Hi, this is Wayne again with a topic “Case Study: David Merrill, Sifteo”.
Well, i’m really excited to be here to share. I wrote this column called going pro for a recent issue of make magazine. That was about how my co-founder and i started our startup company siftio, taking this blue sky idea uh and turning it into a funded product. Shipping company with a really great team, so i’m going to talk about siftio what we do for just a minute and then some lessons learned from this process we’ve been through so first off, siftio cubes are these little inch scale, computers that are made for play, and I really think that smart hardware is the next major trend that a lot of us are a part of and pushing it forward right now, and so we’re building a play company enabled by this trend and the basic idea is that we’re enchanting everyday play things. The humble block with the magic of interactivity, so here’s a little bit video showing some of the interactions that we’re building there’s an insane amount of technical wizardry packed inside to make them work.
But on the outside they’re radically simple, you can download new games for your cubes digitally. Let’S take a look at what you can do. Syntheocubes can be containers for other objects, slide the letter, tiles to make words or they can hold particles that flow from cube to cube. They can be windows into another world.
They understand what your hands can do like pouring a liquid or twisting a key in a lock to open a chest for flicks nudges and collisions all right. So i wanted to go through six. Lessons learned, i thought about it a few days ago, and i boiled it down to this. The first six that came to mind, which i figured were the six most important so number one keep the manufacturing as close to home for as long as you can and then, when you have a warehouse, that’s to take your product from the factory and send it Out to people keep that close to your house too.
We did this sort of half right at siftio. We manufacture our product in china, but then we have our third party logistics, warehouse in fremont and to china. We take frequent trips. Some of our team is there now some is leaving soon.
We go there all the time, it’s pretty expensive and time consuming and what it means is we end up doing what you see here, which we called china at home, which was basically our way of doing a little bit of last minute, qa and firmware updating and Making sure everything was ready to go right here in california, so this is my co-founder jeevan testing, some cubes and so keeping as much of it close to you as possible is super helpful number two uh make the price right. I remember when i was a kid learning: uh, a fact that you know for some products the price you bought them in the store was twice as much as what it cost to make that product, and i was so indignant because i knew i was getting ripped Off when i heard that, but now i understand why, after making a product and selling it, why that’s important you know like every consumer. I also wish everything was cheaper, but i don’t feel like i’m getting ripped off anymore, there’s a great book that goes into this. That’S called from concept to consumer. I recommend it for all makers who want to start a business, and so there’s this. This is the page i think is: is the most instructive, it’s a breakdown of what it costs to make a product and what it costs in various stages. So this this particular example just to summarize it it costs 27 to make this product it gets sold to a retailer for 54. and then that retailer say a best buy, sells it to a consumer for a hundred dollars.
So it means that only 27 dollars of profit goes to the maker of this product and 46 dollars, which in the industry gets called. 46 points goes to the retailer for 100 sale, but that 27 for the maker has to cover all kinds of stuff, like uh r d for new products and returns all the other overhead, which is basically running the business. And then the retailer typically wants anywhere from 15 to 60 points, depending on who they are as a retailer and how good they are getting customers to come in their stores and buy things.
So the upshot is that make sure that you, the price that you need to sell your product at, can cover the cost that your business needs and be acceptable as a price to consumers. Lesson number three make it for the people. There should be an m close to me here and what i mean by this is i’m a fan of vertical businesses, rather than horizontal ones, no offense to the makers here that are building platforms to enable other makers. I’Ve used those platforms, myself they’re very helpful, very useful, but i’m i think, there’s there’s more to be done in making products designed for end consumers for real people rather than building tools for other makers, and the reason is that it’s hard to get developers to adopt A new tool like there’s a consolidation where you know everybody’s, using arduino and now everyone’s using raspberry pi, there’s just a few of these platforms that become uh, the popular ones, and so it’s it’s tempting. I know as an engineer to build the tool that you always wished. You had to scratch that itch that you have, and you know that if you have this particular kind of dev board that nobody’s really making quite what you need, you could sell it to everybody. But it’s really hard to get people to adopt a new version of anything, and so, if you’re, making a product, that’s for the people, the consumers out there in the world rather than for other makers. You just have a much bigger audience. Lesson number four find the experts so as another case study, i apologize for the cut off pictures here.
This is the siftio uh advisory group, um people from flip video back when there was a company that sold flip video cameras, sling xbox, uma and atari and uh. You know as a side note the silver lining of flip video uh, going into cisco and becoming no more was that we got some great advisors. So it’s amazing who will meet you for coffee. You sit down with people that you never thought would take the time to talk to you.
They’Ll, give you great advice. Okay, lesson number five start fast, then iterate get to the second generation of your product as quick as you possibly can, because your first generation might show some of the potential, but it probably won’t really be right. So quick overview for syftio. We launched our first generation product in august 2011..
I think of it as the concept car little cubes talk to your computer programs right on the computer control, the cubes wirelessly and the play experience was great, but it was not convenient enough. The fact that you had to crack your laptop open and have it nearby meant that people just there was too much friction to get to the experience. So we put our heads down for a year built a second generation platform that was portable. That was cheaper and even better in many ways like graphics and can control up to 12 cubes at a time.
So this is the one that we’re putting into retail and investing uh. You know to build a developer community around okay, real, quick last lesson. Uh, your software will protect your hardware, there’s a lot of there’s a lot of fear that that makers have that their hardware is going to get knocked off, especially if i make it in china like.
Isn’T it just going to get ripped off? You can take some precautions like we only provide encrypted versions of our firmware to our manufacturing partner. We have a special bootloader that pulls the code in and and decompresses it. So then you can never read the chip back, but really anything you do.
That’S a technological barrier is just a deterrent if your product is popular enough to start getting knocked off. That’S a good problem to have and really protecting your product with your brand and with with legal recourses, is really the better way to do it. So uh, that’s kind of what we do. We have a game studio. We build software, it’s an ecosystem of hardware and software together and um. We even have developers making great games like this is one.
That’S. It’S called shifted. It’S as, if rubik’s cube were invented for siftio, really cool stuff.
We have other applications like with a multi-touch microsoft, service, table, game interfaces that blend microsoft, surface and syftio, and then finally somebody’s making a adhd detection app. So there’s the recap: lessons learned and i think it’s amazing and satisfying to be able to build a product like this that came from your own idea and turns into a shipping product and a real company. So i hope that’s helpful for any of you that want to do this. Thank you. .