“Consumer Electronics Revolution”- Cerevo, a Japanese startup with the idea to revolutionize household electronics is not only producing revolutionary products but it also is a key player in building of the Japanese hardware startup ecosystem.
Since its founding in 2007, Cerevo has received frequent media exposure for their products such as the world’s first 3D printed IoT bicycle, an internet connected smart key switch, and a smart snowboard binding that sends records of your snowboarding skills to your smartphone.
We were given the opportunity to sit down with Kenichi Matsumoto, the director of Cerevo, to understand what it is that they see for the future of electronic devices.
No presentations or proposals. Just ideas.
—Thank you for meeting up with me today. I heard Cerevo makes products ranging from bicycles to robots. Can you let me in on the process of how ideas become actual products?
Kenichi: At Cerevo, our main communication is through a messaging app, so we’ve made it a habit to send each other messages whenever ideas pop into our heads. When our boss looks through the message thread and finds an idea he likes, we start developing it into a product. A feature of this company is that we don’t have to submit official business proposals or anything, so employees can express and share their new ideas freely.
—I see! Do you guys have a criterion when it comes to choosing ideas to develop?
Kenichi: Cerevo is a company that supplies global niche products into the international market. A global niche market is a field of products that can be called ‘niche’ around the entire world.
Large electronic manufacturing companies have to develop products that satisfy the demands and needs of a large market.
Here at Cerevo, we do the exact opposite. We create and sell products that satisfy the needs of the few in one country, but then we increase the market by selling to 100 countries.
So, the ideas we make into products are ones that have a high demand in the niche market. They all have core concepts that make people say, “This is what I want!!” We believe in marketing our products through knowledge about the product, so we put effort in making sure the product is easily understandable by its design.
—What do you mean by this?
Kenichi: For example, there is a smart toy called the “Dominator” that we have released on presale this year. It’s actually a replica of a weapon from the popular anime “PSYCHO-PASS”. We had the director of PSYCHO-PASS supervise this entire project to make this an identical replica of the one in the anime. The measure of the product is the exact measure according to the anime and it also has over 100 voiceover phrases recorded by the actual voice actor of the Dominator in the anime installed in it.
The retail price of the Dominator is 79,800 JPY, but the “Special Edition Dominator”, the model that uses natural rosewood is set at 89,800 JPY. Despite this high price tag, we received orders from all over the world and the total number of orders was beyond our imagination, I think in the thousands.
—That’s so interesting! How do you make these creative ideas into prototypes?
Kenichi: We change the location and method of prototyping depending on the stage of production.
Most of the time we make them with 3D printers ourselves or order it from China.
When the product is only at the very early stage of being just an idea, our in-house engineers make the prototype with the machines at DMM.makeAKIBA.
We usually complete the developing of technology in-house, and then when we have decided on the product specification, then we outsource the production. When it comes to mass production, we tend to use factories in China.
DMM.makeAKIBA: Providing everything makers need
—We are using DMM.makeAKIBA for our interview here today as well. Can you tell me a bit more about this coworking/makerspace?
Kenichi: I think you might have seen advertisements around town or YouTube commercials with Takeshi Kitano of DMM.makeAKIBA.
DMM.makeAKIBA has the concept of “providing everything makers need”. Starting with 3D printers, thermal shock testing machines, 3DCAD, and oscilloscopes, we are equipped with the latest equipment, worth about a total of 50 billion yen of machines and tools necessery for performance testing.
With software development, all you need is a computer, but for hardware developers, the initial capital needed to start developing a product becomes a huge strain. That’s how DMM.makeAKIBA came to be. It is a member’s only coworking space to create an ecosystem for hardware startups.
—At DMM.makeAKIBA, I know you mentor other hardware startups. What is one advice you have for those in the hardware startup ecosystem?
Kenichi: When you’re starting up, there is no way to avoid accidents. That’s why you need to have to have extra capital, time, and people; basically extra everything to always be prepared for the worst-case scenario.
Just having people with experience in mass production around you gives you access to information and ideas you wont be able to find anywhere on the Internet or in books.
Companies that are developing their first product tend to make goals that are impossible to achieve. They say, “We are going into mass production in 3 months” when they still only have their first prototype and don’t even have a certificate of authorization or their product does not follow the Radio Act. Plus there are additional restrictions about bringing in electronics on airplanes now and the accumulation of hidden problems such as these can become the cause of failure for some of these startups.
—Does DMM.makeAKIBA provide all-inclusive support for these issues?
Kenichi: It’s not exactly a hands-on approach, but we do provide the environment where there you are surrounded by hardware startups and so you are more aware of these problems.
For example, here at DMM.makeAkiba we have a machine in which its sole purpose is to shake packages. I know everyone probably thinks, “Who really needs this?” But the reality is that you need to make sure the contents of packages don’t break during when they are getting shipped overseas.
Just by working at DMM.makeAKIBA, you are made aware that there is such a problem that one could potentially run into.
