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RETHINKING

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RETHINK ROBOTICS

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Abdullah Alreziza, Abhijit Kulkarni and Ricardo Alejos (IMD EMBA 2021) prepared this
case under the supervision of Professor Patrick Reinmoeller as a basis for class
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discussion rather than to illustrate either effective or ineffective handling of a business

situation.
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Copyright © 2023 by IMD – International Institute for Management Development, Lausanne, Switzerland
(www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form
or by any means without the prior written permission of IMD.

This document is authorized for educator review use only by engy youssef, IE Business School until May 2025. Copying or posting is an infringement of copyright.
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RETHINKING RETHINK ROBOTICS

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RHEINBÖLLEN, GERMANY, OCTOBER 2018. Thomas Hähn and Philipp Unterhalt of HAHN
Automation, a German machine builder with a global presence in the automotive,
consumer goods, electronics and healthcare industries, had just learned some disturbing
news. Rethink Robotics – the pioneering Boston-based start-up that had almost single-
handedly created the field of collaborative robotics – was on the verge of bankruptcy.

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HAHN Group was Rethink Robotics’ largest distributor worldwide. Less than 18 months
earlier, after taking a small stake in the company, HAHN had placed an order for 200
units of Sawyer, Rethink Robotics’ flagship cobot. Now the company needed to think
fast. There were at least three courses of action it could take. It could let Rethink Robotics
fail and invest in its own R&D. Another option was an asset deal to secure Rethink
Robotics’ key assets. Finally, it could seize the opportunity, acquire Rethink Robotics

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and gain a leading role in collaborative robotics.

RETHINK ROBOTICS
Originally called Heartland Robotics, Rethink Robotics was founded by Rodney Brooks
and Ann Whittaker in 2008. 1 In nine funding rounds, the company had raised $149.5
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million from major venture capitalists, including GE Ventures, Goldman Sachs, Bezos
Expeditions, Highland Capital and Sigma Partners. 2 The company’s first robot, called
Baxter, was a dual-arm cobot with patented technology based on the use of series elastic
actuators (SEAs). Highly sensitive joints allowed the robot to detect contact with a person
or object and stop immediately, without the need for human intervention. Its second
product, Sawyer, was a one-armed light robot, and it caused a sensation when it was
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launched in 2015. It used the same joint technology as Baxter, but featured significant
improvements in terms of strength, reach, speed and precision thanks to Intera, the
accompanying software application.

Rethink Robotics had traveled a road taken by many US technology start-ups: It had a
founder with strong ties to important academic and research institutions, a staff of
technology experts and high-profile engineers, and backing from proactive venture
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capitalists interested in highly innovative products. Finally – unlike in the US, where
switching jobs was common and often necessary to get ahead in the tech industry –
Rethink Robotics had been able to retain its valued employees. Its closest rival, Danish
company Universal Robots (UR), founded in 2005, had taken a different path. UR’s three
founders had been funded by one of Denmark’s largest incubators and the Danish Export
and Investment Fund. 3 After years of sales growth, the company was acquired by
Teradyne in 2015 for $285 million. 4 Subsequently, it expanded exponentially to become
a leading collaborative robotics company and established a strong presence in Boston.
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Rethink Robotics, by contrast, had remained independent. Similar to UR, Rethink

Robotics had offices in Boston, with a great deal of floor space and a current lease.

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RETHINKING RETHINK ROBOTICS

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Sawyer and Intera
Rethink Robotics’ flagship product, Sawyer, was a cobot designed to move light parts
(up to 4 kg) in a range of industrial settings and to perform tasks such as machine
tending, pick-and-place, testing, and line loading and unloading. Its unique collaborative

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capabilities and flexibility made it very popular. Sawyer could be programmed by intuitive
software and “teach by demonstration” techniques. Unlike conventional robots, Sawyer
featured compliant motion control, a patented system in which force sensors in each joint
enabled it to “sense” obstructions or contact (such as when a person touched the arm)
and quickly stop the task underway. This sensitivity enabled unparalleled adaptive
repeatability – a key differentiator for Rethink Robotics – and allowed Sawyer to be
deployed alongside people in a variety of settings. The intuitive software provided a

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flexible and immediately operational interface with Sawyer, allowing the cobot to perform
simple and complex tasks along the production and supply chain. Intera piloted Sawyer
via the control panel on its arm or body. Changes to the Intera interface could also be
made via a laptop. Unlike most other robots on the market, Sawyer had no touchpad or
control box, and it could be operated by employees with no programming experience.
This reduced integration time and deployment costs. lntera served as a central controller
for other devices that interacted with the robot. When the entire work cell was controlled
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through lntera, data collection, aggregation and analysis led to better decision making
by operators. With this ability to connect and coordinate a work cell, Sawyer and Intera
brought a new level of collaborative technology to the factory shop floor.
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HAHN GROUP
In 1992 Thomas Hähn founded Hähn Engineering, the predecessor of HAHN
Automation, whose headquarters were in Rheinböllen, about an hour outside of
Frankfurt. The company began designing and manufacturing handling devices for heavy
loading equipment, and soon became an important automation company primarily
serving the automotive industry. Small- and medium-sized companies (the so-called
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Mittelstand) are the foundation of the German economy; many of them are family-owned
and they often have local roots. Like many of them, HAHN considered people to be its
most valuable asset, and it trained and retained its workforce. In the HAHN Group,
employees were offered long-term support to develop their specialist engineering skills.
As is typical for these companies, their hardware engineering was world-renowned for
its quality and robustness.

