers”
Most wearable companies have either hardware- or software-heavy founding teams and spend considerable effort going up the learning curve in the area they’re not as familiar with. But to win the wearables space, you’ll actually need to build three mini companies (hardware, software and platform) under one roof, which is no small feat from a hiring perspective.
From day one, you’ll need to be assembling a diverse Avengers-style team of rock stars encompassing hardware, software, firmware, design, data science, manufacturing, logistics, user experience, community management, customer support, app store, API and product-marketing expertise. Top wearables startups will eventually be taking on Apple, Google and other big boys who are capable of delivering delightful integrated hardware and software experiences, so you’ll want to design your organization to be able to do the same.
If you’re not an extremely technical founder who can work out the intricacies, then you’ll need somebody who can see how all the pieces will fit together.
Fortunately, very few other large companies can cover all these bases at any meaningful level, so the caliber and diversity of your team will play a key advantage. Building your own team of Avengers can be maddeningly difficult in today’s labor market, and you’re corralling talent sets that haven’t necessarily worked together under the same roof before. But it’s worth the time, effort and dollars, given the inherent value you’re creating, by assembling the right mix of people.
Get the right engineering lead
Spend extra time on attracting the right systems engineering lead. This person will save your company time and time again, as the tectonic plates of hardware, software and firmware engineering grind together during the long, hard road to shipping product. He or she will serve as the referee when tempers run hot and all fingers are pointed at each other as to why the product is again delayed. The interdependencies are complex, and if you’re not an extremely technical founder who can work out the intricacies, then you’ll need somebody who can see how all the pieces will fit together.
The devil’s advocate
Make sure there is someone on the team who is asking the key question: Yes it’s beautiful, but is it truly wearable? Is your device too bulky, and will it interfere with shirt sleeves, belts, pants or other clothing and jewelry? Is it fashionable enough that users are proud to keep wearing the device even if they don’t engage with the data or app after a couple weeks? Does the device help the user make a personal branding statement in the right way? How can the device be personalized, and can it come in white and pink as well?
When your product team or industrial design firm shows you breathtaking mockups with sleek new materials allowing for attractive finishes, modular accessories and swappable bands, make noise. Your internal Spidey sense should be going off like crazy, with visions of poor fit for slender or thick wrists, unforeseen skin rashes, supply problems from boutique materials vendors, fit and finish rework, temperature and moisture sensitivities and mass recalls.
Assume the worst and rigorously review this disaster checklist lest you suffer recalls of units already in the field like some great companies have.
Develop A Crowdfunding Campaign
The rise of crowdfunding sites like Kickstarter and Indiegogo are the kindling that helped ignite the wearables and the Internet of Things blaze. Companies like Pebble and Misfit have used crowdfunding platforms to not only raise money, but to also engage pre-order customers.
Product story and creating community
Use the power of personal storytelling to provide a glimpse into the people behind the idea. Share your own motivation and dream to give the audience a sense of why you’re working so passionately on your product. And when it comes to explaining the “what,” be sure to use slick visuals, including design mockups and catchy videos engineered to be shared on social media Coin did an amazing job with its video and Facebook ad campaigns, as did Tile.
Your crowdfunders aren’t just buying your product because of utility or coolness. They want to participate in the journey and play a part in the story.
Remember that you’re designing for the “Holy Sh*t, I gotta have that!” moment in the first few minutes. Without triggering this impulse reaction, you’re not going to convert viewers into pre-order buyers and sharers. But the most successful crowdfunding campaigns leverage something even more important than the beauty or cool factor of the product – they harness the Ikea Effect, which dramatically increases the value of a product to customers by involving them in the creation process.
Your crowdfunders aren’t just buying your product because of utility or coolness. They want to participate in the journey and play a part in the story. This is why VIP crowdfunding packages that offer unique and scarce experiences often sell out first, despite the much higher price points: Many of your supporters are looking to buy an experience that they get to talk about (i.e. a story of their own) and not just a product.
Plan for this by thinking through all the different ways you could offer deeper touchpoints with your supporters. Set up tiered bundles and limited-edition experiential packages, whether it’s letting them have input in the creative process, hang out with the creators, see their names on the credits, attend the opening launch party, or own a limited-run version of the product in pink.
Once you have created a runaway success and secured the funding you were looking for, setting timing and expectations with your early community is everything. More likely than not, you’re going to get delayed and miss your advertised launch date. It’s better to just expect and plan for it.
The one factor in your control is when you go live with your pre-order campaign. The rule of thumb is that the shorter the gap between taking pre-orders and an achievable ship date, the better. This all comes down to visibility on the details of your manufacturing process, and the more homework you do ahead of time on manufacturability and DFM (design for manufacturability), the better off you are.
Have as much clarity as possible on viably delivering the product as promised and on time.
I meet many founders who have wickedly cool concept sketches and industrial design, but haven’t spent nearly as much time thinking through the manufacturability of the product and the various trade-offs they’ll have to deal with to get to product launch on time. For example, plastic injection molding may not sound like cutting-edge rocket science, but the nuances and devilish details involved can bring a startup to its knees in a “death by a thousand cuts” fashion.
Do yourself a favor and wait before launching your crowdfunding campaign until you have as much clarity as possible on viably delivering the product as promised and on time. Yes, there’s the terrible pressure of wanting to be first in the market before a competitor launches something similar, but remember the three strikes rule: Your backers will likely give you one, maybe two, hall passes for schedule slips, but even your most die-hard fans will start to give up on you no matter how profusely you apologize and over-communicate the situation for slip No. 3.
