Other Machine Co.

The barriers to developing new hardware products are evaporating, due to the availability of low-cost prototyping equipment and access to alternate forms of capital, such as crowdfunding. Startups are creating innovative new products, but must rely on manufacturers to build the products they bring to market. If small startups and larger, established manufacturers can work together effectively, both will benefit greatly from the growth in the hardware product sector. Without cooperation, startups will fail to meet their demand, scale inefficiently, and ultimately disappear. Manufacturers will miss out on new opportunities and will be less competitive.

“To a startup, a “small change” can mean hundreds of hours and far more expense for the manufacturer”

Traditional Manufacturing vs. the Hybrid Model

Traditional manufacturing favors large unit volumes and processes that remain static. Every time you need to make a change to an existing manufacturing process, it will cost you money and time, and mistakes will always be made. At OMC, we need to manufacture less than 5,000 units per year and continuously innovate to improve our hardware. Our lower unit volume constraint and the necessity of flexibility in our manufacturing process limited the types of manufacturers that we could partner with. We ended up using what we call a “hybrid model.”

We purchase small volumes of high-quality parts from small and medium-sized manufacturers, primarily US-based. We do final assembly and quality control in-house. We learned that contract manufacturers need consistency, and this directly opposed our need for flexibility. Fortunately, it was possible to partner with component manufacturers, confine our external iteration to the component level, and do as much assembly and QC iteration as we needed internally. Hybrid manufacturing will become more common as the cost of hardware product development decreases and large unit volumes are no longer required for companies to be successful.

Blending Old with New: Communication Tools

One of the first ways that startups and manufacturers can better work together is to get on the same page with how communication will work. Startups are accustomed to using software tools that allow flexibility, version tracking, and real-time communication. These are tools like Dropbox, Google Docs, Trello, homegrown MRPs, and Slack. These tools allow them to communicate across a distributed workforce, minimize administrative overhead, and make decisions quickly. Startups can spot issues, track every piece of data about every component in every machine, and turn on a dime. What startups lack in experience, they have to make up for in data and communication.

A surprising source of friction we’ve witnessed in the relationships between manufacturers and startups is in the pace of communication. It’s important for both companies to know when and how frequently they can expect contact. Additionally, everything startups do is digital, so the less paper, the better. If you have a preferred way to communicate, make sure to communicate it.

Heading in the Same Direction: Shared Goals

Another bit of value that startups and manufacturers can build for free is: get the other party excited about your business. Take the time to get to know each other by spending time face-to-face. The time you invest in your relationships will strengthen business when things are going well and will give you important social capital to spend when things fall apart.

One of our strongest partners is our motor manufacturer, Koco Motion in Morgan Hill, CA. They focus on custom motors for applications where precision is paramount. Before we even signed our first contract with Koco Motion, their CEO brought half the company to our facility to meet our team and dig into the details about our current manufacturing process. Even in that first meeting, their engineers gained insights about where we would be headed in the next few years. Rather than just supplying the parts we currently used, they got to know our whole product, and realized that we would eventually migrate away from the off the shelf spindle motor we were using.

When it finally came time to redesign our spindle motor, one of our most critical components, we did not hesitate to bring that business to Koco Motion. Other motor manufacturers have approached us in the past, but we know that Koco Motion is more than a supplier, they are a partner. Many of our customers and sister companies learned about Koco Motion through us and have grown to rely on their motors. The extra effort put into our relationship meant more opportunity and more customers for Koco Motion.

Sharing a bond with our partners is one of the least expensive and most valuable things that we have done to give our business an advantage. As a startup, bring your manufacturer into your story: have the manufacturing team over, show them the product, share customer stories, and celebrate milestones. As a manufacturer, strengthen the bond by sharing the details of your methods, letting the startup know the history of your organization, and sharing the values of your organization.

Just a Small Change

Startups often have no idea how many iterations the need to make in order to get their product to market. To a startup, a “small change” can mean hundreds of hours and far more expense for the manufacturer. It is critical to set expectations with startups, so that they know the relative time and cost impact of changing each aspect of the product. Having buy-in to a realistic growth curve will also help manufacturers and startups set expectations about how fast things need to scale.

The size of the manufacturer usually determines the amount of risk they are willing to take on a startup. If they are large, but the startup can assure fast growth, then it may be okay to have an expensive, iterative ramp-up process. If the manufacturer is smaller, they may only be able to operate below their standard margin for a short period of time. Manufacturers may not want to scale their production to meet the demand of a startup unless the startup has shown a long, steady growth in demand. This potential mismatch is scary because it’s nearly impossible for a startup to really know what their growth will be or how far their prototype is from being production ready. Products and partnerships can fail completely due to a misalignment on the cost and frequency of changes necessary for the product.

A Strong Manufacturing Ecosystem

The way people design new products is changing. More early iterations are happening in-house by smaller and smaller teams at companies that don’t have their own manufacturing facilities. Because the cost of developing products is decreasing, startups are beginning to experiment with models that look very different from traditional contract manufacturing. Focusing on shared goals and setting expectations around communication and the cost of iteration can open up more possibilities for manufacturers. If you are a manufacturer who learns how to work with startups, you will be at an extreme advantage, able to adapt to the changing landscape.