New Hardware Ecology
According to a recent article in the Wall Street Journal (“Forget the Web, Start-Ups Get Real”, Aug. 18, 2012), Silicon Valley USA is seeing a new wave of hardware startups. It tells of a resurgence of garage shops fueled by investment from top-tier venture capitalists. Compared to the typical here-today (and gone tomorrow?) social media startup flying on a wing and a web page, the investors appreciate that hardware is a ‘real’ business.
Entrepreneurship has been re-energized by the advancing technology and economics of manufacturing. For instance, ‘3D printers’ have slashed the cost of homebrew prototype production to a tiny fraction of what it was back in the ‘machine shop’ days. This is magic! With a successful prototype in hand, entrepreneurs can outsource mass production and sell to their customers online, no need for factories and warehouses.
The new manufacturing paradigm will fuel the growth of niche products. Traditionally, markets have been dominated by a few large manufacturers and ‘hit’ products like PCs, TVs, cellphones, etc. Now, long-tail economics promise to turn the 80/20 rule on its head as specialized products proliferate.
Large established manufacturers aren’t in position to sell and support a huge variety of low-volume products. Rather, it’s passionate Do-It-Yourself ‘Prosumers’ that are driving growth. Now they can craft a prototype, get some cash (VC, crowdsourcing), farm out production and sell online. What the new class of entrepreneurs bring to the party is their ideas, and now they have the tools to bring them to life. The second industrial revolution was about ‘mass-production’, the new one will be about‘individualized production’.
Mainstream markets are already showing signs of niche-ification. Witness the fact there are hundreds of thousands of iPad Apps. Going forward, it’s said that 100 billion smart electronic devices will populate the ‘Internet of Things’. Yes, many billions of those will be ‘hit’ products from established manufacturers, but many billions won’t be, representing opportunity for thousands of new-age startups
So how does an electronics component company like WIZnet get in on the action? The historic model, targeting the largest ‘major accounts’ or a few ‘key markets’, won’t work. Instead, a way must be found to reach and influence thousands of individual entrepreneurs, and it’s not sending a sales engineer to pitch each of them.
Instead, the best way to get designed into thousands of products is to get into the tens of products that many small developers rely on. For instance, the Arduino (www.arduino.cc) is a low-cost open source single-board computer widely utilized by the DIY crowd to give intelligence to their products. By sharing our technology (ex: software library) we’ve encouraged adoption by the Arduino community as the best way to reach and support thousands of designers.
Electronic products will become much more diverse and the rate of change will accelerate both threats to the traditional Fortune 500 way of doing business. But the new industrial revolution also represents a huge opportunity for companies that can find a way to get on the bandwagon. That is our challenge!
YB Lee, CEO of WIZnet, email@example.com
(on Sep. 20, 2012)