[Zojokkeli]

We are seeing the rise of wearable electronics (Google Glass, smartwatches etc.), and I guess in a few decades body implants will be the norm. So in a way, computer industry can be viewed in it's infancy. Smartphones and tablets should be considered as part of the computer industry, even though they're not "traditional" computers per ce.

 

[jsiegel14072]

  Technology is not always as mature as our dear commercials and industry leaders actually pretend, however. This has become quite irritating in recent years (or maybe have I become more aware of it?). Final products are closer to what used to be beta (or prototypes, in worse cases...). Thank you ever-shorter time to market strategy... Thumbs up to Schiit for not following that stupid trend.

I am sure they will have thoroughly vetted the self-driving cars before they let them on the roads!
 
 
Oh, wait a minute, aren't they out there already?

 

[forkliftHIFI]

Not to bash but I browsed the light harmonic/geek thingymajig thread and it made me 

  Is that for real or was it all tongue in cheek dark humor?  Forever funding?  Were the people in that thread genuinely pumped up about giving those guys more money?  The whole thing reeked of a ponzi scheme IMHO.    
 
ETA:  I know the original Yggdrasil release date has come and gone by a long shot but Schiit didn't accept a dime of anyone's money so the risk is all theirs and I respect that.   Also I didn't realize that the $1000 dollar USB cable mentioned by a previous poster was in fact a real product.    

 

[judmarc]

Nano computing, dust computers, mesh networks, embedded wearables and more are going to make having to touch a keyboard or look at a dedicated, stationary screen seem antiquated in no time.

But will it do native DSD?

 

[Jason Stoddard]

Chapter 36:
A Real Company?
 
This was originally going to be the final chapter in the book, covering where we were as of December 2013: in the SchiitBox, busy racking the place out, and looking upon a company that was no longer a scrappy garage start-up, but well and truly real.
 
We were also supposed to be looking from a point of view of having been shipping Ragnaroks for 8-9 months and Yggys for 5-6 months, and you all know how that worked out.
 
(Cue evil, polite, or disgusted laughter, depending on your own POV.)
 
But things change, and in the process of going through 2014, we learned a few more things, and got a few more stories under our belt. Stuff that I couldn’t write about at the beginning—the rest of the Gen 2 products, Mani, Wyrd, Fulla, and a few other things that are still coming before the end of the year (I hope), were launched without a whole lot of fanfare. And, in the product launch game, no histrionics is good—that means we didn’t have to make sudden, unexpected changes because stuff wasn’t working, or performing as expected. The thing you want the most is a boring product launch.
 
So where do we go from here? Well, there are a few more chapters to get us up to date, and then I expect I’ll continue adding to the saga—maybe not weekly, but we have enough stories to definitely set up for something every couple of weeks, or, at worst, monthly.
 
So everyone who’s enjoyed this story can look forward to more…just on a more sporadic basis.
 
And everyone who’s cringed at the thought of reading more Schiit blather will just have to cringe a little more.
 
But that’s looking forward. Let’s look back at December 2013, and take a look at just how well we did on the “real company” front.
 
 
By Our Own Rules
 
When I started this whole thing, I tried to condense down the business rules up front for people who just want to cut to the chase. These were:
 

• Shooting to be the next billion-dollar mass-market company is insane—you might as well buy lottery tickets.
• Niche is where it’s at—specifically a niche where people can get in fistfights over the color of a knob.
• Pick a niche you know and love and do something nobody else can do—"me-too" never works.
• Be memorable—this isn’t about getting everyone to like you, this is about getting some people to love you.
• Go direct—distribution is a poisonous remnant of 19th century economics in a disintermediated world.
• Run from both conventional marketing wisdom and the social media mavens—both of them are geared towards the mass market with eight-digit ad budgets and multiple decades to build a brand. 
• Don’t think this'll be easy—this is hard work, but you’ll also be having a whole lot of fun if you’re doing it right!

 
So, how did we do?
 

