Question

iROBOT: HOW TO BE A SUSTAINABLE INNOVATOR?

            iRobot, founded in 1990 in Delaware, designs and builds a vast array of behavior-based robots for home, military, and industrial uses. It is among the first companies to introduce robotic technology into the consumer market. Home care robots have been iRobot’s most successful products, with over 5 million units sold worldwide and accounting for over half of its total annual revenue. iRobot has a long-standing contractual relationship with the US government to produce robots for military defense.

            iRobot is fully gauged towards 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 aims 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 competences, iRobot still has serious concerns. Although the robotics industry is not highly competitive, iRobot needs more competition to help build up the total scale and visibility of the fledgling industry it has pioneered. Home care robots, its biggest revenue source, are a luxury supplemental good. Times of economic recession could prove to be a problem for the sales of iRobot’s consumer goods given that discretionary budgets are likely decreased. Although iRobot has 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 is highly dependent on several third-party suppliers to manufacture its consumer products. It also depends on the US government for the sales of its military products. Any volatility in its supply chain or government fiscal policy will have grave consequences for the company’s future.

Case Study Questions (25 marks each):

1. Prepare a SWOT Analysis for iRobot.

2. What can iRobot “strategically” do to deal with the potential threats? Explain.

3. Under which strategic type, can iRobot fall? Elaborate.

4. In the long run, would iRobot be better served to exit the home consumer products market and concentrate on military and industrial robots where profit margins are better? Discuss.

Answer 1

Q: Prepare a SWOT Analysis for iRobot.

A: A SWOT analysis is a strategic mangement tool to aid an organization's management to plan for projects and assess its market position vis-a-vis its competitors, where S stands for Strenghts, W for Weaknesses, O for Opportunities, and T for Threats.

The Strengths of iRobot are:

i. Home care robots have been iRobot’s most successful products, with over 5 million units sold worldwide.

ii.  iRobot has a long-standing contractual relationship with the US government to produce robots for military defense.

iii.  iRobot is fully gauged towards first mover radical innovation with an extensive R&D budget.

iv. It is made up of over 500 of the most distinguished robotics professionals in the world.

v. The company also has a healthy financial position with an excellent cash and long-term debt rate.

The Weaknesses of iRobot are:

i. Home care robots, its biggest revenue source, are a luxury supplemental good.

ii. Although iRobot has over 70 patents, many of which will begin to expire in 2019.

iii. Additionally, iRobot is highly dependent on several third-party suppliers to manufacture its consumer products.

iv. It also depends on the US government for the sales of its military products.

v.  iRobot needs more competition to help build up the total scale and visibility of the fledgling industry it has pioneered.

The Opportunities for iRobot are:

i. 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.

ii. It is among the first companies to introduce robotic technology into the consumer market.

iii.  iRobot designs and builds a vast array of behavior-based robots for home, military, and industrial uses.

iv.  It aims at leading the robotics industry.

The Threats for iRobot are:

i. Any volatility in its supply chain or government fiscal policy will have grave consequences for the company’s future.

ii. Times of economic recession could prove to be a problem for the sales of iRobot’s consumer goods given that discretionary budgets are likely decreased.

iii. In a rapidly advancing industry, technology can also become obsolete quickly and render patents useless.

Q: What can iRobot “strategically” do to deal with the potential threats? Explain.

A: iRobot needs to review its threats and take necessary risk mitigation tools. For one, it needs to create a market for personal consumer demand for the use of robots in more affordable settings like homes and hotels which will expand its market base from such the government sector and the move beyond the luxury homes market so changes in government policies will not affect its bottom line. iRobot needs to look at expansion and regular updation of technology in a rapidly dynamic environment to keep up with consumer demands and market trends to not allow for it to become obsolete. iRobot should target newer markets to try and build customers across various broad spectrums in order to not be dependent on only one sector for sales. Thus, iRobot needs to diversify and develop new markets based on its strengths. These changes need to be effectively and strategically planned so as to remain relevant and survive.

Q: Under which strategic type, can iRobot fall? Elaborate.

A: iRobot can fall under corporate level strategy type where its top management like CEO and lead the way and take decisions on strategy at a corporate / top level and guide the entire company in a structured manner. Here, the decisions of iRobot are taken at a centralised top corporate level in order to focus on R&D, market diversification, long term direction of business, contracts, global positioning and expansion.

Q: In the long run, would iRobot be better served to exit the home consumer products market and concentrate on military and industrial robots where profit margins are better? Discuss.

A: This statement from the case study makes it amply clear as to corporate level direction that iRobot needs to take in order to decide on long term market strategy: "It is among the first companies to introduce robotic technology into the consumer market. Home care robots have been iRobot’s most successful products, with over 5 million units sold worldwide and accounting for over half of its total annual revenue. Thus, in the long run, it would be best for iRobot not to exit the home consumer products market and to focus on diversifying its products and working on a larger variety of consumer products which can be affordable. Consumer business products would see a better profit margin as robotics and artificial intelligence have captured the imagination of the common people looking to experiment with technology and build smart homes and not limited to the role of cleaning jobs like vacuum cleaners. Contracts with military and industry would mean fixed business but also are highly negotiated contracts focusing on lowering costs of business consumers thereby reducing the profit margins for iRobot. Contracts with military can also be risky in getting extensions when a government changes as economic policy and interests will change. Also, being a pioneer in the field of consumer product robots, will give an edge to iRobot to leverage with end consumers in terms of good will and visibility.