Taking Robots for a Ride
Germany's Kuka found new growth by turning industrial machines into theme-park attractions and movie stars.
(Business 2.0) – The KR 500, designed to lift car parts, is sold by Kuka Robotics, Europe's largest manufacturer of automated industrial machines. In 2000 several Kuka engineers wondered aloud whether the KR 500 could also lift people. "We could attach a chair to the end of it," one said. "It could make a fun ride." At any other industrial manufacturer, such an idea might have been laughed at and forgotten. But at Kuka, which has long built robots not only to perform but also to delight, it breathed new life into the company. Just five years ago, Kuka was a century-old supplier of manufacturing equipment whose profits were disappearing because of its overreliance on automakers. By taking on its engineers' challenge to break down the barrier between man and machine, Kuka has found lucrative customers in a range of new industries and made its robots the stars of internationally renowned action movies and theme parks. Says Donald Vincent, executive vice president of Robotic Industries Association, "Kuka has stretched the envelope in growing new markets."
From its earliest robot-marketing days, Kuka has behaved more like an attention-hungry consumer brand than a staid industrial one, in part because it came late to a crowded sector. The Kuka Group was a pioneer, selling its first robot to Mercedes-Benz in 1973. But two decades later, Kuka's owner--the holding company Industriewerke Karlsruhe Augsburg IWKA--had yet to commit to robots as a business, selling them only in conjunction with welding equipment. In 1996, however, Kuka chief technology officer Bernd Liepert persuaded IWKA to create a wholly owned subsidiary, Kuka Robotics, to make and market robots. The company hired a designer who crafted a sleek robot style and an instantly recognizable color, known as Kuka orange. "We wanted to touch people's hearts," says Kuka chief operating officer Martin Straeb. The branding paid off: Within two years Kuka was Germany's biggest supplier of industrial robots and boasted international clients such as BMW, DaimlerChrysler, and Ford.
By 1999, however, prices for car-manufacturing robots had fallen to less than 30 percent of the going rate a decade earlier. With about 70 percent of its revenue coming from automobile manufacturers, Kuka saw its profits vanish, and Liepert, who became CEO of Kuka Robotics in 2000, was looking for new markets. No wonder he was open to the idea of a robot flinging around a seated human. After the brainstorming session, he spent two years turning Kuka's robots into theme-park attractions, consulting with security experts, regulatory agencies, and doctors. The result--nicknamed the Robocoaster--is capable of 1.4 million combinations of programmable twists, swirls, and loops. The first one made its debut at a German trade show in 2002; since then 70 Robocoasters have been installed at amusement parks in Europe, North America, and Brazil. The newest showed up in May at Legoland in Carlsbad, Calif., where it spun more than 4,000 guests in its first two weeks.
Crucial to Kuka's success in selling to amusement parks was that its robots looked great: They had already won awards for their designs, beating out even high-tech consumer gadgets. Style also helped Kuka robots land roles in Hollywood. After a Kuka demonstration for the producers of the 2002 James Bond flick Die Another Day, the filmmakers added a scene in which Halle Berry fights laser-firing Kuka hunks. Kuka provided its robots and support staff but paid no product placement fees, an arrangement that has since worked with other films. Kuka robots appeared in 2003 in Lara Croft Tomb Raider: The Cradle of Life and more recently in Thunderbirds.
With sales of 8,000 robots last year, Kuka is now the fourth-largest industrial robot manufacturer in the world, behind Fanuc, Motoman, and ABB. About $25 million of Kuka's $520 million in 2004 sales came from its burgeoning entertainment business, and other new applications--including using robots to assist in brain surgery--have diversified Kuka's business so that carmakers now account for only 50 percent of the company's revenue.
Kuka is still vulnerable to the auto industry's ups and downs: In the first quarter of 2005, the company lost $4.3 million thanks to the auto slump. But with profits in nine of the last 10 quarters, Kuka has truly transformed itself. In fact, Guy Wyser-Pratte, a U.S. investor who owns a large stake in IWKA, has waged a public battle to get the company to sell off other businesses so it can capitalize on Kuka's robot unit, which has been growing about 8 percent annually since 2001.
Of course, the search continues for new robot applications. COO Straeb says Kuka hopes to one day sell machines to help senior citizens carry things and perform chores. "This will take longer than many in the industry think," he concedes. But if mechanized maids do become reality, Kuka's consumer-marketing approach to seemingly faceless corporate customers should serve the company well. "It's never companies buying from companies but people buying from people," Straeb says. "We all have emotions."