In 2014, RSBG SE, the industrial investment company of RAG-Stiftung, acquired a 51%
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stake in HAHN Automation. RSBG was an important German investment company that
acted as a long-term partner for medium-sized companies, and it was also active in the
areas of automation, robotics, Industry 4.0 and digitalization. 5 Philipp Unterhalt, RSBG’s
investment manager, was supportive of HAHN Automation acquiring other firms. In 2016,
Unterhalt and Hähn set up HAHN Holding, which was renamed HAHN Group a year

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RETHINKING RETHINK ROBOTICS

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later. The new company began seeking innovative technologies to help differentiate its
business model in order to move from a pure integration company of large assembly
lines into a provider of new and innovative technology. 6 Although the HAHN Group was
still relatively new to the automation market, it was eager to learn and expand its
expertise. At the company’s 25th anniversary, Rethink Robotics’ founder Rodney Brooks

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had given the keynote address, painting a bright future for the cobots market.

HAHN AND THE ROBOTICS MARKET

The HAHN Group was no stranger to integrating robotic assembly lines that were fenced

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off to protect people. Collaborative robotics, however, was a promising complementary
field. In February 2016, HAHN Automation signed an agreement with Rethink Robotics
to distribute its cobots in Germany and Eastern Europe, via a newly created subsidiary
called HAHN Robotics. In only two years, HAHN became Sawyer’s largest distributor,
selling over 250 cobots. In Unterhalt’s view, this success was attributable to HAHN’s
significant experience in automation and robotics with a range of customers in multiple
industries. It knew how to integrate automation and understood situations where cobots
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could add value to a manufacturing process.

Around this time, the cobot market began to heat up. The German automation community
was surprised by the news that Midea, a Chinese home appliance maker, had acquired
iconic German robot maker Kuka for $5 billion, 7 and other robot manufacturers were
pursuing collaborative strategies. Swiss automation manufacturer ABB launched Yumi,
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a dual-arm cobot for light applications, and Fanuc brought out a heavy load cobot, CR-
35ia. Finally, Asian companies such as Techman launched new cobots and were gaining
market share.

Cobots were in demand due to their high return on investment and low overall cost,
attracting many SMEs and global manufacturers based in Europe, North America and
China. The biggest player, Universal Robots, accounted for nearly 46% of the global cobot
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market share in 2018. No other vendor, including Fanuc, Techman, Kuka and ABB, had
more than a 10% share; Rethink Robotics had about 7%. The cobot market was worth
less than $400 million in 2017 but was projected to reach $7.7 billion by 2027, at which
time it would represent 29% of the total industrial robot market. Three applications –
assembly, pick-and-place, and material handling – were expected to be the most widely
used applications for cobots, accounting for 75% of cobot sales revenue by 2023. 8

For the HAHN Group, marketing Rethink Robotics’ products enabled it to be part of this
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trend and the results were encouraging. In July 2017, RSBG (HAHN Group’s only
shareholder) acquired a small stake in Rethink Robotics, which gave it a seat on Rethink
Robotics’ board but without decision-making power. HAHN gained better knowledge of the
technology as well as an understanding of the company and its management. HAHN
Group also announced the purchase of 200 robots, the largest inventory order ever placed

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RETHINKING RETHINK ROBOTICS

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by a distributor. Subsequently, Rethink Robotics announced a 20% increase in the price
of Sawyer. On the one hand, this purchase meant higher profit margins for HAHN and
shorter delivery times. How long it would take to sell the cobots, on the other hand, was
less certain. However, HAHN’s order caught the attention of the entire distribution
ecosystem and was widely viewed as a positive sign, not only among other distributors –

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who were struggling to generate repeat sales with their existing customers – but by the
market and investors, and raised their expectations of better sales results.

A FALLING STAR

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Cobots were seen by many as one of the key technologies that would fuel the Fourth
Industrial Revolution, a term that encapsulates the changes to technology,
manufacturing and society due to increased connectivity and automation. The rapid
growth of the automation and robotics market was partly attributable to rising labor costs
in advanced markets and in China, as well as shrinking labor pools in emerging countries
due to migration. Advances in artificial intelligence (AI) fueled even more robotic
innovations. Rethink Robotics’ closest competitor, Universal Robots (UR), was reporting
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record sales.

