Debra Schifrin, Wesley R. Hartmann
Stanford Graduate School of Business (M369-PDF-ENG)
September 14, 2017
Rachio, a small Denver-based company, developed and sold innovative technology for digitizing home sprinkler systems. Rachio’s “Smart Sprinkler Controller” enabled homeowners to reduce water use by up to 50 percent by using detailed weather reports to automatically adjust irrigation. Homeowners can also easily control their irrigation systems from their smartphone through the Rachio app. Rachio saw strong adoption early on, but in 2018 the percentage of homes with smart sprinkler controls was still quite low. Although the Internet of Things (IoT) market was growing rapidly, the market was still relatively new and expensive. Rachio was similar to many other IoT companies in that most of the product value was in software, but the revenue came from a one-time sale of hardware that Rachio sold as a premium product. Rachio’s main established competitors were one step behind Rachio in smart controllers, but began to copy Rachio’s product feature for feature. To stay ahead of the competition and continue to grow, Rachio needed to move more owners to the B2C channel or expand its first B2C earnings to B2B markets. In B2B markets, professional landscapers chose the controller type and brand for homeowners.
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