While crowdfunding is a great way to bootstrap and raise funding, it’s just a baby step on the road to success. The upside is that it’s gotten easier to get started with a wearable device idea. The downside is that you’ve now got a highly involved, engaged and vocal community of customers to manage as soon as the first pre-order comes in.
Whether you like it or not, community management must become a core competency of your company from the get-go, and you’ll need dedicated resources for this. Your supporters will be an unruly, organic beast comprised of different personalities, all excited for your success but also impatient to get their shiny new toy. Your most enthusiastic fans can quickly become your most vocal haters.
The good news is that this community is yours to tap into and communicate with directly, so don’t just treat them as passive customers waiting in the wings. Think of them as a huge focus group, eager to engage and offer their feedback in the form of pre-launch market research as you try to hone your product-market fit. Many good startups take the pre-launch period as an opportunity to bounce ideas and design decisions directly off the customer community, and in many cases this has refined the product and led to better choices.
This community is yours to tap into and communicate with directly, so don’t just treat them as passive customers waiting in the wings.
Sometimes, over-communicating to your audience about what’s happening can engender a greater sense of trust, especially when it comes to challenges and unforeseen problems you’re dealing with. However, in the case of ongoing delays and repeat schedule slips, you’ll see customers turn into outright haters, throwing your promises in your face to the point where you’ll feel it’s just easier not to say anything at all anymore.
Ideally, the more loyal supporters that you’ve earned through open communication will speak up on your behalf. And don’t be afraid to reach out directly and publicly to your most vocal haters. They’re often seeking acknowledgment and can be turned into your fans again by involving them in the process.
Manufacturing And Distribution
After you raise money through crowdfunding, the real work begins: getting your product manufactured and launched, while keeping an impatient community happy along the bumpy road ahead. Unfortunately, this is the time when most startup teams realize that they don’t actually know what they don’t yet know, and end up paying steep tuition in climbing the manufacturing learning curve.
Traditional wisdom is to “just outsource to an Asian CM or ODM,” but finding a reputable Asian manufacturer is difficult and costly, especially in terms of time, complexity, and re-work. Imagine a nightmare scenario in which your local China GM steals your IP, quits the company and launches a direct competitor, costing you a year of work.
Or that you sign explicit contracts with tier-2 and tier-3 manufacturers and suppliers (since as a startup you’re unlikely to get the attention or proper deal terms from a tier 1 like Foxconn), only to have them cut corners on quality and agreed-upon specifications as they try to eke out additional pennies of their own margin. You then discover that you can’t practically go after them for breach of contract, and then find that they’re in cahoots with your other suppliers who are now holding your tools hostage.
These are all situations that some of my companies have faced. Even Pebble, with one of the most successful crowdfunding campaigns of all time, ran into manufacturing problems that caused disgruntled customers to suffer long wait times for their watches.
This is actually par for the course for almost every crowdfunded hardware startup I’ve seen: expect things to take much more time and money for completely unanticipated reasons (“Oh hey! They really do take the week of Chinese New Year off!”). Luckily, next-generation supply chain and logistics virtualization platforms like PCH International (another of my prior portfolio companies) can take some of the pain out of trying to go direct to Asia.
But realize that you’re likely to sacrifice initial margins for reliability, quality, and peace of mind in launching on time, and appeasing an impatient list of customers who have already given you their credit cards.
The return of “Made in America”?
My advice is to just get your product launched on time, keep the community on your side, and then worry about optimizing manufacturing and margins later. In fact, I actually encourage consumer hardware startups to seriously evaluate “made in North America” as a starting point (as my other company 3D Robotics did, with operations in Tijuana). The bill-of-materials cost, production capacities, and margins won’t be optimal, but may actually be worth the gains from working in the same time zone, language and legal jurisdiction.
You may also have the chance to learn critical details about the nuances of your manufacturing process, thus making you smarter in future dealings with overseas partners who may or may not be trying to pull the wool over your eyes. Again, with U.S.-based supply-chain-solutions providers such as PCH and their hardware accelerator Highway1, you may be able to find a workable hybrid solution to bridge the North America/Asia gap. I’m also hoping that regions like Detroit may someday be able to reinvent themselves through boutique manufacturing outfits optimized for small batch production runs for startups.
Employ behavioral economics in setting up your price points
Do yourself a favor: if you haven’t already read Dan Arielly’s “Predictably Irrational,” go out and pick up a copy and apply some of the lessons when deciding upon your price points. Some I’ve found handy in the world of wearables include:
Accessories and shipping and handling. Terrific places to boost margins.
Scarcity commands its own premium. You’d be surprised by the power of Limited Edition Pink or White. Same goes for personalization: Is it possible to offer (and upsell) engraving or printing of user-provided text, logos or images?
Bundled options. If customers find your product that innovative and exciting, you’ll notice that they rarely just buy the basic bare-bones device if you give them other attractive bundle options. Think about grabbing their attention with a $49 or $99 price tag, but quickly demonstrate how much additional goodness comes with the Starter Kit package, or the Silver, Gold, or Black Diamond Elite bundles. What about the Family Pack that comes with multi-account sync and management? Or the Platinum Plus bundle that comes with one year of subscription service?
Get creative with your bundles, and think of the extra peace of mind and delight that comes from extra chargers for the home, office and car; spare battery packs; swappable bands for work and workout; extended warranty periods — you get the picture.
