hard·ware rev·o·lu·tion

/ˈhärdˌwe(ə)r/ /ˌrevəˈlo͞oSHən/

Noun:

A resurgence in the consumer popularity of independently -and startup- designed hardware devices, for example: smartphones, fitness trackers, wearable devices, internet-connected devices, aerial drones and 3D printers.

Synonyms:

Hardware Renaissance – Internet of Things – Maker Movement – The New Industrial Revolution

We are at the very beginning of an amazing change in the way we build, buy, consume, and experience devices. It’s been called a whole bunch of different names over the past decade, but now that things are (finally) heating up the name that feels like it’s going to stick is “hardware revolution”.

I want to dive into how this all came to pass. Where we are in the resurgence of hardware. What the triggers were and what needs to continue to happen. For starters: why. What has actually happened?”

What changed?

“The evolution in hardware development in some ways parallels what the software industry saw ten years ago.” Matt Witheiler

I believe the biggest change has to do with the way hardware comes to life. And to echo Matt, I think what is happening in hardware right now is a bit like what happened to software a decade ago.

The hardware design process used to look like this:

And if you know anything about the “lean startup” principles, or Agile software development, you’re going to see a couple of very big problems with this. Personally I see a few really big ones, first the time between idea and customer. Second the time and cost between iterations. Third the upfront capital outlay for manufacturing and prototyping. And lastly the supply chain and manufacturing pressures at the end of the product cycle and their effect on growth and distribution. Long story short these things made hardware harder to do.

And this is what it looks like in indie shops and startups post-revolution:

The three really obvious differences are: the move away from old school specifications, the decoupling of final manufacturing from prototype manufacturing, and the reversal of sales and manufacturing. All three of these share some DNA with the developments happening in other industries following trends like collaboration and the move to the cloud. They also share a lot of software development and lean startup principles.

For starters, the early development stages of a hardware product historically were very waterfall-style, specification driven, design-by-committee projects. The innovation here was the introduction of both Open-Source, allowing the reuse of existing trusted hardware IP, and the introduction of Development and Breakout Boards, allowing much faster iteration in the earliest ideation stages of the project.

Following the development of a specification, hardware companies would then begin negotiating supply relationships in parallel with the design of their product. These relationships were necessary, as small and prototype-focused manufacturers didn’t yet exist and the hardware companies would have to fight for time on a manufacturing line or suffer ridiculously high prototyping costs. In the last few years the introduction of specialized prototyping equipment combined with the emergence of small-lot-size, prototype-focused manufacturers has led hardware revolution companies to decouple final manufacturing from rapid prototyping, allowing them to move substantially faster through the design phase.

Finally, the reversal of mass-manufacturing and sales, through pre-sales and crowdfunding, have allowed hardware revolution companies to both fund the manufacturing of – as well as market test – their product before building and inventorying thousands of units.

First movers

“One question I can answer is why hardware is suddenly cool. It always was cool. Physical things are great… Hackers love to build hardware, and customers love to buy it. So if the ease of shipping hardware even approached the ease of shipping software, we’d see a lot more hardware startups.” Paul Graham

There have been very clear signals that hardware is back for about the last 3 years. Before that it was just Wired, Sketching and Maker Faire showing us the hacked up projects of a few burners. There were lots of cool IOT and M2M devices, hackerspaces, and neat writeups on Instructables, but not much commercial and little of substance. But then it started getting real. First with FitBit and MakerBot, then it grew into Pebble and Kickstarter, and in October 2012, PG wrote his famous “Hardware Renaissance“ piece.

These days we’re seeing a rate of approximately one new crowd-funded hardware startup created per week. Over the past year the press has taken to both loving and hating the hardware revolution. Here’s a snapshot:

* The hardware revolution will be crowdfunded / Venture Beat

* The hardware revolution is upon us and why it matters / Pandodaily

* New crowdfunding platform for the hardware revolution / Dragon Innovation on Betakit

* How a Garage-Based Incubator Is Fueling the Hardware Revolution / Wired

* A Hardware Renaissance in Silicon Valley / NY Times

* Silicon Valley’s hardware renaissance is stalling / CNN

* Why we’re not quite ready for the hardware startup renaissance / Venture Burn

Resurgence

“It’s the peace dividend of the smartphone war. Cheap processors, cheaper memory, and even cheaper sensors means it’s a great time for people who like to tinker with hardware.” Chris Anderson

