It's pretty much the same in software too. I often get requests for functionality and when I say "no, we can't do that", I get "Why not? Amazon does it".
Hrmm... Amazon has dozens of people working and supporting just that one feature. You're trying to engage me to do an entire project. On a fixed budget. With a fixed time frame. And you've changed your mind 3 times in the last 3 weeks on key points.
Of course, yes, there are amazing things you can do with software that weren't remotely feasible even just 5 years ago. But there's always a moving target - the market leaders (Apple, Google, Amazon, etc) are constantly pushing the boundaries of what's considered 'normal', and most people have 0 idea of the real cost and effort involved in having the functionality come across as polished and error free as the big boys.
On the other hand, doing even simple things at Amazon scale is WAY more difficult and time consuming than doing them at practically zero scale. There are plenty of examples of features that can be accomplished using quick and dirty methods that Amazon couldn't dream of using.
Reminds me of the many times someone tells me "oh you're developping apps ? I've got a great idea : ". 9 times out of 10 this idea involves rebuilding google search engine and facebook, plus a third thing on top.
Hardware, software, anything really - there's probably an analog to this in most things.
Personally, what I run up against most often aren't questions about fulfilling the initial requests, but the aftermath of someone focusing on specific details to the exclusion of the bigger picture.
An organization spending a few million on software licenses, but nothing on staff / support being the most common example.
I feel like people in tech are particularly prone to this for whatever reason.
I'd wager a person will typically to sustain more criticism for a sub-optimal, but complete, functional implementation than a disjoint pile of fine-tuned components that doesn't add up to anything.
Forget fancy techniques, just scale alone is enough to shock you when looking into manufacturing. We got quotes from various providers at $4-$12/part. Meanwhile, in grocery stores, department stores, even dollar stores we would see similar products (using the same materials) being sold for $1-2.
The difference is mostly related to the number of parts being ordered. For a startup, ordering 100,000+ parts just to get pricing reasonable is a no-go unless you (or your backers) take a major risk.
Makes you feel like getting off the ground is almost impossible, when you can't even get your wholesale cost below the retail cost of similar products.
It's important to note that 20 years ago the surprising thing would be the surprise that you express here:
"The difference is mostly related to the number of parts being ordered. For a startup, ordering 100,000+ parts just to get pricing reasonable is a no-go unless you (or your backers) take a major risk. Makes you feel like getting off the ground is almost impossible, when you can't even get your wholesale cost below the retail cost of similar products."
We just had 150 years where this was so normal that most people didn't think much of it, and very few people ever thought about starting their own business, exactly because it was understood that you could not compete with the economies of scale enjoyed by John Davison Rockefeller, Andrew Carnegie and Andrew W. Mellon.
What's interesting is that this attitude has recently been changing. The economist Larry Summers has made this point about WhatsApp, using WhatsApp as an example of the falling need for capital:
"Ponder for example that the leading technological companies of this age, I think for example of Apple and Google, find themselves swimming in cash and facing the challenge of what to do with a very large cash hoard. Ponder the fact that WhatsApp has a greater market value than Sony with next to no capital investment required to achieve it. Ponder the fact that it used to require tens of millions of dollars to start a significant new venture. Significance new ventures today are seeded with hundreds of thousands of dollars in the information technology era. All of this means reduced demand for investment with consequences for the flow of - with consequences for equilibrium levels of interest rates."
He suggests a negative consequence, that it is difficult to get real interest rates above 0% in a world where people can start a business with little capital, and he suggests that this might contribute to secular stagnation.
Of course, things don't need to be as grim as he suggests. Ideally, the low costs would lead to a flood of research, but that hasn't happened so far, in part because VCs are scornful of what they refer to as "science projects" and the financial community continues to look for returns within 10 years, which is almost certainly the wrong timeframe for 0% interest rates (the low rate suggests a low discount rate which suggests that investors should think long term).
I understand that a big part of why Tim Cook filled Steve Jobs' shoes was that he's a master of supply chain management. He understands what it takes to move a product idea's components from "nonexistent supplies" to "commodity pricing".