Think of offering a “baller package.” It comes with gold plating, 24/7 (outsourced) concierge service, lifetime subscription service, recognition in the user community, and every possible accessory and add-on. You may only sell a few of these, but you’ll end up lifting the attach rates of the next highest bundles by several points. At the same time, don’t be surprised if you sell out of these first: when whales decide to spend, they don’t do so based on economic value – they spend because they can.
Building ongoing demand and distribution channels
To me, an oversubscribed crowdfunding or waitlist campaign can often be a false positive, just as a burst in download activity for an app featured in TechCrunch or the Apple App Store may only be temporary, primarily reaching the early adopters.
Continue to test for what it takes to generate ongoing pre-order interest even after the crowdfunding campaign is over, and see if you can sustain some level of ongoing demand. Try multiple approaches, from invite codes, to Word of Mouth campaigns, Facebook advertising, and SEO. See if you can redirect traffic from an expired crowdfunding page directly to your own site, where you can still take waitlist sign-ups. (Many startups we’re seeing are also using next-gen self-hosted crowdfunding and self-start platforms like CrowdTilt, Celery, SelfStarter, Crowdhoster Shoplocket, etc.).
Post-launch, you’ll likely need to raise a monster follow-on round to ramp-up demand generation, as well as to launch distribution on eTail (Amazon) and retail channels (BestBuy, Walmart, etc.). The more you can prove organic, direct e-commerce demand for your product, the better leverage you’ll have in working with distribution channels. And never expect your distribution channels to help with meaningful demand generation – that’s your job, not the blue shirt at BestBuy.
You’re unlikely to land an end cap in retail or a promoted slot on Amazon (unless you shell out big money or have explosive ongoing sales already), so prepare to be just one product lost among many on the shelf, and be ready to deploy your own marketing war chest in support.
The Role Of Data, Community And Metrics
Most wearables startups that pitch me place heavy emphasis on the value of the data they’re collecting, and aim to be the centralized data repository of their users’ lives, eventually aggregating, measuring and generating insights across multiple devices, apps and feeds. While this sounds great to VCs, the reality is that the data needs to be made relevant, continuously engaging and “playable” to users in order to get them wearing the device past the dreaded three-week habit-formation threshold and beyond.
While sensors and algorithms can tirelessly track your stats for you around the clock, it’s all too easy to dismiss a recommendation or alert on a screen after you’ve seen it for the 10th time.
Many startups are proud of the pretty dashboards and feeds they show to users via companion apps, but these lose the novelty effect quickly if you just show the same thing to users over and over again. Think of how you can provide insights and apps that actually adapt and progress with the user’s journey, and not just simple, static gamification and missions. Expect that users will tire of tracking the same metrics over and over again, no matter how disciplined they are. Can you instead provide multiple branches of mastery and habit building, and even allow for multiple ways to “play” and “win” to accommodate different personality types?
Offer people-powered value
I believe that the future of services enabled by wearables will ultimately be a hybrid model combining algorithm and AI with human-powered networks, harnessing the best of man and machine. While sensors and algorithms can tirelessly track your stats for you around the clock, it’s all too easy to dismiss a recommendation or alert on a screen after you’ve seen it for the 10th time. This is where the power of communities, cohorts and coaching come in.
People are often most accountable to other people, and nothing bonds humans more deeply than a shared struggle against a common adversity — be it weight loss, drug addiction, an obstacle course filled with electrified wire, or a hostile enemy force trying to kill you – this is why the small group mechanic plays such an important part in Weight Watchers, AA, Tough Mudder, and the military. But don’t assume that users always want to be “social” with the habits they’re working on, particularly if they’re uncomfortable to talk about or potentially embarrassing.
In fact, I often advise startups to avoid the usual Facebook/Twitter/Instagram auto-share integrations, and instead try to turn their user base into a vertical community of their own. Offer an opportunity for customers to join cohorts of fellow users who are embarking on the same phase of a journey (total strangers can often be more comfortable to team up and share with when you’re in the same boat together). Match them up with veteran-user mentors and provide coaches to lead the way.
Not only are these types of group and individual coaching services an opportunity for a subscription upsell, but they’re also a way for your customers to elevate their standing and involvement in the user community and stay engaged by working with others. Retrofit and GoQii are some interesting examples of startups in the wearables space harnessing some of these mechanics.
Devices without deep science and multi-sensor competence are doomed
Think of the wearables market as an intensifying arms race of how many sensors and deep algorithms you’ll be able to pack into a connected device in a quest for increasingly granular data that can be collected seamlessly and around the clock. The point of this data is to generate more and more dramatic insights to help improve users’ lives.
The future winners in the wearables space will have two ace cards in their hands: one is a year or more lead-time in using unique or multiple sensor types in the device; the second is the data science know-how to correlate across multiple data streams to mine for richer insights.
Eventually users will realize that asking a pedometer to analyze sleep phases is a bit like asking your shoes to talk about your TV-watching preferences.
Take the case of connected pedometers. As beautiful as you can make one look, ultimately any number of competitors can launch a similar offering by throwing in an off-the-shelf accelerometer (expect every coming smartwatch to have one, as well). You can release apps that claim to measure sleep quality and other deep insights, but eventually users will realize that asking a pedometer to analyze sleep phases is a bit like asking your shoes to talk about your TV-watching preferences. Customers’ expectations will continue to rise, and after their first pedometer they’ll be asking “what else can these things do?”
