EMBA: Networking & entrepreneurship

Raspberry Pi is a– it’s a credit card-sized computer. It does everything that a conventional computer could do, but it’s very small and it’s very cheap. This is an idea that originally came from the Computer Laboratory in Cambridge. The Computer Laboratory has been educating computer scientists for, I guess, the best part of 50 years. And about five years ago, some of us there realised that every year the number of students– the number of 17-year-olds, 18-year-olds who were applying to read computer science was declining year on year, from a peak of maybe 500 a year for 80 places– 500 people applying for 80 places in the mid 1990s, down to maybe 250 people five years ago for the same kind of number of places.

And simultaneously, the kinds of things that those young people knew what to do when they came in the door, that was declining as well. So we’d gone from an environment where you could assume that everyone had done some programming, that everyone had done maybe fairly sophisticated programming, assembly language programming, graphics programming, maybe, in 1995, to an environment where many of the people we were admitting had only maybe done a little bit of web design, maybe a little bit of web programming if we were lucky.

And of course, this is a real problem for us. It was a problem for the university because the university wants to find a good supply of potential candidates, and it doesn’t want to have to spend time in the first year bringing people up to speed. You’ve got a three-year course, so it’s good to be able to start nice and quickly. Three years after it’s a problem for the university, it’s a problem for industry.

We originally aimed Raspberry Pi for children. Obviously the goal was to increase the number of applicants for computer science at university, so children are the obvious target. I think after we announced– news about this got out in May of 2011. After we announced, we found that there were two other markets that we hadn’t originally anticipated. One of them is, I guess what you could call, the hacking community, what is sometimes called the maker community.

So these are adults, maybe people from 20 up who already know a little bit about technology and want to build projects. And this is a large and vibrant community already. There are platforms like– there’s a platform called Arduino, which comes out of Italy. There’s a platform called BeagleBoard, which comes out of the US. Those are both very popular among these people. And I think people in that community saw Raspberry Pi as a way of getting a Beagle Board-like feature set. So this is a device that sells for $150 at a kind of Arduino price point. And we have a very similar price point to this Arduino. So it was the best of both worlds, which was both very capable and also very cheap. So that’s one of the two markets.

The other market that I guess we should have anticipated was the developing world market. We’ve had an enormous amount of interest, particularly from the BRIC countries. We’ve had a lot of interest from Russia, we’ve had a lot of interest from Brazil, a little bit last maybe from India and from China, and then a lot of interest from Africa as well and other parts of South America, a lot of interest from sub-Saharan Africa, people who see this as a way of, in communities where there are already televisions– there are a lot of places in the world where people have televisions but they don’t necessarily have computers. And just as in the 1980s something like a Commodore 64 or ZX Spectrum, you could see that as a machine for turning your television, which you already own, into a computer. People see us in the same way because we’re designed to plug into a television and use a television as a display device.

I guess going into the MBA, we had this idea, we had, I guess, the technical capabilities, but one of the things that was missing really was perhaps some of the ways of thinking about how to turn that into an actual business. I’ve done a little bit of business in the past, but certainly nothing in this kind of volume manufacturer of physical devices. I’ve done software business in the past. But one of the things that the Exec MBA course helped me to understand was just to think about what we were doing in a more structured way, rather than just muddling through, thinking about how we develop the brand for the device, thinking about how we work with partners, thinking about how we deal with some of the challenges that come with being a not-for-profit and therefore being restricted in the ways that you can raise capital. At the same time, it was trying to get a very, very large number of devices out into the wild.

I found myself getting maybe halfway through the course and feeling like, I have this idea and now feeling I have enough knowledge to do something about it. I’m just sitting there kind of chafing to get going on the project. This was something where the Exec course finished in April of 2011, and then we rolled straight into this in May. So my hope for a post-MBA vacation tailed off in work, didn’t really materialise. For the first six months, we’d very much hoped that we were going to be able to manufacture this in the UK. We put an enormous amount of effort into cost optimising the design to make sure that we could do that.

But I think what became apparent to us maybe in October, November of last year was that the entire global supply chain is set up to support manufacturing finished goods, particularly finished electronics goods in southern China. So all of the components are there, all the suppliers are located there. If you do try and manufacture somewhere else, what you find is that you’re air freighting in or sea freighting in components from southern China anyway, so your lead times go up, your costs go up. And I think in the end what we discovered was that the volumes we’re talking about here, we could just about manage manufacturing in the UK at zero margin.

So we could manufacture in the UK, but we wouldn’t make any money on the devices at all. Now, that’s not necessarily a disaster because there are other things you can do, there are other sources of revenue you can appeal to. But it did feel like that wasn’t going to be sustainable, that wasn’t going to allow the foundation to pursue its educational goals because producing the hardware is only one part of what the foundation is trying to do. The foundation’s stated goal is to promote education, and the hardware is a means to an end. So what we found was that, because of the cost optimisation work we’d done, we could produce with very good margins in southern China, import them into the UK, and work from there. But yeah, it is a disappointment because it had been one of the– I guess one of our secondary goals had been to be able to do that, and it’s been a shame we’ve not been able to.

People often ask us what we’re going to do after the current two versions, after the 16 and the 22-pound versions of the device. We’re always very, very careful not to discuss future products. The industry is littered with the remains of companies that talked up future products and killed their current set of products. This is often referred to– I think the verb people use is to Osborne, after a computer company from the 1980s which did exactly this. I think it announced a product six months in the future and managed to kill the cash flow that would’ve paid to develop the product. Obviously we would like to keep going.

We have a device which is extremely capable in a lot of areas. It’s extremely good at multimedia, so it’s extremely good at graphics, it’s extremely good at video. I think we would like to see products in the future which perhaps start to approach the performance of a modern desktop PC. I think that in this kind of price range, I think in a few years time, I think that that’s extremely achievable. I think we’ll have to wait and see. We certainly have nothing on the horizon in 2012. I can say that much.

There’s something really special about the Cambridge environment. I’m not quite sure what it is. But if I just talk a bit about the experience.

So it started in the first week, in the induction week. And you find yourself in Downing College, staying with everybody else. If you then just do a bit research, Downing College was founded by the same Downing that founded Downing Street, where our prime minister lives in the UK. So there’s a real– you start understanding a real connection across the UK.

Then you get told that Cambridge University has over 90 Nobel Prize winners. And that’s 90 Nobel Prize winners. That’s more than any other institution. And you can’t help but feel as you’re walking around, walking to different Colleges, there’s something special about this environment.

And then, in induction week a few days later, you get taught economics by a professor that works in the same faculty that Keynes used to work in, that has fundamentally transformed the way people think about economics across society. So you kind of get steeped or start to understand this history, and feel you’re in a very, very different environment.

And you contrast that fantastic history and heritage with then some of the speakers that we have over evening dinner. And we get talked about some of the challenges on around IT in the NHS to talked about some of the social influences in women’s makeup. The contrast could not be more profound, but it is so engaging, so stimulating in ways that I would never have thought I’d experience.