The main point is that manufacturing, especially high-volume, consumer, apple-quality products, is very hard and requires serious expertise. Such startups should bring in such mechanical & production engineering expertise, because the hardware becomes as important as the software & electronics.
The irony is that many software startup wizards brush off mechanical design the same way that naive managers treat software development. "It's just a [box/case/app/website], how hard can it be?"
You have summarized the perfect take-away from this article. Disclosure for bias: I am the 4th generation of an American manufacturer, that has survived for 100 years in New York City.
Of the hundreds of retail startups I have seen that are going to contract manufacturers, none have had a manufacturing expert or even one with any experience. In fact, it's severely undervalued with respect to importance. If they do have someone from manufacturing, they probably aren't being paid relative to their market scarcity.
The best manufacturers also design what they make, their own product, and do not make for others.
Apple has manufacturing experts and manufactures themselves, hence they control what they make. <startup-person class="random inexperienced" /> does not, so they cannot have their quality level, by definition. Hence, they pay more because they didn't capture the margin, and because they have to get in line to pay a contractor who knows how. But they cannot bring a serious order unless they are funded by deep pockets.
Here in America, we have lost most of our manufacturers, leaving three generations missing manufacturing experts. This is a no-brainer, obvious to all. However, the connection is rarely made that we have lost our manufacturing capability because /it is difficult/. It's so difficult it had to go to a highly efficient country with cut-throat competition, abundant labor supply, and abundant poverty. The perfect conditions for plunging down manufacturing costs.
Manufacturing is quite different from "making." We are having a resurgence of interest in making in this country, which is exceptional. Arduino is amazing! It manufactures for the people, not for other companies, reducing cost and providing access. Making doesn't scale without manufacturing expertise. I hope manufacturing is part of the renaissance as it grows.
Their attention to detail in casings is the same as the very high end hi-fi, jewelery, or sports-car industries. Nobody else in computing seems to come close.
In terms of electronic components however, you can nearly always get more bang for your buck, the exception sometimes being the screens.
All I needed to stop believing that was to hold an Apple product in one hand and a competing one in the other. Whether you care about fit and finish is a matter of personal taste, but the difference is visible.
Really this, I hear from a lot of people that Apple products are shit because they are much more expensive for similar specced devices but no one ever considers the hardware outside of the specs. Sure I can get a huge Galaxy note XYZ with 10gb of ram but at the same time it has a subpar UX and is made of cheap plastic and cheap glass and a cheap display and has no where near the build quality of an iPhone, same goes for MBP vs Any Other Laptop.
Packaging is a product to be designed unto itself, especially as what you're usually ultimately selling is an experience. I think I've seen people rave about packaging I've designed as much as the products. And just like the product itself, manufacturing experience helps you hit a better price/performance note, all the way down to making boxes that fit in a certain USPS weight class which you can slap a mailing label on.
Not mentioned is the challenge of managing a good CM in China or Malaysia. If you're small you get what everyone else does, at higher prices. If you're huge you can groom your CM and make sure you get what nobody else does, at a lower cost. Of course sooner or later the manufacturing knowledge leaks out so it's a rat race even for someone like Apple.
When did Apple go from manufacturing ordinary hardware to making that leap where they had the financial resources to truly make something incredibly unique and beautiful? Was it one product one year, or did happen over a span of years where they had smaller increments of change?
I'm curious to know how a company can get to a point and say, "Ok, we can do something really cool, on a massive scale and make it successful." Is a slower transition, or more of an abrupt change that takes place?
It was definitely a gradual thing. As early as the "Snow White" design language introduced in 1984, Apple was pushing the limits of conventional computer manufacturing techniques. And they didn't go from beige boxes to unibody aluminum slabs in one step.
This is why -- for example -- Flextronics opened their Lab IX [1] in SV last year. In cases where hardware ideas are good ones, it makes a lot of sense for the guys with the manufacturing expertise to get in the loop early on. They can incubate, invest, and indulge in some of the wild stuff innovators want but can only be executed with $mm of equipment.
