I enjoyed the article “Kiva the Disrupter” in the December 2012 issue of Harvard Business Review, which offered a great example of disruptive innovation in engineering. The company Kiva Systems has fundamentally altered “how consumer orders are picked and packed in warehouses” by making robots bring items from shelves to workers packing orders, instead of forcing workers to walk back and forth through the warehouse aisles. The first-person account of Kiva’s business challenges and ultimate success makes for a riveting read.
Here are a few things that caught my attention:
- VCs were remarkably unenthusiastic about the hardware part of the business, because it “required a potentially substantial – and, [VCs] thought, risky – investment in engineering and manufacturing hardware.”
- Implementing an “industry-defying approach” requires many, many calls to very sceptical possible customers arguing “this can’t be done” or protesting that, as the author was told once, “what you’re asking me to undergo is like a heart-lung transplant for my fulfilment center.”
- It is critical to relieve customers of risk to facilitate adoption. Kiva’s simple system of three fixed-fee invoices guaranteed that customers wouldn’t be charged cost overruns or change-order fees. They also had “right of return for a full refund at any point up to final acceptance.”
- “Designing, manufacturing and delivering all aspects of the solution” made a significant difference in implementing “a pricing approach that shifted much of the risk to Kiva.” It also allowed Kiva to offer rapid deployment capabilities where the system is installed quickly in any warehouse setting, and can be transferred easily to another warehouse.
- Kiva covered every system of the customer experience, which enabled continuous improvement: “Because our system is based on software, it will keep getting better with each new release, thanks to improved workflows and algorithms.”
IEEE Spectrum has posted a fascinating demo of Kiva robots at work on YouTube. Kiva was ultimately acquired by Amazon in May 2012 for $775 million.