The Wild West of Innovation
The Wild West of Innovation
Authored by Mark Hatch
Some very powerful new tools, communication methods and understandings about the way we innovate have come into existence during the last ten years. Collectively, they are radically changing how innovation is practiced—and who gets to play. Their presence is fundamentally changing, quite likely forever, the risk and reward equation of innovation.
In 1992, Steven Wheelwright and Kim Clark released Revolutionizing Product Development, an influential book and research study. It concluded that, in many instances, a six-month delay in a new product launch could cause one-half of the product’s potential profits to be lost. Today, a delay of that length might put a firm a full generation behind a competitor, and could possibly cost the firm its existence.
Until recently, it was a well-known “fact” that it was impossible to launch a new car company (witness the failure of the DeLorean Motor Company back in the 1980s). Yet today the entire industry is playing catch-up to Elon Musk and Tesla. Likewise, outer space was once the sole purview of nation states—until Musk and Sir Richard Branson changed that landscape (or,
more aptly, spacescape). Now we have a bunch of billionaires funding the development of Planetary Resources, a space mining company.
And it’s not just huge interlopers like Tesla, Virgin and Google who are upending convention. It’s General Electric, DARPA and Ford on the large enterprise side, and people like Bre Petis, Jane Chen, Espen Sivertsen, Richard Hatfield and James McKelvey on the startup side—individuals I’ll discuss soon, who are soundly beating entrenched giants at their own game.
As the CEO of TechShop, the world’s first and largest chain of makerspaces, I’ve been watching as new companies launch for a fraction of traditional costs.
For those who may not know: A large makerspace is basically a 15,000- to 25,000-square-foot fabrication arena, with tons of equipment. You can make just about anything. TechShop spaces include a metal shop, a wood shop, a textile lab, laser cutters, 3D printers, electronics and plastics areas, powered hand tools, welding equipment, a full software suite with a couple dozen computers and the space to work on projects up to the size of a small lunar lander (yes, one guy has worked on a lunar lander).
(Inspired by Japanese origami folding techniques, the 26-pound Oru Bay kayak was developed in a makerspace with the help of Kickstarter in 2012.)
Like a club, makerspaces (or “hacker spaces”) attract a vibrant community of people who share a love for making things. Each aggregates a community of the most creative and dedicated “makers” in a city.
But the most amazing thing about these places is how much they can reduce the cost of starting a hardware company. What used to cost a small fortune can now be accomplished for a few thousand dollars and some sweat equity. I have seen people come in with little knowledge and few skills—and mere months (not years) later, they launch multi-million-dollar companies that change the world. I’ve been doing new product development my entire life, for companies big and small, and have never seen anything like this occur before. We’ve heard quite a lot about software startup firms; these places create a platform for lean hardware startups.
Duleesha Kulasooriya, head of strategy for Deloitte’s Center for the Edge (Deloitte is the world’s largest professional services and accounting firm), is studying the impact of the Maker Movement, and makerspaces in particular. According to Duleeesha:
Makerspaces have fundamentally shifted the economics of prototyping and small-batch manufacturing. By providing affordable access to tools and community, and thereby capital cost requirements, they have lowered the barriers for entry for hardware startups. Large firms too can take advantage of the same economics by providing access to these makerspaces and allowing for larger portions of their employees base to participate in innovation activities.
The startups I work with on a daily basis have reduced the cost of launching their products and companies by upwards of 98%. The cost of failure has dropped so low, anyone can innovate. Chris Anderson (CEO of 3D Robotics, and former Editor-in Chief of Wired) sums up the excitement about the renewed interest in and the democratizing effects of makerspaces this way: “If you like the Web, you’re going to love the Maker Movement. It’s the same revolutionary innovation model, but now applied to one of the biggest industries in the world - manufacturing.” He adds, “If you thought the web was big, I think this is going to be bigger.”
Here are some examples of people who have launched lean, fast, cheap-to-start, companies out of a makerspaces.
Let’s begin with Bre Petis. He was a founding member of NYC Resistor, a hacker space in Brooklyn. Formerly a junior high art instructor, Bre learned about 3D printing and launched MakerBot Industries out of NYC Resistor in 2009. In 2013, he sold it to Stratasys for $600 million.
Jane Chen is the co-founder of Embrace, a non-profit organization that has won numerous awards, including The Economist’s Social and Economic Innovation Award, Forbes Impact 30, and Fast Company’s Innovation by Design Award. Embrace makes low-cost, portable, incubation blanket warmers to regulate the body temperature of vulnerable low-birth-weight and premature babies. The infant warmers cost less than 1% of standard incubators, don’t require constant electricity to operate and are lightweight—making them ideal for use in developing countries where rural access to hospitals and electricity is limited or unavailable. Developed in a makerspace and first used in 2010, the Embrace Warmer had reported saved the lives of more than 87,000 babies by the end of 2014.
Espen Siversten started his 3D printer company, Type A Machines, in Noisebridge, an anarchistic educational hackerspace in San Francisco, and actually moved his company into the San Francisco TechShop. “We brought our product to market in nine months while bootstrapping,” Siversten remarks, “when experts said it would cost $5 million and take a year.” A makerspace, he says, “was the great equalizer: access to equipment we could only dream of as a startup reduced our risks and doubled our rewards.”