There are so many acronyms in this article that aren't defined. Maybe I'm not the intended audience for this article, but it's pretty hard to understand when you don't know what CM, CNC, or BOM mean. Is it really so hard to use the <abbr> tag?
Article does not mention capacitive touch screens. Apple basically build its own factories (and subsequently entire industry) to manufacture for iphone 1.
Capacitive screens are petty much custom for whatever the end applicaton is. Apple pretty much bought out the market for CNC laser ablation machines used in this line of work.
but apple is not the only large luxury goods manufacturer, right? how does louis vuitton do their thing? or leica? or rolex? if anything, aren't lv and rolex the orginals at mass producing/marketing luxury goods?
separately, i imagine not just leica, but the entire optics industry has answered the question of precision/quality at scale before?
and finally, there're more , right? like mercedes-benz, bmw, lexus, porsche, medical instruments, the aerospace industry... don't all of them have to solve 'quality at scale' problems?
and at smaller scales..parker pens? zippo lighters? swiss army knives?
and then..something like http://www.muji.us/store/ could be good enough as far as the perception of quality goes?
Rolex is similar to Apple in that they control most, or almost all, of their manufacturing and parts process. Rolex is one of the very few watch companies that produces their own movements instead of outsourcing them, or slightly modifying/customizing an OEM movement. Rolex has proprietary metallurgy for metals. They make their own stainless steal and gold for all their watches. The watch case is milled from a single piece of material, much like a unibody MacBook.
I don't know as much about Leica, but Canon grinds and polishes their own glass for their lenses (the higher-end ones at least, not sure about EF-S lenses). Other companies create lenses with OEM's elements.
They hired the brilliant Bould[0] design for ID and partnered with a Tier-1 Taiwanese ODM for manufacturing[1]. This takes a bit of money, connections and being able to demonstrate you will have volume.
What the article doesn't mention is that you can manufacture in Apple's wake. After Apple started purchasing 4" touch panels and LCD displays for iPhones, and then larger displays for the iPad, the capacity increased and prices went down. Same with all the CNC machines purchased for the iPhone 4 frame - they are no longer being used to manufacture Apple devices, but they are being used to manufacture other devices.
Second part is that modern manufacturing tech means you can have lean hardware startups. As much as cheap hosting, software as a service, etc. have made software app development cheaper manufacturing tech has made hardware manufacturing cheaper. You can now get rolling with complete custom hardware in thousands of units (as opposed to millions) with 6-figures in capital.
The key is knowing one of the small number of people who understand design, materials, the capabilities at the ODM's, the right people at these companies, supply chain etc. and have them design the product to fit the current manufacturing capacity without requiring customization. It is easy to hire an industrial designer sitting ten thousand kilometers away from Shenzhen who can CAD something nice, but knowing that manufacturing that fancy designed device would cost extra millions in tooling and setup is where the real skill is. Good ID people can design great products and in a way where they can be manufactured easily and with a smaller investment. If you don't have one of these people on your team, your either going to get something that is very ordinary looking (think Chinese knockoff) or you'll attempt something ambitious, run out of money and fail.
What Nest did is use clever ID to create a product that looked unique without over-stretching the manufacturing requirements. They didn't go anywhere near the scale Apple does.
They were rich former Apple staff that created a luxury item (it was 10x the price of other thermostats) and still were smart enough to not require CNC or matched white plastics or even a fancy box.
A Nest thermostat is quite expensive if think about it. An average Honeywell thermostat is maybe $50 while a Nest is $250. Also the cylindrical design of the Nest is a little easier to manufacture.
This article actually misses some key points while it is telling the truth.
Most of the things mentioned in the article is correct BUT,
If you are going to make a product and you think that your product is going to be as revolutionary as Apple was at the beginning, then don't worry. You will be good to go.
If you can provide a unique, mind blowing product just like Apple Lisa in 1983, you can sell it for really unrealistic prizes.
Apple Lisa was sold for US$ 9,995 at the time it was released. You could buy a new house around $86000.
