Hardware Companies Need to Evolve or Die

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There has been lots of chatter on the airwaves that hardware is hot again – the Nest acquisition at the beginning of 2014 by Google reenergized the hardware discussion and this year crowdsourced funding sites are seeing great interest in hardware projects as many of these projects are hitting their fund raising goals (Did anyone see Neil Young’s Kickstarter project?) . But take a closer look – hardware is just the ” shiny object” that these projects are leveraging, it is a deeper level of intelligent engineering that makes these hardware projects stand out.

This resurgence in hardware is more specifically driven by companies that are using software to create competitive differentiation through smartphone client applications or “Apps” and scalable cloud platforms. The “appcessories” category is growing very fast, encompassing everything from smart toys to wearables and may just be one of the fastest going categories at Apple retail today.

But how does an appcessory approach really help a hardware company lock in competitive advantage? Let’s look at a relevant example in the hardware home automation market space. Our client, Rachio has developed an irrigation controller that is user operated through an intuitive iPhone application simplifying the management of the typical valve controller box in the garage that no one but the gardener can figure out. In addition, Rachio has added cloud based smarts to this system so that it knows not to water your yard when it is raining, saving the user on the water bill and making the system more environmentally friendly. What a needed upgrade to an otherwise archaic solution! This was all done by updating a hardware platform and smartly adding software app and cloud capabilities using an engineering approach that cannot be readily copied by a team without real motivation and software skills. This complexity of adding software and cloud services adds a higher level barrier to entry for any would be competitors.

This is a true example of the internet of things becoming a reality and I encourage all hardware companies to broaden their vision and build the right software engineering teams to architect better hardware systems through software and cloud services. Running a sustainable, profit margin rich hardware company demands it.

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