Case Study: Lully's OEM Solution
How have Highway1 startups solved some of the big problems that affect hardware companies?
Do you have to design your product from scratch, or is there value in using off-the-shelf technology? A lot of factors go into this decision, not all of them obvious. Lully, a Highway1 alum, used an OEM solution to great effect. Let’s take a look at their approach.
Lully’s product, the Sleep Guardian, is a smart device that lives under the mattress and vibrates on command, causing the person sleeping to partially awaken. It’s a highly effective treatment for anyone suffering from night terrors, which commonly afflict small children — families whose kids have night terrors tend not to get a lot of sleep. When they were starting out, Lully was creating a new product for a completely untested market whose size they could only guess. Were they going to be able to reach their customers? Would they pay for a device that solved their problem? How much? On top of all these unknowns, there was also the usual lengthy development path for any hardware device to consider, a journey of 12-18 months at least. Did they have enough runway to make it? Was there a faster way to market?
What Lully knew they needed was a study that would help validate their market and put some data on the board they could use to triangulate a price point, and an MVP with which to run said study. As they were exploring their options, the Lully team came across a vibrating pod about the size of a hockey puck designed to go under someone’s mattress and wake them up: it was an alarm clock for the deaf. With a little tuning, this pod turned out to be ideal for their purposes; all it needed was a PCB with a BLE module to make it smart. This was a much smaller challenge, shrinking the scope and development path to something like 4 months to execution instead of 12-18.
- Lully got to launch their study faster, and learned that their MVP was almost shockingly viable in many senses of the word; they also got the price point data they were looking for.
- Lully got to market 3x quicker than they’d anticipated, and are already on the third generation of their product. A more conventional approach would have just yielded their first launch.
- In getting to market quicker, Lully learned from their users which features to prioritize and the best ways to implement them.
Thinking about going off-the-shelf with some aspect of your hardware? Lully CEO Varun Boriah has some advice:
“If you’re considering going with an OEM model, the first thing you should do is define your need: the problem you’re trying to solve. Then, list your must-have and nice-to-have criteria. Your OEM solution has to meet all your must-haves as a baseline; how far you go down the nice-to-have list is optional.
“OEM makes sense if the actual hardware isn’t your secret sauce. All our effort and IP was on the app development and the algorithms we were designing. Your dollars are better spent working on your IP and what brings value to the company. If your custom solution’s going to take you a significant amount of time, does the risk profile of the business justify doing all that development before validating your market?
“OEM solutions are definitely more expensive: your cost of goods sold is significantly higher because you’re paying someone else’s margin, and it makes your bill of materials bigger. For the first six months, we went pure OEM. Once we saw more market traction and the volume started justifying an effort to reduce our costs, we went down the route of custom tooling and integrating the technology.”