What is half the size of a Volkswagen Beetle, capable of speeds of no greater than 25 mph, and looks like a giant toaster? It’s Arizona’s latest autonomous vehicle.
Nuro began inside Google. The startup raised $95 million to stretch the limits of robotics and machine learning. Its first application is a tiny driverless delivery van.
Despite its size, it is a big deal, with much larger implications.
For many, the very idea of automated delivery is Silicon Valley run amok. A Dec. 18 story from the New York Times characterizes self-driving vehicles as technology in search of a purpose. As a movement, the technology has been slow to yield vehicles capable of truly human-free autonomy. And diminutive grocery-toting robots cluttering city sidewalks in San Francisco have become more nuisance than convenience.
These assessments are legitimate. They are also short-sighted.
AVs are part of a larger digital transformation. Ultimately, they will remove the friction between wanting something and getting it. That is a powerful part of process. It is valuable. It brings new consumer experiences. It facilitates new business models.
When Steve Jobs introduced the first iPhone he thought the revolution was a cell phone that could browse the internet and play music. He devoted an entire bit in his presentation to its multiple uses. The true iPhone revolution was how it transformed media and commerce by standardizing digital files, then geolocating hundreds of millions of smartphone users.
Domino’s Pizza (DPZ) is a wonderful company. Managers have carefully embraced digital. They built a new business model around removing all of the friction between their customers and their products. With a smartphone, customers can get fresh pizza delivered to their doorstep without knowing the menu or talking to another human.
Nuro’s cute delivery vans may seem superfluous. After all, they are delivery vans without delivery people. And so far, only two units are puttering around the streets of Scottsdale, delivering up to six bags of groceries from Fry’s Marketplace, a local store.
The electric vehicles probably move too slowly to deliver hot foods. Ice cream may not stand up to the desert sun. Then there is the “last twenty feet” problem. Customers will have to walk out to the curb and lug their bags back to the front door. So much for the service being ideal for the infirm.
These are considerable obstacles. Nuro has assembled a team of the brightest problem solvers. They come from the finest schools, like Carnegie Mellon, MIT, Caltech, Oxford and Stanford. And they have won prestigious world competitions like DARPA Urban Challenge, DARPA Robotics Challenge and ImageNet.
Nuro is charging ahead so hard because the prize is so big. Delivery is a big piece of the digital transformation puzzle. Automation removes the last significant friction point in the path between pressing a virtual smartphone button and having real goods show up at your doorstep.
Softbank, the world’s largest technology investment company, has been hopscotching the globe, investing in delivery startups. The Wall Street Journal reported in March that the Japanese firm led a $535 million investment in DoorDash, a San Francisco delivery company. In November, Softbank extended $350 million to Delhivery, an Indian startup.
It was the same month the company invested $375 million in Zume, a robotics startup that hopes to eventually disrupt Domino’s with pizzas made by robots and cooked on the truck on the way to the customer.
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Excluding the Zume deal, Forbes reports that funding for food robotics startups surged to $127 million in 2017, from $54 million in 2016, and only $11 million a year earlier.
Amazon.com (AMZN) is one of the largest e-commerce companies in the world. In addition to its extensive warehouse robotics operations, it is uniquely positioned to benefit disproportionately from reduced logistics friction.
The online retailer is also building out a network of automated vehicle and drone delivery systems. While these programs may seem far off, getting there early will bring huge windfalls.
Shares are down sharply from $2,039 in September. Although the stock still trades at 58x forward earnings, the potential for this company to disrupt other segments of the global economy is unrivaled.
Long term investors should buy Amazon shares into further weakness; they’ll deliver.