iRobot: Finding the Right Market Mix?
Alan N. Hoffman
CORPORATION, FOUNDED IN 1990 IN DELAWARE, designed and built a vast array of behavior-based robots for home, military, and industrial uses. iRobot was among the first companies to introduce robotic technology into the consumer market. Home care robots were iRobot’s most successful products, with over 5 million units sold worldwide and accounting for over half of its total annual revenue. iRobot had a long-standing contractual relationship with the U.S. government to produce robots for military defense. iRobot was fully gauged toward first mover radical innovation with an extensive R&D budget. Made up of over 500 of the most distinguished robotics professionals in the world, it aimed at leading the robotics industry. By forming alliances with companies like Boeing and Advanced Scientific Concepts, it is able to develop and improve upon products that it otherwise is incapable of obtaining using only its own technology. The company also has a healthy financial position with an excellent cash and long-term debt rate. Despite these competencies, iRobot still had serious concerns. Although the robotics industry was not highly competitive, iRobot needed more competition to help build up the total scale and visibility of the fledgling industry it had pioneered. Home care robots, its biggest revenue source, was a luxury supplemental good. Times of economic recession could prove to
This case was prepared by Professor Alan N. Hoffman, Bentley University and Erasmus University. Copyright ©2010 by Alan N. Hoffman. The copyright holder is solely responsible for case content. Reprint permission is solely granted to the publisher, Prentice Hall, for Strategic Management and Business Policy, 13th Edition (and the international and electronic versions of this book) by the copyright holder, Alan N. Hoffman. Any other publication of the case (translation, any form of electronics or other media) or sale (any form of partnership) to another publisher will be in violation of copyright law, unless Alan N. Hoffman has granted an additional written permission. Reprinted by permission. The author would like to thank MBA students Jeremy Elias, Ryan Herrick, Steven Iem, Jaspreet Khambay, and Marina Smirnova at Bentley University for their research. RSM Case Development Centre prepared this case to provide material for class discussion rather than to illustrate either effective or ineffective handling of a management situation. Copyright © 2010, RSM Case Development Centre, Erasmus University. No part of this publication may be copied, stored, transmitted, reproduced or distributed in any form or medium whatsoever without the permission of the copyright owner, Alan N. Hoffman.
be a problem for the sales of iRobot’s consumer goods given that discretionary budgets are likely decreased. In addition, iRobot had over 70 patents, many of which will begin to expire in 2019. In a rapidly advancing industry, technology can also become obsolete quickly and render patents useless. Additionally, iRobot was highly dependent on several third-party suppliers to manufacture its consumer products. It also depends on the U.S. government for the sales of its military products. Any volatility in its supply chain or government fiscal policy has grave consequences for the company’s future.
In the late 1980s, the coolest robots in the world were being developed at the MIT Artificial Intelligence Lab. These robots, modeled on insects, captured the imagination of researchers, explorers, military, and dreamers alike. iRobot cofounders, MIT professor Rodney Brooks and graduates Colin Angle and Helen Greiner, saw this technology as the basis for a whole new class of robots that could make people’s lives easier and more fun. So, in 1990, the three decided to work full time on fulfilling this promise and incorporated iRobot in Delaware.1 After leaving the MIT...