Book Excerpt September 3, 2010, 4:00PM EST

Book Excerpt: Trade-Off

In Trade-Off, Kevin Maney writes about how the Roomba fits into what he calls the "fidelity/convenience trade-off"

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Once in a while, a huge, sweeping innovation creates a strategic inflection point that entirely changes an industry. Digital cameras had that kind of impact on the consumer film industry. Personal computers did the same to the mainframe computer business. But such innovation is rare.

There is a more nuanced and common form of innovation that fits into the fidelity/convenience swap—the trade-off between the fidelity of an experience and its convenience—and it's more like the invention of a feature that gives an edge to an age-old product. Consider the Coors Light "cold activated" label. It's pretty hard to differentiate midprice beer. Coors thought it would try to add a little fidelity in 2008 by making a label that changes color when the beer inside gets cold. (Hard to know how big a role the added fidelity played in getting people to buy Coors Light instead of another beer, but Coors Light has become Coors's best-selling brand.)

Most companies are not the super-fidelity leader nor the super-convenience powerhouse. Competitors tend to cluster around each other in the same area on a fidelity/convenience chart. To gain an edge, these companies have to decide whether to move up a notch in terms of fidelity or down a notch in terms of convenience. Some find imaginative ways to add features or quality for the same price or to keep pace with existing features and quality and drop the price. Small moves can bring small victories. Truly creative ideas, on the other hand, can change the dynamics of a market. This can happen in fast-changing industries, such as computers, or in mature, seemingly static sectors—like vacuum cleaners.

Dreaming of Clean Floors

Colin Angle never thought he'd be in the vacuum cleaner business. As an undergrad at the Massachusetts Institute of Technology in 1988, he got involved with the university's famous Artificial Intelligence (AI) Lab, run by one of the foremost thinkers about robotics, Rodney Brooks. A couple of years later, Angle, Brooks, and another student from the lab, Helen Greiner, started a company to design and sell commercial robots. They didn't yet know what those robots would do, but Angle said he kept getting hints. "I could bet that if I [were] introduced to someone who was not a techie, nearly every time they'd say, 'When are you going to make a robot to clean my floors?'"

Angle would smile and nod, while the company—eventually named iRobot—worked on robots that could find underwater mines and did other dangerous things for police and the military. Two projects changed the company's course. One was a partnership with S.C. Johnson to make a high-priced industrial floor-cleaning robot. The other was a deal with Hasbro to put artificial intelligence into a doll called My Real Baby—a partnership that taught iRobot about the challenges of low-cost manufacturing. Between the two, Angle started thinking about all those requests for a floor-cleaning consumer robot—and decided iRobot should make a robot vacuum that cost $200.

The price point was important. The folks at iRobot didn't want to make an expensive toy that happened to clean floors; they wanted to make a competitive vacuum cleaner that could clean floors by itself. In the vacuum-cleaner market in the 2000s, you'd find a cluster of simple models that cost around $50 or $60, and another cluster of more robust models that cost $150 to $200. Angle wanted to compete against the robust models, matching their fidelity. In other words, he wanted his $200 robot vacuum to clean floors just as well as a $200 traditional vacuum. For decades, the cluster of $150 to $200 vacuums jostled with each other in a rather small range of the sector's fidelity/convenience trade-off. Some lowered prices a bit to compete on convenience. Others added an extra nozzle here or a control there to differentiate on fidelity. But you didn't find many bold leaps in the vacuum-cleaner market. Most people who had a 15-year-old vacuum didn't feel they were missing much.