iRobot is a rapidly growing firm, producing both government/industry robots and household cleaning robots. Founded in 1990, iRobot’s mission has been to provide an innovative approach to both markets through the use of technology. Their motto, “Build cool stuff, deliver great products, make money, have fun, change the world,” illustrates this fresh approach. [i] Originally called IS Robotics, Massachusetts Institute of Technology associates Rod Brooks, Colin Angle, and Helen Greiner built the company with original intent of becoming a firm that produced robots for space exploration. While working on a robot for lunar exploration, the company began to secure government and industry contracts.i These contracts confirmed that government and industry funded research was much more profitable than what the company was currently developing, and caused the brand to change their focus to more practical, innovative work.
iRobot has experienced a very healthy 13.3 percent revenue growth year over year. Revenue has increased from 189 million in 2006 to 401 million for 2010. Almost 90% of revenue comes from the combination of home cleaning products and tactical military robots. At the same time, iRobot receives 10% of its revenue for research and development contracts. More specifically, about 50 percent of total revenue comes from consumer products, while 40 percent comes from military products. This demonstrates a pretty balanced revenue stream of its consumer and military segments. However, this firm has experienced highs and lows in the stock market, dipping under its IPO of $24 in 2005 to below $10 in the wake of the recent financial crisis, and recovering in 2011 to a high of $39. [ii]
Gross profit has also risen dramatically. In 2006, profit was $82 million, while in 2010 profit reached $145 million. This is mainly due to an increase in revenue as expenses have climbed significantly. For example, in 2010 research and development expenses reached $25 million. [iii] Although for many companies this would be very high, iRobot prides itself on its research as essential in keeping it ahead of its competitors. Additionally, these high operating expenses allow iRobot to obtain top robotics talent in order to continue to produce innovative products. iRobot has total of 687 employees including 304 that are in research and development. [iv] Therefore, despite being much smaller than many competitors such as Electrolux and Lockheed Martin, it is able to compete on talent level, by investing money in human capital.
In 2002, iRobot introduced the first affordable robot vacuum cleaner- the Roomba. The Swedish company Electrolux introduced a robot vacuum called the Trilobite a year earlier in 2001; however, the Trilobite was listed for $1,800 and only sold thousands of units. [v] The Roomba was released so shortly after the Trilobite that Electrolux quickly discontinued their product. Peter Steel, general manager of the Electrolux brand in the United States said, "We're concerned that some manufacturers have entered the category so low that it's damaged the real price value of the segment." Steel’s concern is directed toward iRobot, who introduced the Roomba at a price of almost ten times less than the Trilobite. Unlike the high-end Trilobite, The Roomba was an extremely affordable, successful product, selling over 2 million units by 2006. v
iRobot sought to continue expanding their consumer product base, and introduced the Scooba, a robotic floor washer in 2005. The Scooba’s purpose, much like the Roomba, was to make an undesirable household task easier. iRobot continued to innovate, and introduced other consumer products, including the Dirt Dog sweeping robot, the Looj gutter cleaning robot, and the Verro pool cleaning robot. Although all of these products have received positive consumer reviews, the majority the consumer market has not yet adopted them as readily as the Roomba. The Roomba continues to be both iRobot’s most popular domestic product and the most successful commercial vacuum robot, encouraging iRobot to constantly improve Roomba’s technology. In January 2011, iRobot announced the production of a third generation Roomba. This model, the 700 series, has improvements including a redefined dust bin for better air-flow 50% better battery life, improved fine particle cleanup, and the ability to use its optical sensor to detect larger messes and spend more time cleaning that area. [vi]
Although Electrolux’s Trilobite was manufactured a year earlier than the Roomba, iRobot was first to successfully break into the United States market. Because the Roomba was the first affordable robot vacuum cleaner available in the US, iRobot had considerable competitive advantage in regard to price. Because they effectively entered the market before any viable competitors, iRobot was able to establish a strong, loyal customer base. CEO, Colin M. Angle is confident in iRobot’s continued success and states, “Our brand awareness and strong intellectual property position will enable us to continue growing our share of both of these[robot floor cleaner and vacuum] markets.” [vii] iRobot has a considerable advantage over new entrants into the robot cleaning market namely because of this brand awareness. The Roomba, in particular, has gotten overwhelmingly positive feedback from consumers, making the Roomba a household name.