The outlook for Rethink Robotics was not so rosy, however. Sawyer experienced
constant quality problems, performance was below expectations and downtimes were
frequent. Rethink Robotics cut back the speed of new robot development, contrary to
market expectations. As early as the summer of 2016, during the first sales meeting for
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distributors, held in Boston, Rethink Robotics’ management had been advised by some
participants to hire an experienced operations director to run manufacturing and address
quality problems. This advice was not heeded. Quality problems led to higher costs, and
some customers extended their trial runs, leading to long evaluation periods without a
purchase. Among those who did purchase a cobot, repeat purchases were uncommon.
Some major customers, who were struggling to find applications for a cobot and thus
generate faster payback, were reluctant to place a second order.
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On the sales end, sales representatives pushed inventory on distributors, who were not
able to sell cobots fast enough but who were constantly fielding complaints and
replacement requests from key customers. In addition, increasing customer acquisition
costs worsened the situation and made sales growth hard to predict. Finally, there was
a lack of after-sales service to provide on-site support or help, and often the only solution
was a replacement, which did not sit well with customers.
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All of this dented perceptions in a highly sensitive market segment that was still
evaluating cobots’ potential. By the beginning of 2018 Rethink Robotics’ sales had
flatlined, pressure from investors was high and rumors were rife of potential buyers
eyeing the company. Kuka, the robot manufacturer that had been acquired by China’s
Midea, 9 had shown a keen interest and was in negotiations to acquire Rethink Robotics.

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All this distracted management and distributors from focusing on running the company.
Some of the sales team left Rethink Robotics and certain distributors started exploring
other options, including UR.

In contrast to the hardware problems, Rethink Robotics’ software was hailed by

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customers and competitors alike as a key differentiator. Intera (see Exhibit 1) gave users
an intuitive means to “teach by demonstration” rather than by programming commands,
as was the case with most industrial robots. This, and the iconic “eyes” displayed on
Sawyer’s main user interface screen, gave the robot a distinctive image in the market
(see Exhibit 2).

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WINDOW OF OPPORTUNITY
As Sawyer’s distributors and integrators, RSBG and HAHN Group were aware of the
problems in the rest of the ecosystem. As Rethink Robotics’ investors, they also knew
about the company’s precarious economic situation. HAHN Robotics’ experience as a
distributor gave it a good understanding of Sawyer’s possibilities as regards its hardware
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and software. For RSBG and HAHN Group, the situation opened a window of
opportunity.

Attempts by Rethink Robotics to sell itself failed. One of the preferred potential investors,
a Chinese company, backed out because of concerns that the acquisition would not be
approved by the US Committee on Foreign Investments, due to tensions from the US-
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China trade war. 10 In October 2018, the company announced that it was experiencing an
unsustainable cash situation due to low sales and that it was closing its doors and filing
for bankruptcy.

At that moment, the HAHN Group went into high gear. Thomas Hähn considered
acquiring Rethink Robotics, but there were issues to consider. By that time, about 2,500
robots had been sold worldwide and there was limited information on when and to whom
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they had been sold and what was the situation with outstanding warranties. In addition
to doubts about the product and the value of the Intera software for the HAHN Group, a
machine builder, Hähn reflected on one of Rethink Robotics’ most important assets.
Hähn and Unterhalt found that robust engineering was what was needed to revive
Sawyer’s sagging fortunes. They believed they could make at least three different bids.
One was an asset deal to secure Rethink Robotics’ key assets. A second involved a full
acquisition. Finally, they could make no bid, invest in R&D and develop organically.
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RETHINKING RETHINK ROBOTICS

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Exhibit 1: The Intera software

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Source: Company information

Exhibit 2: Rethink Robotics’ collaborative robot Sawyer

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Source: Company information

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REFERENCES

1 Duhamel et al. “Rethink Robotics - Finding a Market.” Stanford CasePublisher 204-2013-1. 20

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January 2023).
3 Devi, Sharmila. “Universal Robots Are a Big Hit.” ft.com, 19 May 2014.

<https://www.ft.com/content/44e83f24-dc4e-11e3-a33d-00144feabdc0> (accessed 9 January

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2023).
4 Green, T. “Teradyne CEO on Universal Robots Acquisition, Strategic Vision.”
roboticsbusinessreview.com, 25 June 2015.
<https://www.roboticsbusinessreview.com/manufacturing/teradyne_ceo_on_universal_robots_a
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7 Taylor Edward, and Ludwig Burger. “China’s Midea Makes $5bn Bid For German Robot Maker

Kuka.” reuters.com, 18 May 2016. https://www.reuters.com/article/us-kuka-m-a-midea-group-

idUSKCN0Y90DB (accessed 5 February 2023).
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<https://www.interactanalysis.com/collaborative-robots/> (accessed 19 July 2020).

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9 Taylor Edward, and Ludwig Burger. “China’s Midea Makes $5bn Bid For German Robot Maker
Kuka.” reuters.com, 18 May 2016. <https://www.reuters.com/article/us-kuka-m-a-midea-group-
idUSKCN0Y90DB> (accessed 5 February 2023).
10 Lawrence, Carol. “Rise and Fall of Rethink Robotics.” asme.org, 5 April 2019.
<https://www.asme.org/topics-resources/content/rise-fall-of-rethink-robotics> (accessed 10 July
2020).
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