How to fill in the “Death Valley” of mass production
—Your company has been able to successfully bring many products into mass production. How do you choose which factories to choose?
Kenichi: We don’t have certain factories that we are longtime partners with. Instead, we choose the most appropriate one from our list of factories for every product that we produce.
We generally do small lot productions so we choose factories that can match the number of lots we require.
Recently, we also ask OEM factories we meet at exhibitions in Hong Kong that take place twice a year. And then there are also overseas factories that we chat with through Alibaba.
—So you usually use factories in China?
Yes. Not just in terms of cost, but I feel it is much easier for hardware startups to do business with factories overseas than in Japan. The differences in business practices between Japan and ASEAN countries, and the cost and speed of production of factories overseas better fits startups.
—There are factories all over the world, so what are your criteria for choosing one to use?
Kenichi: Simply put, it is how well they respond. Projects overseas depend on smooth communication so the first criterion is whether doing business through Skype and messages on Alibaba is the norm in that area or not. In Japan, signing a contract can take up to a whole month.
The second criterion is whether the manufactured product is of high quality. After they make and send us the prototype, our CEO Iwasa and engineers head on over to the factories and check on the production procedure, the condition of the production line, and meet with the factory owner and to make the final decision.
—At Cerevo, you already have several products that have successfully entered the retail stage. How did you overcome problems that startups face when going into mass production?
Kenichi: We calculate everything with the assumption that it is going to go into mass production. Even when we are still only building the prototype, we try to make it as close to a product that could be built in factories so that we don’t risk the chances of not being able to create the same product when it comes to mass production.
—That’s very interesting! Usually hardware startups on crowdfunding sites such as Kickstarter take the exact opposite approach. They first make prototypes of their ideas with 3D printers and Raspberry Pi, and only after they raise funds do they start thinking about how to mass produce their products. That’s the reason why they run into so many problems during the switch to mass production.
Kenichi: Exactly. In addition, our products use a maximum of 1,000 or 2,000, small lot production and so we can’t ask major EMS companies (electronics manufacturing services). That’s why we use small factories in China that can take requests of smaller quantity.
Seizing the global niche market by doing the opposite of large electronics corporations.
—Cerevo makes electronic devices that, starting with their physical appearance, differ from other companies. Can you tell me how this this unique company began?
Kenichi: Our CEO Iwasa and I originally worked at Panasonic where we were building a network service for digital cameras. It was around 2004 when the idea of connecting household electronics with the Internet was very new and interesting.
Back then, the company was concentrating on how to increase the size of TV screens. These kinds of product improvement and development are very common in large corporation and are what they excel at.
However, our product development department concentrated on IoT and connecting the Internet with electronics. Working in that department, we thought we would have much more freedom and speed creating completely new products that could effect people’s daily lives if we had our own independent company rather than continuing to work inside of Panasonic. So we decided to startup.
—So that’s how Cerevo was founded?
Kenichi: No, not yet. When we just started in 2007, we were still only producing general commodity products for the mass crowd. However, we realized that in this market, we would never be able to compete against the major corporations who have hundreds of people working on creating and improving the same kind of product that we were making.
That’s when we pivoted and decided to create niche products that are highly demanded by about 100, 200 people in each country. However, by selling and marketing to the entire world, and the products would be sold at a high price of about 100,000 to 200,000 JPY. We realized we could focus on this global niche market and make it Cerevo’s strength.
Working to change the ways of society through the creation of new products.
—As a company that has been working on IoT since the 2000s when IoT wasn’t even popular, what do you see for the future prospects of Cerevo?
Kenichi: Apple products such as the iPhone and MacBook are easy to use as examples. When you look around, you see that 5 out of 10 people are using the exact same product. What we want to do is create a world where 10 out of 10 people have their own different gadgets and electronic devices: a world where people can choose their devices according to their personal needs, just like with clothing!
To be honest, it doesn’t matter what we make. Isn’t it strange that there aren’t any companies that make gadgets that aren’t TVs and cellphones? Companies that create products that help make our daily lives just a little more rich. I think there must be companies that can supply the demand of even a small group of people. In order to do that, we need small lot production and makers willing to satisfy diverse sets of needs. We want Cerevo to be the leader in this field.
—Lastly, can you tell me a little about Cerevo’s vision?
We want to keep penetrating the global niche market and continue creating niche products.
We currently have over 10 products on the market, but I think if we can increase this number to, lets say, 25, then we would start to see a pattern in the business model. We hope to spread the use of this pattern not only in our company but also in other aspects of society.
I was personally very interested in Cerevo ever since I read about them and was impressed by how they have such a strong fan base of their unique products.
Sitting down at a Starbucks, I see that 8 out of every 10 people are using iPhones, and everyone on their laptops is using a MacBook. I myself an iPhone user and am currently writing this article on a MacBook. Kenichi’s vision made me realize how strange it is that we are all using the same products when we are all very different people. The interview left me musing over what the world would be like if everyone had different electronics and gadgets as we have with clothing.