iRobot’s brand discourages small, independent competitors from entering the market, but a threat to the company is raised by a recent production of similar robotic vacuums from large corporations. Samsung, LG, Dyson, and Panasonic are all beginning to develop products similar to the Roomba, and iRobot’s consumer products may be in danger if these companies successfully produce comparable products. [viii] These existing brands have scale advantages over iRobot, however it will be difficult for them to enter such a specific niche market that is already dominated. Because the market for domestic robotic devices is a niche market, it has not yet begun to become a substitute for traditional household cleaning methods. iRobot, as well as their competitors, must defeat certain challenges that still hinder the domestic robotic industry from replacing household cleaning products. Despite all of the innovative robotic technology, iRobot still must overcome difficulties such as the inability to efficiently clean corners of rooms. While iRobot continues to place tremendous value in its domestic robots, the company is aware of threats to its homecare product brand, and is also reliant on products in other industries.
In addition to specialties in home care robotics, iRobot also specializes in government and industrial robotics. Specifically, iRobot’s government and industrial application is in ground use, in bomb disposal and observational roles, and in maritime use for scientific and defense roles. iRobot is seeking to expand its business in the military robot market significantly in light of poor performance of consumer products in the weak economy. With U.S military operations in Iraq and Afghanistan, defense robots are in a greater demand than ever before. Ground forces use them for safety applications including bomb disposal, and observation/intelligence purposes. iRobot’s military robots have been in great use, with “more than 2,000 of its PackBot tactical mobile robots used in dangerous search, reconnaissance and bomb-disposal missions”. [ix] Firm management has high goals for iRobot’s bomb disposal robotics, with Jeff Evanson, analyst at Doughtery & Co., saying that “the U.S military has about 1,000 explosive ordinance disposal teams, and one or two robots are sufficient per team”, meaning that iRobot has great potential in the market.i
iRobot is in a interesting industry for its government and industry consumers because of the unique products it offers. No one firm directly competes with iRobot for bomb disposal units that are remote controlled robots, but other companies do compete with iRobot by offering other technologies for bomb disposal. For example, iRobot competes with different bomb disposing techniques such as Cobham Analytic Solutions’ HMMWV Laser Ordnance Neutralization System, which uses laser technology to “neutralize surface mines and unexploded ordnance from a safe standoff distance”.[x] As a result, iRobot competes for government purchases by refining and offering new unmanned vehicle products with specific bonuses such as the safety components with unmanned ground vehicles.
The threat of entry into the defense robotics industry is low because of the high entry barriers of operating costs required to be competitive with other industries’ scales of economy. Lockheed Martin ($45.8 billion in sales in 2010)[xi] and Boeing ($64 billion in revenue in 2010)[xii] are giants in the defense industry, so entrants should be aiming to be competitive with smaller firms such as iRobot ($400.95 million in revenue, smaller than Boeing and Lockheed Martin’s figures but still shows how extremely large the amount of capital needed is).[xiii]
iRobot is expected to benefit greatly from future growth in its military and industry products. Joe Dyer, iRobot’s chief operating officer, believes that “military researchers are starting to see the potential of unmanned underwater vehicles, or UUVs, to hunt for mines or other threats, much as the wars in Iraq and Afghanistan accelerated the demand for bomb-disposal robots to search for suspected roadside bombs”.[xiv] This means that iRobot could see large growth in its future, and its 34% revenue increase from $298.6 million in 2009 to $401.0 million in 2010 shows large growth even in a year’s time. [xv] However, this could be temporary growth as the wars in Iraq and Afghanistan come to a close and the need for iRobot’s UGV products decrease.
One of the things that makes iRobot unique in its industry is the b