(The Lightning LS-218 is the world’s fastest production motorcycle.)
The world’s fastest production motorcycle is now all-electric, built by makerspace veteran Richard Hatfield’s Lightning Motorcycles. The Lightning SuperBike has already won the acclaimed Pikes Peak International Hill Climb (the second oldest motorsport race in the US), besting the entire field, including gas powered superbikes, by a stunning 21 seconds. Powered by solar energy, it now holds the Guinness World Record for the world’s fastest electric motorcycle, having reached 218 miles per hour in 2011 on the Bonneville Salt Flats.
(The Lumio lamp, developed in a makerspace, is a multi-functional lamp concealed in the form of a small, hard-cover book.)
But the largest single company to launch from a makerspace so far is Square, the merchant payments solution that James McKelvey and Jack Dorsey founded in 2009. Now worth more than $6 billion in shareholder value, it is believed the company did in excess of $1 billion in sales and over $30 billion in transactions in 2014. One of the most revealing things about Square’s success was that they could not get funding until they had developed a prototype device. But once the prototype was made (in our very own makerspace) they were funded quickly. This speaks to the critical importance of engineering that first prototype. As James recently told CNN, “TechShop was this miraculous find. [They] had all the equipment and they have all these amazing people. I saw a guy making his own Segway, [and] a guy making a lunar lander.”
There are more. Oru Kayak, Lumio, Boosted Boards, DODOCase, Open ROV and Theradome Laser are all examples of businesses launched through makerspaces and hacker spaces around the world.
Today, it’s possible to learn the skills needed to launch a company in very short periods of time. You can even fund your company through crowdsourcing. And you can use the crowd to help solve problems, set your specifications and flesh out the features and benefits you need. New members routinely come in to a makerspace, take a few classes, build a prototype and then raise tens of thousands of dollars on Kickstarter or Indiegogo to launch a company—sometimes in just a few months.
One of the things that I find interesting is how disruptive some of these startups actually are. Square changed the merchant payments landscape. Lightning Motorcycles is changing the definition of a superbike. Clustered Systems, a computer server cooling company, took on major entrenched Fortune 100 companies.
But this radical new way of launching is not just for the small, agile startup. The big guns are getting in on the action as well.
Ford Motor Company, for example, wanted to engage their employees in a way that would energize them to generate more innovative ideas. To do this, they funded a makerspace near their corporate HQ in 2012, wrapping it within a successful program to engage Ford employees. Their key objective was to increase the number of high quality patentable ideas coming into the Ford licensing office. The target was modest, but the actual results were stellar: a 100% increase in high-quality suggestions from their existing employee base. One resulting device (which, because of an NDA, cannot yet be disclosed) is making its way to become an option on Ford vehicles.
Another surprising case has been the experiment run by the research arm of the Department of Defense. A few years ago, DARPA used open innovation strategies and the crowd to help develop their Fast Adaptable Next-Generation Ground Combat Vehicle (FANG GVC) project. Working with Local Motors, a build-it-yourself, street-legal rally car company in Arizona, DARPA was able to produce the first fully functional prototype, using a specifications process that leveraged the crowd. Time and cost? An astonishing four months and one million dollars.
A final dramatic example: Late in 2013, GE asked their new partner, Quirky (a company that specializes in crowd-based innovations), to see if they had any ideas for new air conditioners. In December of that year, GE/Quirky used the Quirky platform to help develop and lock in the specifications of the Aros in-window air conditioner. By March of 2014, they began taking orders (on Amazon) for shipments beginning in May. Total elapsed time from inception to release: about six months. This is the same amount of time that, in the 1980s, a delay in the development of a product might cost a company half that product’s profits. And that was a relatively gentle penalty. If a delay of that length occurs today, a company might fail entirely.
What’s going on here?
The contemporary truth is that crowds have more and better information than many R&D departments. Markets can be assessed and tapped virtually. Prototypes can be created rapidly—thanks to CNC tools, digital design, 3D printers and other rapid prototyping capabilities—for a tiny fraction of what they used to cost. The rate at which innovations are being developed and adopted is accelerating, while the cost of taking risks is dropping.
(Incubation blanket warmers by Jane Chen’s Embrace have saved more than 87,000 babies in the developing world.)
In short—during the last decade—everything about new product development has changed. I’d like to offer a challenge, directed at any imaginative player within a big company: Leverage these new capabilities and skip the traditional innovation processes entirely. Why bother getting permission from a bunch of corporate naysayers when you can test your idea via private prototyping (at a makerspace) and Indiegogo? Launch the product, make some money, and—rather than asking for permission to test market something—ask for permission to return the profits from your experiment. Imagine going to your CEO and saying, “Hey, I just did a market test on an idea my team has been kicking around. The market test generated $200,000 and we need a way to book this revenue.” These days, it’s not at all far-fetched: market tests as a profit center.
When that starts happening—with frequency—the radical changes we’re seeing in the speed, ease and cost of launching new products will have completely transformed the art