• Not being the next billion-dollar business. Yep. Check. Schiit will likely hit 8 figures sooner than later, but 10 is really, really beyond the pale. If someone gave us $100 million of VC to come out with the broad range of products needed to get there, I think I’d rather leave than continue. Because, to hit that kind of revenue, you’re looking at $99 headphones and $79 bluetooth speakers and $199 soundbars and $149 powered speakers with Class D amps…true mass products. And don’t dare think about trying to take a creative approach with something—the path to success would be in low-dollar, high-volume products that are absolutely guaranteed to find buyers. Which means you want them in established product categories. Which means no swinging for the fences, no trying to break the mold…and, in turn, that means that we’d more than likely fail. Billion-$ audio companies got there either through decades of product development and marketing (and a bit of luck)—think Bose and Harman—or through 100% sheer luck, by creating a new product category—think Beats, though they never cracked more than $0.5B a year in sales. The Apple acquisition is what sent them over the top.
• Niche is where it’s at, and fistfights. Yep, check. We are a dominant player in a niche market (what they’re now calling “personal audio.”) We also play in the larger two-channel realm, mainly with DACs, and now with Mani and some other products. But we’re definitely a niche—and a niche so narrow that it’s smaller than the audiophile market as a whole. We’re not trying to be another Bryston. And fistfights? Yep. All the action is in personal audio. Traditional two-channel audio has the “Buick disease.” It’s moribund, almost literally. Over 70, you lose 10% of your customers a year. Over 60, 5%. That’s basic actuarial table stuff. And you can’t make up for the loss by increasing your product costs forever. Eventually, the last 200 people who think a $120,000 DAC is a good idea will die off, and you’re done.
• A niche you love, doing unique, non-“me-too” products. Check again. I got back into this because I’ve always loved music, and I found a new and exciting way to express it in the headphone space. It was everything that two-channel wasn’t. Mike, who’d checked out at the end of the golden era of multibit DACs, felt exactly the same way. This isn’t a field you can get into based on spreadsheets and margins and feature analysis. This is something you have to love. And unique? Yes. We have a unique place—not the cheapest made-in-China gear, and not the eye-wateringly expensive audio jewelry stuff, either. With unique topologies, unique value, unique sound. It’s a great place to be, because I don’t think everything should be about price, nor should everything be about bling. I think we’ve struck a good balance. Others disagree. See below.
• Be memorable, it’s about some people loving you, not everyone liking you. Check, check, check. There are some people who have literally bought everything we make, and think we can do no (or very little) wrong. There are people who go out of their way to help us. And, at the same time, there are some people who dislike, or actively hate us. Dislike because of the name, dislike because of some perceived slight, dislike because they got a dead product (hey, it happens), irritation because we stood up for our policies, hate because of some imagined agenda pushing crappy products on an unsuspecting public, dislike because we don’t toe the line to being 100% subjectivist, distaste because we don’t toe the line to being 100% objectivist, irritation because we skewer some sacred cows, hate because we say what we believe, even if it’s wrong and goes against the “accepted wisdom.” But, you know what? It’s the dialogue between the unabashed fans and the skeptics and the outright hostile that keep the discussions going—and that’s what helps more people find out about us…and make their own decisions.
• Go direct, avoid distribution. Almost completely check. We made the mistake of putting on some dealers in the early days, and some distribution that didn’t do us any favors. Chalk it up to a learning curve. Now, with our quasi-direct pricing coming into play in Europe through Electromod, and the clear non-necessity of any dealers in North America, we’re 100% committed to staying direct. Asia is still a conundrum…but we’ll see what we can do next year.
• Run from both conventional advertising and social media both. Check and check. I mentioned our marketing budget as being a tiny fraction of what would be normal for any other company. Part of this is due to the fact of heeding our own advice. Yes, some advertising is necessary, but we’ve stuck to just a couple of online venues that are completely measurable and trackable as to their actual results. If they don’t pay off, the plug is pulled and the funds reallocated. We have yet to take print pages in any magazine (and the way magazines are going, I suspect we may never have to—except for one stunt for a new product I’m thinking about…hmm). At the same time, we have spent exactly zero time on Facebook or Twitter. Of course, this isn’t entirely fair, because we (meaning I) have spent significant time on micro-social like here at Head-fi. But this isn’t just marketing…I enjoy writing, and I enjoy the various arguments…er, I mean discussions…that we get into. No ad agency would have proposed this. And most corporate lawyers would go pale at the thought of their CEO going online and, say, calling out things like “the worst customer, ever.”
• Hard work, but fun. Yes, hell yes, and yes again. In some ways, this is the hardest thing I’ve ever done, but I’m having a whole lot more fun actually making things than I did on the agency side. But it hasn’t exactly been smooth and easy, or all dancing-through-the-sprinklers. In fact, probably not a day goes by without a minor problem (out of stock parts, for example) and not a week goes by without something more moderate (new shipment of boards acting weird, for example.) Nothing is insurmountable, but this isn’t a hands-off business, especially when we’re rolling out many new products.

 
 
The Perspective of December 2013
 
December 2013 was the first time I could look around Schiit and legitimately say, “This feels like a real company.” Of course, we were still just a handful of people, rattling around in a messy, not-yet-organized big box with ugly carpet and scuffed walls. But Theta was just a handful of people, too, and the facility was never a looker. For the first time, we had a real tech area, a real assembly area, enough space for parts, an office for R&D, a listening area…and, more importantly, things were running smoothly. The team had gelled. Nobody there was perfect, but everyone did their jobs—and believed in the overall direction.
 
