Softbank Robotics introducing Pepper
“Sold Out”. 10:00 AM on June 20th, 2015, Softbank Robotics released its first wireless humanoid robot on earth in its website – and at 10:01 AM, registration closed. 1,000 robots were sold out in less than one minute. Here I would like to introduce Softbank Robotics “Pepper”, as one of the most effective early stage business model in the world.
Softbank unveiled “Pepper” in 2014, the first revolutionary wireless connected humanoid robot for consumers. Softbank Robotics was established in 1st of August 2014 as a 100% subsidiary of Softbank Group to solely focus on Pepper business. Pepper is a communication robot. It intends to pull out demand for communication, entertainment, and promotion. Although the ability to communicate with the human is still limited, Pepper can interact with people through its vocal communication, physical gesture, and 10.1-inch display.
To attract consumers and generate profitable business, Softbank Robotics effectively leveraged its product strength, creators community, and subscription model of Softbank group telecom business.
(1) Subscription business
Softbank’s breakthrough against consumers’ negative perception to pricy robots was brought by implementation of mobile subscription model. Already one of the most famous and successful company in Japan, Softbank shrewdly announced its product for the insane price of approximately $1,650 which shocked the media and Japanese for its insanely low pricing.
(Currency 1USD = 120 Yen)
In reality, including the mandatory 36 months subscription and maintenance fee, the total cost accumulates up to $10,000 in a long term. Still, consumers were attracted to Pepper because of its low purchase cost.
(2) Robot creator community
Softbank Robotics successfully nurtured “robot creator” community that creates the ecosystem of Pepper users. Just as Threadless created T-shirt designer community, the community worked as gaining retention and attraction of both existing users as well as newcomers.
To generate long-lasting community, Softbank tirelessly launched “Pepper Creator Certification” in order to authorize qualified creators. In addition, it opened “Pepper Pioneer Club” who will gain benefit to sell robotics app which will be opened soon. To incentivize competition, Softbank continuously hold “Pepper’s Creator’s Contest” and reward those who made interesting apps.
(3) Softbank group synergy
Unlike other robotics ventures which often struggle with promotion, Softbank Robotics successfully managed to save sales and promotion cost through utilizing business asset of Softbank mobile. Using Softbank group’s mobile phone store network all over Japan, Softbank Robotics provided the demonstration of Pepper at each of Softbank stores. Also, they bundled Pepper promotion in line with mobile service advertisement – thereby minimizing the cost of promoting innovation while maximizing existing promotion channel.
(1) Mass production and wireless function
Outsourcing production of Pepper was a key success factor to transform a dog into the cash cow. Softbank outsourced the manufacture of Pepper to Foxconn, the world’s largest EMS (Electronics Manufacturing Service) based in Taiwan, a drastic change from its high-cost production in Aldebaran, France, where it held “job shop” production model.
Through drastic outsourcing, Softbank Robotics drastically changed its cost structure within a year. Especially, it (a) lowered labor costs compared to the previous factory in Aldebaran, (b) utilized line production knowledge that Foxconn accumulated through electronics manufacturing, and (c) minimized procurement costs of robot parts by use of bargaining power and bulk purchase.
Moreover, Pepper embedded wireless connection as a default function. This enabled Softbank Robotics to start with a monthly subscription business model from the start.
(2) Software integration of intellectual properties
For all Pepper owners, online-accessible SDK platform is provided. Robotics apps may be created through SDK to create the wide range of application from simple movements to advanced customization using widely available languages. To assist beginner creators, SDK education programs are provided by Softbank Robotics, which was called “Aldebaran Atelier” for all robot creators with no charge.
Alignment with operating and business model
Through effective alignment between business model and business model, Softbank Robotics seems to make ecosystem that enables long lasting business.
Although the disclosure is limited because Softbank Robotics is a private company, Softbank Robotics has been able to keep its zero inventory since its start of Pepper introduction. Moreover, rumors tell that Pepper business already exceeded the breakeven cost for their variable costs, and partly covered fix costs.
Furthermore, Softbank already took a footsteps into global expansion. On June 18, 2015, Softbank publicly announced that it will expand Pepper sales in collaboration with Alibaba and Honhai. Moreover, as Softbank owns Sprint, introduction to Sprint stores in US is now discussed internally. Be prepared to see Pepper robot in Sprint shop soon!
Most of source based on interview from Softbank Robotics employees