So the question is not how expensive is going to be, the real question is,
> If you are going to make a product and you think that your product is going to be as revolutionary as Apple was at the beginning, then don't worry. You will be good to go.
I would disagree with this, but keep quiet, if you removed "you think". As it is, the advice just seems irresponsible.
If you think your product is going to be as revolutionary as Apple was at the beginning, you are probably wrong, and you should adjust your expectations accordingly.
I don't see that anywhere. Closest thing I could find is:
> 4-color, double-walled, matte boxes + HD foam inserts
> I know you’re going to do this anyways, but be aware that these kind of boxes will literally be the most expensive line item on your BOM. It’s not unusual for them to cost upwards of $12/unit at scale. And then they get thrown away.
...which is talking about your costs, not Apple's.
[+] [-] mgkimsal|11 years ago|reply
Hrmm... Amazon has dozens of people working and supporting just that one feature. You're trying to engage me to do an entire project. On a fixed budget. With a fixed time frame. And you've changed your mind 3 times in the last 3 weeks on key points.
Of course, yes, there are amazing things you can do with software that weren't remotely feasible even just 5 years ago. But there's always a moving target - the market leaders (Apple, Google, Amazon, etc) are constantly pushing the boundaries of what's considered 'normal', and most people have 0 idea of the real cost and effort involved in having the functionality come across as polished and error free as the big boys.
[+] [-] mcfunley|11 years ago|reply
[+] [-] bsaul|11 years ago|reply
[+] [-] imaginenore|11 years ago|reply
[+] [-] incision|11 years ago|reply
Hardware, software, anything really - there's probably an analog to this in most things.
Personally, what I run up against most often aren't questions about fulfilling the initial requests, but the aftermath of someone focusing on specific details to the exclusion of the bigger picture.
An organization spending a few million on software licenses, but nothing on staff / support being the most common example.
I feel like people in tech are particularly prone to this for whatever reason.
I'd wager a person will typically to sustain more criticism for a sub-optimal, but complete, functional implementation than a disjoint pile of fine-tuned components that doesn't add up to anything.
[+] [-] _RPM|11 years ago|reply
Can you provide an example to back up your claim?
[+] [-] josefresco|11 years ago|reply
The difference is mostly related to the number of parts being ordered. For a startup, ordering 100,000+ parts just to get pricing reasonable is a no-go unless you (or your backers) take a major risk.
Makes you feel like getting off the ground is almost impossible, when you can't even get your wholesale cost below the retail cost of similar products.
[+] [-] lkrubner|11 years ago|reply
"The difference is mostly related to the number of parts being ordered. For a startup, ordering 100,000+ parts just to get pricing reasonable is a no-go unless you (or your backers) take a major risk. Makes you feel like getting off the ground is almost impossible, when you can't even get your wholesale cost below the retail cost of similar products."
We just had 150 years where this was so normal that most people didn't think much of it, and very few people ever thought about starting their own business, exactly because it was understood that you could not compete with the economies of scale enjoyed by John Davison Rockefeller, Andrew Carnegie and Andrew W. Mellon.
What's interesting is that this attitude has recently been changing. The economist Larry Summers has made this point about WhatsApp, using WhatsApp as an example of the falling need for capital:
http://www.businessinsider.com/larry-summers-on-whatsapp-201...
"Ponder for example that the leading technological companies of this age, I think for example of Apple and Google, find themselves swimming in cash and facing the challenge of what to do with a very large cash hoard. Ponder the fact that WhatsApp has a greater market value than Sony with next to no capital investment required to achieve it. Ponder the fact that it used to require tens of millions of dollars to start a significant new venture. Significance new ventures today are seeded with hundreds of thousands of dollars in the information technology era. All of this means reduced demand for investment with consequences for the flow of - with consequences for equilibrium levels of interest rates."
He suggests a negative consequence, that it is difficult to get real interest rates above 0% in a world where people can start a business with little capital, and he suggests that this might contribute to secular stagnation.
