Evaluating Vertical Markets and Use Cases

Choosing the Game & The League

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Choosing the right vertical market

Robotics is not a standalone industry—it is a technology asset class with a wide range of applications across the largest, most essential global markets.

At the most fundamental level of evaluating a robotics solution, consider the vertical market for which it is being developed. Both the market, and the customers within that market, must show signs of readiness to adopt robotics.

Note on General Purpose Robotics: General-purpose robotics may struggle to succeed, especially in B2B applications, where focusing on specific verticals is often more effective. Each vertical has its own unique challenges and requirements, making it difficult for a general-purpose solution to address them all effectively. A more focused approach on a single vertical allows companies to meet the specific needs of businesses, which increases the chances of success.

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Market Readiness

Demand Indicators

  • Labor shortages and/or high labor cost
  • Repetitive tasks
  • High pressure for productivity, throughput, and predictability
  • Increased demand for customization, mass production, quantities of one-of-one end products
  • One (maybe two) market leaders pioneering robotics (ex. Amazon in supply chain)
  • Underserved by automation
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Vertical Market Segment Insight

B2B and B2B2C are market segments with high likelihood to adopt robotics

B2B markets are best suited for robotics adoption. Product requirements are more favorable because B2B settings are often in structured environments with less variable tasks. Employees and end users have technical knowledge or can be trained. Human-robot interactions are more defined. Even though there is a long ramp time in B2B, it is ultimately easier to get early adoption with large-scale potential.

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Examples of robotics-friendly markets:

  • Manufacturing
  • Supply chain and logistics
  • Healthcare
  • Construction
  • Agriculture
  • Aerospace and Defense
  • Climate Tech

Markets with indicators for future robotics adoption:

  • Space
  • Energy
  • Utilities
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B2C market segment has a lower likelihood to adopt robotics

Consumer is historically the “go-to” market sector for new tech innovation due to large markets, fast adoption with high volumes, and typically more relaxed performance and environmental requirements. However, in robotics it is the toughest market to penetrate—use case criteria, product development and cost considerations are all major challenges. It’s worth noting that robotic vacuum cleaners are the only exception in this category so far.

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SO WHAT:

  • B2C has historically seen multiple failures in robotics startups, i.e. Jibo and Anki. Operating robots in the presence of the everyday consumer in uncontrolled environments with the highest safety requirements with the most cost-sensitive customers is an extraordinary challenge.
  • Advancements in robotics and AI is bringing the robotics industry closer to meeting this challenge, but carefully considered product development and go-to-market strategies will be required to ultimately be successful at scale.
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Customer Readiness

Internal indicators

  • Tech-friendly, early adopters
  • Clarity around problem set that can be addressed by automation
  • Safety concerns for human workforce
  • Tolerance for workflow changes
  • Availability of capital for pilots and experimentation, R&D
  • Customer willingness and ability to pay

External indicators

  • Mission critical macro pressures that set the stage for disruption, i.e., Climate crisis, food and water safety, global affordable housing, aging population and health crisis
  • Critical market pressures forcing need for change now, such as dramatic productivity improvements are needed while labor shortages are worsening
  • Global competition, i.e., the push to reshore manufacturing requires robotics, and leading drone capability is critical to military strength
  • Regulatory changes that make it easier for new tech adoption
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SO WHAT:

  • Market Readiness and Customer Readiness VARIES A LOT and there are certain applications that are absolutely NOT ready to adopt robotic solutions today
  • Proceed with caution, deeply analyze the market and customer readiness, and be sure that the expected adoption timelines will be acceptable
  • Just because the robot could solve the problem doesn’t mean it is a good problem to go solve and build a high quality business around. Don’t fall into the “early adopters trap”
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Choosing the Right Use Case

There are 3 primary considerations for entrepreneurs and investors when evaluating a robotics startup’s target use case in a particular vertical market. These are:

  1. Operating Environment
  2. Scalability
  3. Defensibility
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1. Operating Environment

a. Indoor vs. Outdoor

Indoor Characteristics

  • Structured layouts enabling efficient path planning and optimization
  • Stable and predictable temperature and weather conditions
  • Electronics designed for optimized performance without concerns about external conditions
  • Relatively lower maintenance and support costs
  • Enhanced reliability and cost-effectiveness in operations
  • Opportunities for seamless integration with existing indoor systems and workflows
  • Available and reliable wireless connectivity
  • Power and charging access points