Ideally your device leverages multiple sensors to paint a deeper data picture, and maybe you’re the first in market with a next-gen sensor that others haven’t tried to use before. Perhaps you’ve found a medtech or industrial sensor type that has never been tried for a lighter-weight consumer use case before.
Either way, wearables are a big data play in the long run, with your algorithms crunching multiple inputs. These might include sensors on your own device, additional sensors from other devices the you’re using, and even other feeds and sources you can gain context from — be it cloud-based calendars, email accounts, social media feeds, location, public databases, and other apps. You’ll need killer data scientists to pull this off, and that team alone may end up fueling a tremendous amount of your future strategic value.
Wearable companies are measuring the wrong metrics
Many wearable tech companies tend to manage by a standard set of metrics: number of units sold and shipped, product gross margins, sell-in and sell-through in the channel, contribution margin versus returns, support and customer acquisition costs, and maybe device activations and total install base. But few companies measure what really matters: how often users engage with the devices and the accompanying software and services; the average lifetime of active usage; and the ways users are engaging.
Successful wearable devices startups are really software and services companies, so they’ll need to adopt standard software and app metrics: percentage of users registered, registered users to monthly active users; monthly active users to weekly active users or daily active users; average revenue per daily active user; and lifetime value. Of course, this requires the proper instrumentation and analytics to track, so think of how you bake those hooks into your device, app and cloud. Just like most mobile apps are forgotten about shortly after download, many wearables are no longer worn after a month or two.
But if you’re looking to capitalize on the Device-as-a-Service business model, your entire strategy hinges upon active usage, just like any company with an in-app purchase and upsell offering. If you can lock in attached subscription services from the initial purchase, all the better. Otherwise, you’ll need to obsess over active usage and ongoing engagement of your customers.
The Future Of Wearables
In the early days of this market, we all tend to think of wearable tech startups as hardware companies driven by beautiful design and cool companion apps. We focus on product gross margins, pre-order volumes, and then retail demand, sell-in, sell-through and total install base. We expect that each holiday season there will be a new rev of the product, and that margins will hopefully hold through volume and supply-chain optimization as the competition and channel distribution start to takes their toll.
Successful wearables startups will actually be software and services companies wrapped in hardware.
However, focusing on hardware sales as the primary business model actually places a wearables startup on an even more “hit-based” treadmill than a game or movie studio. I worry that most of the software, apps, and APIs built for today’s connected device startups are treated more like an after-thought or a future roadmap item to deal with later. In fact, I predict that the most successful wearable companies will really be software and services firms, with a hardware entry point. Even the most gorgeous device ends up unworn and collecting dust after a few weeks unless it includes compelling software and services to make the user’s life easier, better, more fun, and/or more productive.
Over time, it’ll really be the software and service experience that keeps users coming back, and it’s here that you’ll need to deliver a magical experience – from the out-of-the box moment to one-year-purchase anniversary and beyond. Creating a software product roadmap should be the first thing you do – even before you bring in designers to create an awesome-looking gadget.
You can’t bolt software onto your hardware later; it has to come first, and it needs to be baked into the core experience. Ask yourself these questions: how much better can the device be made through the SW and service experience? Can you even design the device to be purchased with a subscription up front? Not every wearables startup may be a fit for a subscription service, but it’s certainly worth thinking about. (Although not a wearables company per se, Dropcam managed to achieve a majority of users signing up for recurring subscription services very early on, and is an inspiring point of comparison.)
Of course you’ll have grand ambitions to become a platform (or will be told to grow into one if you take significant VC funding), so you’ll need to have your API and SDK locked in on the roadmap. In addition, you’ll need your first Killer App or three to legitimize your platform, and use these as an opportunity to begin building out your own App Store for your device.
Cut API integration deals with several well-known apps in adjacent categories, and proudly feature those logos on your site and product packaging. In the process, you’ll hopefully be demonstrating to your users that your product isn’t just a one-trick tracker, and that it offers a whole “mall” of use cases and habits to take on, while adding value to other devices and apps that the customer is already using. Eventually, you may even host hackathons and provide third-party app support with your own app and content publishing model.
Be prepared to have a team devoted to managing this side of the business, and see if you can get a Deepak Chopra, Tim Ferriss, or other noted influencer, thought leader or celeb to co-author an app or module to showcase. Building the backends and technology for all these pieces is no trivial task, and you may want to look at off-the-shelf and PaaS (platform as a service) solutions to fill in parts of the stack versus building the whole thing in-house.
Plan for a day you exit the hardware business altogether
If your product idea is that great, then you can expect it to attract copycats, from other well-funded startups, fast-followers, and especially massive incumbent corporations that have decided your category is now strategic to them. Better to anticipate this day, and think several moves down the chess board when Foxconn rolls out a white-label version of your device, or Apple, Google, Samsung, and Amazon announce their offerings.
While terrifying to suddenly be square in the crosshairs of the big boys, recognize that you’ll also be a potential buy or build solution.
By that point, ideally your software and service business, as well as user community, are firmly in place, and difficult to displace. Your brand is strong and even becoming the “Xerox”-style verb in your category. You’ve got retailers and channel increasing their purchase orders, enterprises looking for volume deals, and maybe healthcare companies asking to help you develop an FDA-approved version for the medical market. Most importantly, your phone will start to ring off the hook with partnership, OEM and joint-venture opportunities with all the other companies worried about being left behind if Apple, Google and Amazon get serious about your space.