For the first time, it seemed like we’d arrived.
 
But at the same time, there was still a ton of work to do. Ragnarok still wasn’t working right, after many, many firmware revisions. We were still going back and forth on DACs for the Yggdrasil, instead of moving into production. The Valhalla 2 and Lyr 2 prototypes had their own niggling problems.
 
And, worse…I’d gone off on some tangential stuff that looked like it might never become a product. We had one product just sitting on a desk because we were too busy working other things out. And at the same time, Mike was playing with phono stages, Dave was designing Wyrd, and I had a bunch of crazy ideas that I figured we could launch in 2014, as soon as Ragnarok and Yggdrasil were put to bed.
 
But without the freedom to experiment, without the ability to dream about what might be…many of our products would never have come to market. As I told Mike recently, “It says something that our only truly conventional design is Magni.”
 
Mike laughed. “And it’s essentially a small speaker amp, which is insane for a $99 product.”
 
Remember: be unique.
 
 
So Where Do We Go From Here?
 
Anyone with a brain knows that 2014 didn’t solve all the problems we were facing at the end of 2013. But we never expected it to. That’s not how business challenges work. When you knock the current ones down, you find new ones.
 
But, in 2014, we were in a new position: that of being part of “the establishment.” This in itself is a challenge. We’ve noticed a recent increase in threads that go like this: “DAC recommendation (besides Bifrost),” or “Headphone amp (not Magni or Asgard 2). Simply by being part of the perceived “establishment” means that we can be dismissed.
 
Why? Plenty of reasons:
 

• When “everyone else” has one, it may be enough to simply be different. I know lots of people who don’t want a Camry (or a Corvette) simply because they’re “too popular,” not based on any objective criteria.
• Something new and shiny is new and shiny, period. There’s excitement in being one of the first to discover something new and good. We know this. We also know there’s inevitable backlash against a perceived “flavor of the month.” People were calling us the “flavor of the month” for years. Some flavors last longer than others. Only time will tell.
• We don’t make what they want. Whether it’s black gear, or DSD, or power switches on the front. And that’s perfectly cool. We can’t please everyone all the time.
• They heard we’re crap. Yep, that still hangs out there. It’ll never go away. We have to just keep on keeping on.
• They had a bad experience. This usually means they got something that didn’t work out for them (like, say, an original Valhalla and LCD-2s) or we shipped them the wrong thing (it happens—and even if we fix it right away, sometimes bad feelings linger), or they got a DOA/defective product. And even though our DOA/defectives are less than 0.05% now, that still adds up when you’re moving tons of products. Again, all valid reasons (though really, if you aren’t sure if one of our headphone amps is ideal for your products, ask us…we’ll tell you honestly, and it won’t be “just buy the more expensive amp.”)

 
But, bottom line, we aren’t the new shiny anymore. We aren’t the One True Challenger who will Redefine Everything, Forever.
 
So what do we do with this?
 
Well, the first step to overcoming a problem is to recognize it. We can’t dismiss it out of hand. Nor do we think it’s right to respond in the manner of many companies—which is to throw marketing money at it. Nor can we simply reinvent ourselves as a company making expensive audio jewelry, because, well, that’s not us. Nor is it fair to our customers.
 
So here’s what we’re doing:
 

