IoT (Internet of Things) is an interesting trend. It is certainly impact everything in manufacturing. In Product Lifecycle Management, it open a new way for manufacturing companies to interact with physical products, collect intelligence and improve the design of products. Dreams? Yes, kind of… A confirmation of that is Gartner Hype cycle. According to the recent report IoT is on the top of inflated expectations in 2015.
Product lifecycle management vendors jumped into IoT bandwagon with lot of ideas, new products and technologies. Read few of my previous articles – How PTC plan to connect PLM to things, How IoT can eclipse and outcompete PLM platforms, PLM vendors and multiple IoT platforms.
An interesting aspect of IoT development and technologies is an emerging number of hardware startups focusing on devices and equipment development for IoT ecosystem. Check Google trends to see the peak in IoT startups for 2015. Quick search on Angel List shows 1,853 companies. CrunchBase search shows 1,218 startups. Who invests in hardware startups article can give a more specific perspective on number of hardware companies and amount of invested capital.
Running out of cash and fail is statistically the most common thing every startup does. Thousands of articles are written about startups and how to prevent a startup from failure. But, here is the thing…. IoT hardware startup is different from the one that develops web or enterprise software. It requires a broader set of skills, specific equipment and more capital. It resulted in even higher risk of failure.
Hardware accelerators and incubators are helping hardware startups to mitigate risk. You can read bunch of good materials about hardware startup development from Bolt.io blog Highway1.io Fabricator blog, Hax blog.
My attention was caught by IoT accelerator LeConnected Camp article Why you can’t build your #IOT startup in garage! It gives you an interesting perspective on skills and activities required to create IoT device and build hardware company. One of my favorite passages is related to managing of components and sourcing.
…problem is there are millions of different components, thousands of suppliers, as many strategies as the choice between making his own PCb card or use a pre-fabricated module. In a startup hardware to upgrade your product, we have to roll up your sleeves, go around the web and maybe even go to Shenzhen to source components and chipsets. Not clear if X or Y out of new products, developed its range, stopped production of this or that piece …
It took me back to think about my earlier blog Why kickstarter projects need PLM? Sourcing and component management is one of the problems IoT hardware startup is fighting. To find right components, to insure these components are compatible with requirements of your bill of materials, to track lifecycle of components, orders, inventory, lead time. All together it creates set of problems every manufacturing is facing. However, the unique challenge of hardware startups is to fight this problem with a very limited set of capital during very short period of time.
7 reasons why my IoT startup failed story by Yash Kotak brings a short and brutal summary of this challenge:
We had underestimated the work, time and funding that goes into making a market-ready hardware product. We had overestimated the demand and utility of our product. “Hardware products sell at 4 to 5 times the component costs. How did we not know this?” Our price estimates were wildly off the mark. And when all this realization came together, we were in a crisis.
What is my conclusion? IoT is hyping and it brings many entrepreneurs to this space. IoT startups are unique type of manufacturing companies operating with highest level uncertainty and very limited amount of capital. They need to battle variety of problems, but one of them is related to management of product information and its lifecycle at very early stage of product development – starting from prototype to early production. A very interesting problem to solve. Just my thoughts…
Picture credit Youstory article