While terrifying to suddenly be square in the crosshairs of the big boys, recognize that you’ll also be a potential buy or build solution for everyone from Lenovo to GE, Philips to J&J, Qualcomm to Foxconn, and Comcast to Kaiser. And if your software and subscription businesses stands to grow non-linearly from mass distribution deals, it may not be a bad idea to exit the hardware business altogether at the right time and spread your tentacles elsewhere.
Just remember to own the customer relationship if possible, which isn’t out of the realm of possibility: most device and component makers aren’t set up to run effective software and services businesses, and will likely need you to run that side of the house for them.
These represent a handful of lessons that I try to share with entrepreneurs looking to play in the wearables space. It’s meant to be a daunting list: “hardware” starts with the word “hard” for a reason, and it’s better to go in with eyes wide open. Sadly, Basis was founded in an era before we could properly leverage crowdfunding, hardware accelerators and many of the suggestions listed above, but we always had the notion of Device-as-a-Service firmly in mind even from the early days.
Along the way we hit almost every pitfall possible and many we hadn’t expected, including the speed at which the category evolved from “who the heck would wear stuff like this?” to “must-have strategic priority” for many major tech giants. It’s a true testament to the quality of the team and the scope of their vision for persevering through such a difficult journey and achieving a happy outcome.
Overall, I’m still bullish on this space, because the opportunity is huge and there are so many more valuable devices and services to be invented (I’m not kidding when I talk about wanting to find “the Nest meets Retrofit of connected Toilets”). Entrepreneurs who keep the above lessons in mind have a better shot at success, and I’d be happy to champion anyone able to apply these learnings to their business plan.
While I’ve been a fan of the Chromecast since the beginning, I find myself using it more and more lately. During the work day, I end up using it for all of the random videos I want to watch but that I don’t want taking up my laptop’s screen space or taking my full attention.
As such, my office TV almost always has Chromecast’s idle screen on it.
Right now, that just means it spends much of the day showing a clock and any one of Google’s many pre-selected Chromecast wallpapers. Sometime soon, though, that screen might get a bit smarter.
The idea, it seems, is that a quick glance at the Chromecast home screen would tell you what sort of weather to expect (Sweater weather? Tank top weather?) and whether or not you’ll need an umbrella. For people like me who tend to have Chromecast up on a screen more often than not, it’d be a low-bandwidth way to make the idle screen a tad more useful.
It’s easy to imagine Google going deep on this, especially with their work on stuff like Google Now. It could show upcoming meeting reminders, package delivery trackers — basically, a second-screen dashboard for your life. At a certain point, though (for anything more personal than weather, really) you’d probably want it to be a separate application rather than something that’s on by default.
Meet the 20 American cities that received the most patents since the year 2000. Plus, a look at the metro areas that dominate the most patent categories.
Technological breakthroughs are contagious: They break out in specific areas, then spread. To identify the most innovative cities of the 21st century, we compiled U.S. Patent and Trademark Office data on utility patents (for a new invention or process) issued between 2000 and 2011–and analyzed which metropolitan areas were the national leaders in each patent category.
We found several hubs of industry fueling new ideas. These innovation clusters create an “ecosystem effect,” says Steven Pedigo, a director at the Creative Class Group, an advisory group founded by urban theorist Richard Florida. “It’s a concentration of assets,” Pedigo says. “Companies have everything they need to be successful: talent, capital, other firms.” And there’s nothing like a little competition to make you more resourceful.
No. 1 in these classes: Semiconductor manufacturing; multiplex communications; solid-state devices.
Patent Leader: More than 10,000 patents were issued to organizations in the San Jose area in 2011, nearly 10 percent of all U.S. patents issued that year. Silicon Valley also leads in 66 of the 400 patent classes, the most in the nation.
Tech Town Of course, many categories are in high tech: semiconductors, networking, and artificial intelligence. Some surprises: television and metalworking.
No. 1 in these classes: Shoes; image projectors; typewriting machines.
Toehold: Portland holds the most patents in some shoe-related classes. After Nike launched in 1964, other athletic footwear businesses flocked to the area, including Adidas and Keen.
Meeting Projections: Portland leads in a few other classes, including image projectors (Epson has operations nearby).
No. 1 in these classes: Surgery (medicators and receptors); illumination; aeronautics and astronautics.
Movies and Meds: Los Angeles is No. 1 in 46 patent classes, including many associated with Hollywood–lighting, audio, and motion-picture optics. Home to several medical schools, hospitals, and medical-device makers, L.A. also dominates some medical-patent classes, including syringes, dentistry, and physical therapy.
Jet Powered: Once the aerospace capital of the U.S., the area manages to hang onto the most patents in that class, too.
No. 1 in these classes: Telecommunications; games using a tangible projectile.
Wireless Hub: Sparked by Qualcomm’s founding there in 1985, San Diego now hosts some 800 telecom companies.
On the Green: San Diego is also No. 1 for patents on “games using a tangible projectile,” which typically means golf. More than 30 golf-equipment manufacturers, including TaylorMade and Callaway, have set up shop in the sunny locale, home to Torrey Pines and about 90 other golf courses.
No. 1 in these classes: Surgery (light, thermal, and electrical application); surgery (all types); stock material.