Examples of Indoor Environments

  • Warehouses
  • Factories
  • Life Science Labs


Outdoor Characteristics

  • Unpredictable terrain and weather conditions
  • Temperature fluctuations and potential corrosion challenges (rain, dust, snow)
  • Necessity for extremely robust electronics and materials
  • Physical security issues
  • Higher maintenance and support costs due to wear and tear
  • Connectivity issues, especially in remote areas
  • Dependence on reliable location-based services for autonomy
  • Distinction between private and public outdoor environments, each with its own complexity and cost implications

Examples of Outdoor Environments

  • Farms and orchards
  • Cities
  • Mines
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1. Operating Environment

B. Structured vs. Unstructured Operating Environments

Characteristics of Structured Environments

  • Gridded layouts
  • Human travel lanes
  • Defined work cells
  • Fixed locations for automation execution
  • Minimal change in environment over time/low instances of unexpected obstacles and traffic

Examples of Structured Environments

  • Warehouses (with aisles and shelves)
  • Farms with row crops
  • Factories

Characteristics of Unstructured Environments

  • Vast set of edge and corner cases
  • Less able to optimize a robotics solution
  • More sensors and computers to navigate these environments
  • More planning for safety required
  • Unplanned congestion
  • Unexpected obstacles

Examples of Unstructured Environments

  • Construction sites
  • Hospitals
  • Urban sidewalks
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1. Operating Environment

C. Human-Robot Isolation vs. Co-working Environments

Human-robot collaboration

  • Humans and robots work closely together, sharing the same workspace
  • Requires safety measures and protocols to ensure seamless interaction
  • Finding the optimal use of robots while humans assist in the more complex tasks, i.e. Locus AMR with workers doing the pick and place

Independent robot operation in human environments

  • Robots operate autonomously among people without direct human interaction
  • Requires a level of adaptability and responsiveness from the robots
  • Safety mechanisms, such as detectable clothing, may be employed to prevent accidents
  • In many cases, this proves to be more expensive with low efficiency and throughput due to the emphasis on detecting and avoiding humans

Isolated robot operation without human presence

  • Robots operate in environments with no human presence, i.e. solutions like Kiva and traditional industrial arms
  • Robots are able to move swiftly and carry heavy loads without human interference
  • Despite its efficiency and cost effectiveness, this category may have reached a plateau due to limited applications or the need for a complete change of the workflow and operational processes
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SO WHAT:

  • It is important to focus deeply on a specific use case in large B2B market/use cases while seeking out adjacent market opportunities over time for the same product
  • Today, there are very few examples of successful robotics companies with general purpose robots that are targeting many markets and applications. Foundational robotics AI models and Humanoids are the obvious examples that could change the prospects for general purpose robots in the future.
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2. Scalability

Large markets with large vertical use cases are just the beginning of a business case assessment for robotics. Other key considerations are:

  • Degree of target problem complexity:
    • Task variability vs. uniformity
    • Projected cost to develop vs. the solution cost
  • Ease of deployment, integration with existing workflows, and ease of maintenance
  • Consistent deployment environment, manageable number of edge cases
  • Manageable setup, deployment, and/or breakdown times, i.e.the overhead associated with utilizing the solution
  • Low oversight needed, with ability to “set and forget” performance of the task
  • Large potential use of  a robotics solution within single customers
  • Potential for solution to apply to other high value use cases in adjacent markets
  • Adaptability of the product to various projects and customer requirements
  • Frequency of utilization of the robot once deployed
  • Manageable product complexity
    • Few subsystems, redundancies, points of failure, modes of operation
    • Feasible component production
  • Limited reliance on custom projects and the potential limitations it imposes on scalability
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3. Defensibility Criteria

There is a robust list of options to differentiate and protect robotics businesses.

  • Deep industry experience and customer connections – historically a weakness for robotics entrepreneurs but there are now many great examples today
  • Access to unique data sets, especially physical world related data
  • Execution Speed: fast prototyping, short manufacturing cycle times, fast and easy to deploy, quick to reach economies of scale
  • Superior field reliability and high uptime performance
  • Strong personal and/or company brand and reputation – often overlooked by robotics companies
  • Exclusive strategic partnerships with market leader
  • Ease of Adoption – Integration with existing systems and workflows
  • Influence over industry standard
  • Data Networking effects -the ability for robotics and Industrial AI products to continuously improve with each deployment, each real world use case experience
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Vertical Markets
Use Cases