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Will exoskeleton companies turn a profit by selling product or a service?

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Will wearable robotics become more profitable by selling devices or a full-service package?  In the near future, selling exoskeleton units will become a profitable venture.  But will the profit be higher if companies focused on selling the devices instead of a complete service package that includes documentation, training, support, and service?  Policing knockoff and counterfeit products is a difficult task in an age where almost any computer server can be hacked, and inventions are publicly disclosed in patents.  In the long run, would exoskeleton companies turn a profit by outbidding to make the cheapest exoskeleton possible?  Probably not.  Exoskeleton companies stand to turn the greatest profit by selling a service.

Selling a service rather than units is precisely what the major exoskeleton companies are already doing.  For example, even with FDA approvals for the Ekso GT and Indego unit sales have not shot up.  This is because the companies are focusing on creating positive connections with the medical service providers.  For every exoskeleton deployed there is an army of people that handle documentation, write user guides, answer questions around the clock and provide field service.  The same situation exists with exoskeletons for work and industry.  Exo companies can already flood the market with units, but in the long run, it is much better to have a soft launch.  A soft launch gives companies the opportunity to establish a good reputation with customers.

Building an excellent reputation for providing service is not just a marketing tool.  It also has a direct impact on potential clients.  Imagine you are a large manufacturer such as BMW (which is currently testing the Noonee Chairless Chair and the Ekso Bionics Ekso Works Vest).  If you have two exoskeletons with similar capabilities but two different price tags you will always choose the cheaper one, right?  Maybe not.  Because people have to wear exoskeletons at all times, the unit cost is not as important as the wearable safety record, ability to troubleshoot, quality of documentation and service contracts.  The overall reputation and service record are just as important as the exoskeleton price.

Having a reliable service and safety record can also influence insurance companies.  Returning to the previous example, let us say BMW has a choice between a cheap exoskeleton and a more expensive one with a proven record and excellent support.  BMW might still want to go with the more inexpensive device, but would it be able to get insurance for the employees wearing it?

Reliability vs. Cost

Device reliability and service speed sometimes ultimately trump unit cost.  A medical rehabilitation gym that relies on exoskeletons will not be able to afford to have units down for too long.  A medical provider will also not be able to tolerate random behavior by the exoskeletons or have unanswered questions.  The medical field is unique in that the exoskeletons have to operate entirely with usually frail individuals, yet the majority of rehabilitation providers will not have robotics specialists on-hand.  Similar to military exoskeletons, medical exoskeletons can not fail, but they also have limited engineering resources on-hand.  An excellent customer support and service team is what will distinguish companies from each other.

If you work for a company that provides a product look around and see if any of the departments have machines that can’t fail.  Pay specific attention to testing equipment in your manufacturing department.  Employees may remember the original price tag of the testing equipment.  Regardless of what the original cost was, no one will dare cut the maintenance contract because something as simple as a calibration error could cost the company millions of dollars in mischaracterized product.  Even if the maintenance contract over two to three years is more than the original device cost, it is paid and paid gladly.

OK, but isn’t this all self-evident?

Major players in the robotics industry have figured out that having a superior robot is not enough.  The robot has to be packaged with user-friendly instructions, work with minimum maintenance and customers have to feel safe that if something goes wrong, they have someone to lean on.  Having happy customers leads to higher name recognition.  For example, there are robotic vacuum cleaner robots that are mechanically far superior to the Roomba.  However, they just can’t match the name recognition.  Roombas look completely safe with their round shape that lacks a single harsh edge, and they have a fantastic reputation.

Building a happy customer base and providing a great service is critical for exoskeleton companies to turn a profit.  Even so, countless investors want to see an increase in unit sales, and they want to see it now.  This is just not the path for long term success.  Exoskeleton companies have to develop an entire package first that fulfills the customer needs with a well documented and maintained device(s).

Creating a full sales packages is not easy to do.  Most exoskeleton companies are focused on engineering and building the best product.  As exoskeleton companies escalate production, they have to allocate more and more resources from development to customer support and marketing.  This allocation of resources will take time and money.  Exoskeleton companies have had years to build and cultivate amazing engineering teams, and they are now repeating the process over again on the marketing and service end.

The power of a good service contract

In the long run, robots that are mission critical are valued not by their initial purchasing cost but by their service contract.  If a business relies on a device that has to stay up and operational they will pay anything to have it properly maintained.  Service agreements will allow exoskeleton companies to differentiate themselves from one another.  More importantly, it will create a safeguard against copycats and knockoffs.

A dishonest company can replicate an exoskeleton device and copy its manuals and application.  But that same fraudulent company will not be able to reproduce the customer support and service departments.  Supporting a robotics customer requires time, knowledgeable people and more often than not physical travel.  It requires the client to trust the exoskeleton manufacturer.  A reputation for dependable service can provide a shield for the current exoskeleton companies against future copycats.

Conclusion:

The exoskeleton companies are on the right track.  Rather than flooding the market with units they are generating and cultivating customer relationships.  The exoskeleton industry is collectively building a positive reputation.  ReWalk Robotics, Ekso Bionics, Hocoma, Parker Hannifin and others have sections on their website or online brochures dedicated to institutions that they are partnering with throughout the world.

On the military and industrial side, it is harder to track exoskeleton proliferation due to NDA agreements.  Companies such as Ekso Bionics, Lockheed Martin, and Laevo are cautiously selling and loaning evaluation units.  The exoskeleton developers are giving themselves the necessary time and resources to listen to customer feedback and incorporate it into their products.  This, in turn, makes it easier for insurance companies to cover workers using exoskeletons on the job.

Finally, in the long run, exoskeleton companies will not be differentiated by the product they provide, but by their total service package and reputation.  The companies with a positive reputation will also have a safeguard from future knockoff and copycat attempts.

5 Comments on Will exoskeleton companies turn a profit by selling product or a service?

  1. Great article with very right point of view. Thank you.

  2. Peter Thomas // October 24, 2016 at 3:05 pm // Reply

    I think you got it right especially since the tech is so new. Lease until the tech is worked out. You are also right that significant money comes from reduced injury rates and reduced insurance costs but it will take a few years to gather and affirm that data. I led the Navy side of this program and our primary goal was the reduction in shipyard injury rates. We estimated that insurance and injury time lost cost reduction alone would pay for the tech. Productivity and quality gains were gravy. Tremendous potential for this tech to improve the lives of industrial workers.

    • Thank you, Peter, for your insight! When you say the “productivity and quality gains were gravy” what do you mean? I have read several articles that say the same thing: workers could keep working for longer without taking breaks, but there was no measurable increase in productivity. To me, that sounds counter-intuitive. Is this taking into account reduced mobility for the worker to get from one station to another? Any non-confidential information that you can share to shed some light on this will be greatly appreciated.

  3. Peter Thomas // October 25, 2016 at 11:11 am // Reply

    The mechanical advantage that an exo like FORTIS brings to certain tasks like overhead grinding is spectacular. However, tripling the productivity of one step in a ten step industrial process probably won’t significantly affect the overall output of the product. The real impact is that you will need fewer workers to do that one step, they will do better work because they won’t be fatigued, they will remain in the job longer, and they will have fewer injuries. The hidden costs of insurance, disability claims, training, sick days, and rework will be reduced significantly. The business guys will tell you that is where the real money is and the worker will tell you his life just got a whole lot better. What no one is talking about yet is the opportunity to design a whole new heavier set of “hand tools” to equip the exo. If you want to talk offline, send me an email.

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