The Doctor Is in: The Twin Cities make up a big hub of medical patents, leading in classes involving surgical tools, prosthetics, and bandages. Many medical-device makers have operations in the area, including Medtronic and St. Jude Medical. And the Mayo Clinic is headquartered in nearby Rochester, Minnesota.
Like Glue: The area also leads in so-called stock-material patents, which include adhesives and coatings (3M is in St. Paul).
No. 1 in these classes: Food; liquid purification;electric conductors and insulators.
Heat and Serve: The Windy City dominates 36 patent classes in various industries, the largest of which is food. The area has a long history in food manufacturing–Kraft, Quaker Oats, and Wrigley are all based there.
Keep it Clean: With the largest wastewater treatment plant in the world, Chicago leads in liquid-purification patents. A few others: electronic components, receptacles, and marine propulsion
No. 1 in these classes: Fabric; merchandising.
Carpet Land: Atlanta leads the nation in fabric patents. North Georgia produces about 80 percent of the nation’s carpeting.
Ka-Ching: The area is also No. 1 for merchandising patents, many from NCR, which makes self-checkout systems in nearby Duluth, Georgia.
No. 1 in these classes: Internal-combustion engines; land-vehicle bodies and tops; vehicle navigation.
Still Humming: The Motor City is running strong as far as patents go. Detroit is 10th in the nation, with more than 25,000 patents issued between 2000 and 2011.
Auto Shop: It also leads the country in 38 different patent classes, the majority of them involving cars or car parts.
No. 1 in these classes: Organic compounds; synthetic resins or natural rubbers; compositions.
Fun with Beakers: Forget cheese steaks–Philadelphia is the hot spot for chemistry. DuPont, Dow Chemical, and many other chemical makers have operations in the area, which leads in several patent classes related to chemicals.
Biotech Boom: Philadelphia’s University City Science Center, a science startup incubator, has also helped fuel the local biotech industry.
No. 1 in these classes: Radiant energy; electric lamps; printing.
Radiation and Bulbs: A hub of scientific innovation, Boston leads the country in radiant energy, a class that includes medical-imaging patents from the area’s research companies and universities. The city has become a hotbed of LED technology, with lighting companies such as Philips Color Kinetics and Osram Sylvania.
Oddball: Boston also leads in printing patents, though many belong to Acushnet–based in nearby Fairhaven, Massachusetts–for methods of printing on its Titleist golf balls.
New York City
No. 1 in these classes: Drugs; financial, business practice, or management; telephonic communications.
In Fashion: The Big Apple leads in an impressive 48 patent classes. A fashion mecca, New York City dominates in several related classes, including apparel, foundation garments, clasps, and jewelry. The city also leads in patents on cash registers and financial transactions, as well as drugs (Pfizer, Bristol-Myers Squibb, and ImClone are all headquartered there).
Royal Flush: A few of the more surprising wins for New York City: animal husbandry, ammunition, and toilets
While Apple’s iBeacon technology is already being adopted by both large and small retailers, we’ve started to see other use cases pop up for this new indoor positioning technology, which involves Bluetooth LE-enabled transmitters that can communicate with nearby iOS 7 devices in order to push alerts, or even interact with other devices in your home.
Now a small team of developers based in Brazil have come up with a new angle for iBeacon: taking attendance in the classroom.
Their new application called BeHere, first spotted by Apple blog 9 to 5 Mac, turns a teacher’s iPad into an iBeacon that automatically identifies students as they enter the classroom with their iPhone, iPad, or iPod touch application also running the same BeHere app.
Students’ profiles can also be connected to Facebook, allowing BeHere to include a profile picture, too.
Plus, students can use the app after class starts to ask for the teacher’s help by just pushing a button on their phone. The teacher then sees those requests in a queue, and can respond as needed.
BeHere, now making its official debut, was created by a company called Beelieve, which includes developers Ricardo Rauber, Maurício Meirelles, Maurício T. Zaquia, and Ricardo Rauber Pereira. Together, the team has self-funded their applications by doing client work, which lets them build their own projects, like this game designer iPad app called Game Coder. That app is currently on hold while they focus on BeHere, however.
Rauber also tells us they’ve been working on the BeHere application itself since the release of the iOS 7 SDK. The company is currently testing the app at various colleges, where it has nearly 400 users, up from just 17 initially (teachers and students combined).
Though only a simple application with minimal flourishes, the team has come up with an interesting idea which again showcases the broad potential for iBeacon outside the retail environment. While this particular app may not win the race when it comes to iBeacon in the classroom, it’s definitely a thought-provoking experiment.
Now the next challenge is to figure out how to prevent students from carrying their friends’ phones into class so they can skip class that day. Or, hey, maybe that won’t be an issue, since who would want to be without their iPhone?
Mark Zuckerberg already knows a lot about you, your mom, your dad, your friends, what your new baby looks like, where you went on vacation and what you wore to that party last weekend. Now, he wants to get inside your brain.
The Facebook founder, along with Hollywood actor-investor Ashton Kutcher, recently participated in a $40 million investment round for San Francisco-based artificial intelligence startup Vicarious.
This is not the first time that Zuckerberg and Kutcher have backed the same company. This past October, they participated in a $4 million seed round for Panorama Education, a Cambridge, Mass.-based education technology company.
Several news reports indicate that Elon Musk, the founder of Tesla motors, was also a lead investor in the $40 million round. Vicarious co-founder Scott Phoenix told Entrepreneur.com that he had no comment on whether Musk was involved.