Of course, things don't need to be as grim as he suggests. Ideally, the low costs would lead to a flood of research, but that hasn't happened so far, in part because VCs are scornful of what they refer to as "science projects" and the financial community continues to look for returns within 10 years, which is almost certainly the wrong timeframe for 0% interest rates (the low rate suggests a low discount rate which suggests that investors should think long term).
[+] [-] jkestner|11 years ago|reply
- Start with the high end/low volume market.
- Minimize custom parts.
- Architect a completely different approach to change the cost equation. (Throw software at the problem instead of hardware.)
[+] [-] ctdonath|11 years ago|reply
[+] [-] foofoo55|11 years ago|reply
The irony is that many software startup wizards brush off mechanical design the same way that naive managers treat software development. "It's just a [box/case/app/website], how hard can it be?"
[+] [-] digitailor|11 years ago|reply
Of the hundreds of retail startups I have seen that are going to contract manufacturers, none have had a manufacturing expert or even one with any experience. In fact, it's severely undervalued with respect to importance. If they do have someone from manufacturing, they probably aren't being paid relative to their market scarcity.
The best manufacturers also design what they make, their own product, and do not make for others.
Apple has manufacturing experts and manufactures themselves, hence they control what they make. <startup-person class="random inexperienced" /> does not, so they cannot have their quality level, by definition. Hence, they pay more because they didn't capture the margin, and because they have to get in line to pay a contractor who knows how. But they cannot bring a serious order unless they are funded by deep pockets.
Here in America, we have lost most of our manufacturers, leaving three generations missing manufacturing experts. This is a no-brainer, obvious to all. However, the connection is rarely made that we have lost our manufacturing capability because /it is difficult/. It's so difficult it had to go to a highly efficient country with cut-throat competition, abundant labor supply, and abundant poverty. The perfect conditions for plunging down manufacturing costs.
Manufacturing is quite different from "making." We are having a resurgence of interest in making in this country, which is exceptional. Arduino is amazing! It manufactures for the people, not for other companies, reducing cost and providing access. Making doesn't scale without manufacturing expertise. I hope manufacturing is part of the renaissance as it grows.
[+] [-] taylodl|11 years ago|reply
[+] [-] serve_yay|11 years ago|reply
[+] [-] lotsofmangos|11 years ago|reply
In terms of electronic components however, you can nearly always get more bang for your buck, the exception sometimes being the screens.
[+] [-] wmf|11 years ago|reply
[+] [-] Igglyboo|11 years ago|reply
[+] [-] noir_lord|11 years ago|reply
Use 100% recycled cardboard and print the box in a single color water based bio-degradable ink.
Then claim you do this to save the environment, win-win ;).
[+] [-] jkestner|11 years ago|reply
[+] [-] herge|11 years ago|reply
[+] [-] zwieback|11 years ago|reply
[+] [-] at-fates-hands|11 years ago|reply
I'm curious to know how a company can get to a point and say, "Ok, we can do something really cool, on a massive scale and make it successful." Is a slower transition, or more of an abrupt change that takes place?
[+] [-] wtallis|11 years ago|reply
[+] [-] eitally|11 years ago|reply
[1] http://www.labix.io/
[+] [-] psychometry|11 years ago|reply
[+] [-] mcooley|11 years ago|reply
It is jargon, but it's jargon that someone who would be concerned about "not showing ejector pin marks" would probably know.
[+] [-] qwerta|11 years ago|reply
[+] [-] sedachv|11 years ago|reply
Are there any articles or book sections about this? Seems very interesting.
[+] [-] joezydeco|11 years ago|reply
[+] [-] wmf|11 years ago|reply
[+] [-] lazylizard|11 years ago|reply
separately, i imagine not just leica, but the entire optics industry has answered the question of precision/quality at scale before?
and finally, there're more , right? like mercedes-benz, bmw, lexus, porsche, medical instruments, the aerospace industry... don't all of them have to solve 'quality at scale' problems?
and at smaller scales..parker pens? zippo lighters? swiss army knives?
and then..something like http://www.muji.us/store/ could be good enough as far as the perception of quality goes?