• Staying where we are, and getting even better at it. This means staying affordable, and putting the bulk of our effort towards creating truly amazing, groundbreaking, and inexpensive products. This may also entail “killing our babies,” as I’ve said in another chapter. Because the only thing worse than bringing out a product that might cannibalize sales of your main product line is to have someone else do it first.
• Exploring new vistas. This doesn’t mean $20,000 DACs or $15,000 amplifiers. This doesn’t mean a full line of two-channel products, like conventional preamps and power amps. Nor does it mean crowdfunding or “co-creation” or any of those fancy new models that essentially say, “We have no ideas.” But it does mean we’ll be looking at how we can make a difference in the two-channel world—including in some very, very surprising new directions. But all on the affordable side. And all with some significant advantage. No me-too products.
• Less product introductions in 2015…but with more significance. There are some real surprises on the horizon, no kidding. At least one product…no, well, two products on the horizon for 2015 are real eye-openers. It pains me that I can’t really talk about them, because the best thing besides introducing a new product is talking about it. And many of these are really far along. In fact, I’m listening to one now. Another I’ve been listening to for months (but it is going in for some changes to bring in some very cool trickle-down tech.) What I can say…watch TheShow Newport. 
• Continuing this conversation, and listening to your input. Yes, we do listen to your input, and it does help when we’re developing new products. You’ll see some of your own ideas reflected in the coming year. But…and here’s the real but…it’s just that we also have our own point of view. Call us old-fashioned, but we think that if we can’t add something of our own to the product development, why are we here? Why not form a coalition and go to a contract manufacturer to realize your perfect crowdsourced dream product? If we’re right, we’ll do well, and if we’re wrong, we’ll take our lumps. But in any case, this document, this conversation, and this exchange of ideas will consider, as long as you’ll tolerate me. 
• Continuing to challenge the established wisdom. Whether it’s product design, buzzword compliance, unicorn formats, en-vogue branded power supplies, fancy capacitor types, or any other of a dozen different things, we have a unique point of view. It’s far too easy for someone to wade through a forum, look at some product websites, and decide that “well, everyone’s talking about ABC, and it’s gotta have XYZ, and of course it has to be isolated with SuperWowie technology, and of course it has to support rates up to 64/3472…without knowing that everyone’s talking about ABC because a big name is putting big money behind a proprietary technology, and one person said it had to have XYZ, and SuperWowie technology doesn’t work at the rates that high-res is available at, and 64/3472 doesn’t even have any demo tracks available, much less any music you can buy. We call out this marketing-based “common wisdom” and skewer these sacred cows. Some people like it. Some people disagree politely. And we rub some people completely the wrong way.

 
Because…(you know it’s coming) it’s not about getting everyone to like you. It’s about getting some people to love you.
 
And that, in a nutshell, is what we’re going to continue doing. It’s up to you to decide if we’re completely insane.
 
Or not.

 

[rmullins08]

  Chapter 36:
A Real Company?
 
So everyone who’s enjoyed this story can look forward to more…just on a more sporadic basis.
 

 
I find it hard to believe anybody could not enjoy the story, whether from the audio/technology perspective, or even just the running of a business side.  Can't wait to see what other products you have in store for us.

 

[45longcolt]

Niche is where it’s at—specifically a niche where people can get in fistfights over the color of a knob.
 
 
So, Jason, did you use a big chrome nob on Ragnarok as a sort of wry counterpoint to the plain aluminum/painted steel finish of the rest of the unit - ironic bling? Or did you get a great deal on a box of big chrome knobs?

 
Either way, hoping my Rag will arrive soon. Cheers. 

 

[reddog]

[Mod Edit: Please don't quote a huge, long post just to write a one-line reply. Cheers.]

A great chapter, looking forward to future products.

 

[DaveUpton]

Hey reddog,

Just a tip, but it's usually appreciated if you snip or spoiler tag the content of a really long quote like that so we don't all have to scroll through it to read your reply!

 

[Muinarc]

[*]Continuing this conversation, and listening to your input. Yes, we do listen to your input, and it does help when we’re developing new products. You’ll see some of your own ideas reflected in the coming year. But…and here’s the real but…it’s just that we also have our own point of view. Call us old-fashioned, but we think that if we can’t add something of our own to the product development, why are we here? Why not form a coalition and go to a contract manufacturer to realize your perfect crowdsourced dream product? If we’re right, we’ll do well, and if we’re wrong, we’ll take our lumps. But in any case, this document, this conversation, and this exchange of ideas will consider, as long as you’ll tolerate me. 

 


I want an IGBT amp, just becuase!

 

[reddog]

Hey reddog,


Just a tip, but it's usually appreciated if you snip or spoiler tag the content of a really long quote like that so we don't all have to scroll through it to read your reply!

Yes I will do that from now on, sorry.

 

[DaveUpton]

Yes I will do that from now on, sorry.

Nothing to be sorry for! My first time making that mistake I quoted a post almost 2500 lines long , suffice to say, I made some new friends that day.

 

[OddE]

I want an IGBT amp, just becuase!

 
-You can get that if you really want - just about any frequency converter drive will do in a pinch. Better pick a small-ish one to get the switching frequency high enough to have any reasonable bandwidth for the reconstruction filter to work with, though. Vacon in Finland makes some nifty units which can generate 3-phase AC up to 7200Hz; they should be able to power just about any speaker there is with something approaching mid-fi...
 
(I think you may need an export licence for those drives nowadays, though, courtesy of the Iranian nuclear program. Probably simpler just to roll your own.)

 

[Argo Duck]

Another great read Jason - one of the best because of the simultaneous looking back and looking forward.

Last bullet group, point 4, last sentence: did you mean "continue" rather than "consider"?

 

[valiant66]

 
But will it do native DSD?

 
Heh. Yeah, but by then you won't need a dedicated chip, it'll all be done on the fly in software... and then streamed directly to your cranium, no headphones required.