Venture capital firm Formation8 also participated, Phoenix said.
Vicarious is relatively vague about what it does – probably because its team of science masterminds are working on things we mere mortals would hardly understand. “We are building software that thinks and learns like a human,” the company’s homepage says. Peter Thiel, a heavyweight Silicon Valley investor, has said, “Vicarious is bringing us all closer to a future where computers perceive, imagine, and reason just like humans.”
One thing that Vicarious’ technology has been proven to accomplish is getting past a CAPTCHA test. An example of a CAPTCHA test is a program that requires a web user to type in letters that are obscured and distorted, making them, in theory, undetectable by a computer bot. CAPTCHA tests are typically considered flawed if an algorithm can get past the wall 1 percent of the time. Vicarious’ technology has been able to get by CAPTCHAs used by Google, Yahoo and PayPal 90 percent of the time. And it’s doing it with innovative technological “thinking.”
“Recent AI (artificial intelligence) systems like IBM’s Watson and deep neural networks rely on brute force: connecting massive computing power to massive datasets. This is the first time this distinctively human act of perception has been achieved, and it uses relatively minuscule amounts of data and computing power,” said Phoenix of the company’s CAPTCHA feat.
Down the line, the technology that Vicarious develops will be used in industries including robotics, clean energy and medicine, Phoenix told Entrepreneur.com.
This most recent round of funding is Vicarious’ third. In 2012, the San Francisco-based software company received $20 million in two rounds from top tier venture capital firms, including Founders Fund.
Interest in artificial intelligence technology has recently been heating up across Silicon Valley. Earlier this year, Google paid $400 million for artificial-intelligence startup DeepMind. Late last year, it bought Boston Dynamics, a company making rugged robots for the U.S. military and humanoid robots for work in hazardous environments.
While Zuckerberg is out investing in external artificial intelligence companies, his internal Facebook team is investing heavily in the space. The latest face-recognition software released from Facebook’s in house artificial intelligence group is almost as capable of recognizing people’s faces as a human being.
Amazon is readying a game console/set top box of its own, and we’ve learned from multiple sources familiar with the device that the Lab126-produced gadget will have a form factor similar to the Chromecast, or in other words it’ll be a stick or dongle as opposed to something like the Apple TV. In addition, one source claims it should have support for streaming full PC game titles, and as such might be able to compete with consoles including the Xbox and PlayStation, instead of just Android-powered living room game devices.
The stick form factor is not a surprise, given that Roku has just launched its own device using the same design, and the Chromecast has done so well in terms of attracting buyers. But the interesting component could be the way the gadget approaches gaming. Streamed PC titles is in keeping with some of what we’ve heard before in whispers around Amazon’s efforts, and makes sense given that the company sells digital download titles for PC and Mac direct from its ecommerce website.
These streaming efforts will be more akin to the remote game service offered by OnLive, than to the local streaming that Nvidia offers through its Shield Android gaming console and Nvidia-powered gaming PCs. The titles, which are said to be top-tier games, will be streamed from Amazon’s services at 30fps (which is comparable to most online video) according to our source.
OnLive was acquired by Lauder Partners, in a deal that was designed to relieve its financial troubles. The company had racked up considerable debt during the course of its operations, which were cost-intensive in part because of the need for it to establish high-capacity servers across the country to provide its service. Amazon has a big head start: It already manages huge server farms to power its digital content and cloud service offerings.
Offering streaming gaming would provide a huge competitive advantage over its rivals in the set top box space, both large and small, and OnLive’s failure wasn’t due to a lack of demand, but due to the high cost of operation and lack of ability to scale. Plus, if added in as an Amazon Prime member benefit, the e-commerce company could have yet another incentive to get users on board with its premium product. Plus, it could plug into the recently leaked Amazon gaming controller, despite the fact that the device is said to be sold independently of any set top box and compatible with Kindle Fire tablets, too.
We’ve heard conflicting things about what exactly would be included in an Amazon set top box, but it seems likely the company would use it to promote its streaming Amazon Instant Video and Amazon MP3 offerings. The gaming piece looks to be something that could offer a considerable advantage over the platforms of its rivals, and perhaps put Amazon into more direct competition with Steam, as well as major game console makers. The device is still in testing, however, so we’ll have to wait and see what emerges in terms of features included in the final version.
Companies are looking for your ideas. Smart businessmen understand and respect that great ideas can come from anywhere — and anyone. Open innovation makes sense!
By seeking out and being willing to accept product ideas submitted from outside their own walls, companies up their chances of finding the next great idea. At the same time, they lower their research and development costs. Entrepreneurs can capitalize on open innovation by learning how to license their ideas, cheap. If that sounds too difficult, you’re psyching yourself out.
Earning royalties from licensing one of your ideas is one of the most straightforward examples of the multiplier effect: Rent your idea to a company, and they’ll have to pay you every time a unit is sold, regardless of where you physically are or what you’re doing. I’ve collected royalties while on vacation with my family. I’ve been able to set my own hours.
When I started out, only a few industries were willing to work with freelancers and outside inventors. That has changed.
Here’s a quick guide to help get your brain churning:
1. Come up with an idea. This step should be fun. My advice is to focus on making small improvements to existing products — that way, you can be sure there’s already a market for your idea. More likely than not, it can be manufactured at a reasonable price point. Retailers change their inventory often. Companies are looking for newly improved products. For more information, see: “Three games to help you generate business ideas” and “Reinvent a Product, Not the wheel.”