[+] [-] brk|11 years ago|reply
I don't know as much about Leica, but Canon grinds and polishes their own glass for their lenses (the higher-end ones at least, not sure about EF-S lenses). Other companies create lenses with OEM's elements.
[+] [-] pduan|11 years ago|reply
As for volume, they aren't shipping millions upon millions of their devices in a month either.
[+] [-] ashish01|11 years ago|reply
[+] [-] nikcub|11 years ago|reply
What the article doesn't mention is that you can manufacture in Apple's wake. After Apple started purchasing 4" touch panels and LCD displays for iPhones, and then larger displays for the iPad, the capacity increased and prices went down. Same with all the CNC machines purchased for the iPhone 4 frame - they are no longer being used to manufacture Apple devices, but they are being used to manufacture other devices.
Second part is that modern manufacturing tech means you can have lean hardware startups. As much as cheap hosting, software as a service, etc. have made software app development cheaper manufacturing tech has made hardware manufacturing cheaper. You can now get rolling with complete custom hardware in thousands of units (as opposed to millions) with 6-figures in capital.
The key is knowing one of the small number of people who understand design, materials, the capabilities at the ODM's, the right people at these companies, supply chain etc. and have them design the product to fit the current manufacturing capacity without requiring customization. It is easy to hire an industrial designer sitting ten thousand kilometers away from Shenzhen who can CAD something nice, but knowing that manufacturing that fancy designed device would cost extra millions in tooling and setup is where the real skill is. Good ID people can design great products and in a way where they can be manufactured easily and with a smaller investment. If you don't have one of these people on your team, your either going to get something that is very ordinary looking (think Chinese knockoff) or you'll attempt something ambitious, run out of money and fail.
What Nest did is use clever ID to create a product that looked unique without over-stretching the manufacturing requirements. They didn't go anywhere near the scale Apple does.
[0] http://www.bould.com/
[1] not certain which, but it is 3-4 possible companies.
[+] [-] dpark|11 years ago|reply
> White plastic
No.
> CNC machining at scale
I'd be shocked if they CNC machined any piece of the nest. There's no need.
> Laser drilled holes
Nope.
> Molded plastic packaging
I guess they did this. They probably had the experience and money to pull this off.
> No ejector pin marks
Not relevant because there is no exposed plastic.
> 4-color, double-walled, matte boxes + HD foam inserts
Nope.
[+] [-] jonknee|11 years ago|reply
[+] [-] jeffreyrogers|11 years ago|reply
[+] [-] pkaye|11 years ago|reply
[+] [-] niels_olson|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] whizzkid|11 years ago|reply
Most of the things mentioned in the article is correct BUT,
If you are going to make a product and you think that your product is going to be as revolutionary as Apple was at the beginning, then don't worry. You will be good to go.
If you can provide a unique, mind blowing product just like Apple Lisa in 1983, you can sell it for really unrealistic prizes.
Apple Lisa was sold for US$ 9,995 at the time it was released. You could buy a new house around $86000.
So the question is not how expensive is going to be, the real question is,
Is your product mind blowing?
[+] [-] wmf|11 years ago|reply
[+] [-] philh|11 years ago|reply
I would disagree with this, but keep quiet, if you removed "you think". As it is, the advice just seems irresponsible.
If you think your product is going to be as revolutionary as Apple was at the beginning, you are probably wrong, and you should adjust your expectations accordingly.
[+] [-] DarkIye|11 years ago|reply
[+] [-] snowwrestler|11 years ago|reply
[+] [-] yourad_io|11 years ago|reply
> 4-color, double-walled, matte boxes + HD foam inserts > I know you’re going to do this anyways, but be aware that these kind of boxes will literally be the most expensive line item on your BOM. It’s not unusual for them to cost upwards of $12/unit at scale. And then they get thrown away.
...which is talking about your costs, not Apple's.
Please correct me if I've missed something.
[+] [-] lotsofmangos|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] ww520|11 years ago|reply