I think we are about 8 years into the hardware revolution. It all started back in 2005 with the Arduino. That led to the Raspberry Pi, the iPhone, and startups like Meraki. In 2008 FitBit would kick-off the quantified self movement with their super-smart pedometer. Continuing this trend Kickstarter, Dropcam, and Makerbot were founded in 2009, followed by crowdfunded successes like Pebble, Ouya, and Lockitron. By 2013 there have been hundreds of new hardware startups founded, with a growth rate of new startups of more than 50% year-over-year. Consumers have purchased many tens of millions of dollars of these startups’ products, and many hundreds of millions have been invested in these same companies.

If the hardware revolution as a whole were to be treated as a technology adoption lifecycle, I predict we are mid-way through the second stage. We are about 2 years away from consumers in the early majority participating in pre-sales and buying the products these startups are producing. By 2020 Gartner estimates there will be 80 billion internet connected devices, and I would predict upwards of 50% of these devices will be the products of hardware revolution companies. And finally by 2025, after 20 years, I believe we will be mid-way through the laggard market, and that there will be approximately 100 new, major, and influential consumer electronics companies in existence. I believe we still need to create a workshop, a factory, and a store to sustain the hardware revolution and I think these will get resolved in 2014, 2016 and 2019 respectively. More on this below.

Ecosystem

“Before we can see a true “Hardware Renaissance” [we need] a company to do for hardware manufacturing what Amazon Web Services did for SaaS hosting and delivery. A commoditisation of manufacturing. Hardware-(production)-as-a-service.“ Richard Oakley

The first stage in the product ecosystem is where both designers and ideas are born. It is the most developed of the three stages, and the least in need of future innovation. The first part of the education stage is the school, a collection of resources, articles, mentors, and institutions like universities that take beginners and turn them into engineers. The second part of the education stage is the lab, a collection of hardware building blocks for testing out ideas. This is where ideas get hacked into parts, development boards get cobbled together, and the first lines of code may be written. I predict the continued dominance of both community curated content like Make as the school and open hardware merchants like Sparkfun as the lab.

The second stage in the product ecosystem is where ideas and development boards get deconstructed and refined into products. The first part of the design stage are tools, software application built to help engineers turn ideas into CAD-style manufacturing files. The second part of the design stage is the workshop, sophisticated overnight product prototyping. This is where designs get rapidly turned into testable prototypes. It will be a service offered at first by specialty manufacturers, and later addressed by the evolution of 3D printing. I (obviously) predict the success of web-based, collaborative, multi-player communities like Upverter as dominating both parts of the design stage.

The third stage in the product ecosystem is also the most in need of innovation. The first part of the production stage is the store, a mixed physical and virtual marketplace. This is where customers discover and purchase products based on a pre-sales model. The second part of the production stage is the factory, a scalable on-demand API for manufacturing. This will be the Amazon Web Services of hardware. This step still requires huge investment and innovation in logistics, smaller batch sizes, manufacturing equipment, and process control. I predict a consolidation in the store stage and the emergence of a dominant marketplace explicitly pre-selling products. Likewise I also predict manufacturers will differentiate through their APIs with the most accessible and elastic of these dominating.

What’s next?

“We believe this is just the very beginning of the hardware revolution. The world is eagerly awaiting new devices and new device platforms. Look around you and it is hard not to see opportunities.” Jon Callaghan

Over the coming years I think we will both see a massive increase in hardware startups – Indiegogo has seen more than a 100% increase in the number of technology campaigns launched over the last year-, but also an increase in the companies that exist to make these startups successful. I think startups will be created to solve the ecosystem voids, I think massive consumer hardware companies will grow out of the startups being founded today, and I think we will be successful in putting 70+ billion more devices onto the internet over the next 7 years.

I think the wellness craze will fade out over the next 5 years, eventually being replaced by actual medical-health tech. I think drones and logistics will get have 8 or so more interesting years, that energy tech and transportation is just getting started, and that by 2020 agricultural tech will pick-up where both of these markets leave off.

I expect to see continued double or triple digit market growth, massive investment, massive innovation, and some very real consumer behaviour changes as they adopt pre-sales and purchase more and more niche devices. It’s going to be a very exciting two decades, stay tuned!