2. File a provisional patent application. Only big ideas require patents. Filing a PPA establishes perceived ownership — and if you move quickly, which you should, perceived ownership is enough to get your product to market first. Filing a PPA is easy and inexpensive, and most importantly, it allows you to label your idea “patent pending” for up to one year. Later on, you might be able to get the company who is licensing the idea to pay for your patent application. See “How to protect your business idea without a patent.”
3. Create a sell sheet. It’s your most important tool when licensing an idea. Essentially, a sell sheet is a short and sweet advertisement for your idea. That means one page only! It should feature your one-line benefit statement prominently. Why do people want and need this idea? Next, include a picture or drawing of your idea. And of course, include your contact information. See “The Secret to selling your brand with one sentence.”
4. If you have a prototype made, make a YouTube video. I use my iPhone, and keep it very simple. That means no music and not much longer than a minute — just enough time to identify the problem that needs solving, and how your product solves it.
5. Get on the phone. Start calling potential licensees. It sounds scary, but in reality, it’s not hard. What companies make the products that are similar to your idea? Call those companies. Don’t identify yourself as an inventor; introduce yourself as a product developer. Tell them you have a new idea that you’d like to submit. Ask what employee you should talk to.
Unconvinced that companies are looking for your ideas? Here’s a database of more than 1,400 companies that are looking for ideas.
These entrepreneurs didn’t get to where they are today without hitting setbacks–lots of them. Here’s how they turned those failures into strengths.
Few people in the world like to fail. Success is so much more pleasant. But if you’re an entrepreneur, you can often learn much more from failure than from success. You just need the right way to think about it–as an opportunity, not as a permanent roadblock.
Some of the most successful (and wealthy) entrepreneurs in the world know this lesson well. Below are four takeaways from billionaires who failed several times over on their way to building big businesses.
Failure can stoke your desire to succeed.
Success takes a lot of work, whether things are going well or badly. Nick Woodman, billionaire inventor of the GoPro line of sports cameras, had two previous business failuresduring the heyday of the dot-com era. The experience stung, as he told Forbes:
“I failed and deserved to be on f**ckedcompany, [a now-defunct site that used to catalogue dot-com failures]” says Woodman. “I mean nobody likes to fail, but the worst thing was I lost my investors’ money, and these were people that believed in this young guy that was passionate about this idea…. [When you fail,] you start to question, are my ideas really good?”
Woodmanwas so upset by failure that he worked 18 hours a day sourcing parts and assembling prototypes. When GoPro first hit the market, he was the only employee and was determined to make things work. “I was so scared that I would fail again that I was totally committed to succeed.”
Use little failures to get big successes.
You want your ideas to work out. No surprise: everyone does. But you can’t expect that they will, at least not at first. Ask James Dyson, who has an estimated net worth of $4.4 billion thanks to the power of blowing air, whether in a vacuum cleaner, cooling fan, or lavatory hand drier.
“I mean, 99 percent of my life is failure, because we’re building prototypes all the time,” Dyson told Bloomberg. “We’re trying out ideas, and they all fail.” Well, not all. Eventually a model will work, and then Dyson has something worthwhile. But it would have been next to impossible to achieve without learning from all those failures on the way.
Fail your way around what “everyone knows.”
Sara Blakely, billionaire inventor of Spanx, tripped and failed many times on the way to building her company. As she admitted to CNBC, she had no idea of what she was doing. But that ignorance gave her the opening she needed.
“The fact that I had never taken a business class, had no training, didn’t know how retail worked,” she said. “I wasn’t as intimidated as I should have been.”
Experts might have told her that going directly to Neiman Marcus with a new product type was a waste of time. Instead, the chain became her first retail customer.
One big caveat: Don’t tell everyone about your idea early on because you don’t want to get talked out of it before you have a chance to see if there’s something there, as she told David Kidder, author of “The Startup Playbook: Secrets of the Fastest-Growing Startups from Their Founding Entrepreneurs.”
After a year of this, I sat my friends and family down and said, “It’s footless pantyhose.” They looked horrified. “That’s what you’ve been working on?!” It wasn’t malicious; there was a lot of love and concern: “Sweetie, if it’s such a good idea, why doesn’t it already exist? And even if it is a good idea, those big guys are going to blow you out of the water in the first couple of months.” If I’d heard those things on the day I first cut the feet out of my pantyhose, I think I’d probably still be selling fax machines today.
Make today’s failure part of tomorrow’s success.
When the market crashed in 2008 and eventually lost half its value, a lot of people were badly hurt. Many took what seemed to be the logical course and sold. And that did make sense, if your time frame was a few months or a year. Today, the markets are at all-time record levels. As experts in investing will tell you, panic can lead you to sell low and buy high, a great way to transfer your wealth to other people. You need to look at a more realistic interval–and realize that there will be times things won’t go your way. Now, the really smart investor would have bought more stock when the prices were so low, and could have made a killing.
John Catsimatidis is a billionaire who owns supermarkets, gas stations, and real estate. Hegreatly admires Donald Trump. “No matter how bad a day he’s having, he keeps his head up high and he goes back and fights some more,” Catsimatidis said. “He doesn’t go and put his head in the ground and cry.”
Eventually conditions will change. You want to be ready to take advantage of them when they do. That means lay the groundwork when things look like they flopped. If you’re lucky, your competitors will have prematurely given up the ghost, leaving you more room to expand.