Commercialization Plan: The Widget System Project for the Visually Impaired
Authors: Team 1 Technology Transfer and Commercialization Class Niagara University MBA Program
This document provides an example of the work that resulted from collaboration between the Center on Knowledge Translation for Technology Transfer (KT4TT) and the Niagara University Technology Transfer clinic. The names of products and individuals, as well as key financial information, have been changed to prevent the disclosure of the recipient company’s proprietary information. Do not rely on the market figures in this document for your own work, they are fictitious.
Instructor: Dr. Steve Mayer
Submission date: May 1, 2014
Table of Contents 1. Executive Summary ...... 3
2. Project Value, Expected Outcomes, and Impact ...... 8
3. Company Overview ...... 10
4. Market, Customer, and Competition ...... 13
4.1 Market Overview...... 13
4.1.1 Customer Profile ...... 13
4.1.2 Market Size ...... 15
4.1.3 Industry Information ...... 18
4.2 Marketing Strategy ...... 19
4.2.1 Product ...... 19
4.2.2 Pricing ...... 19
4.2.3 Distribution ...... 19
4.2.4 Promotion ...... 29
4.3 Competitive Analysis ...... 36
4.4 Barriers to Consumer Acceptance ...... 38
5. Intellectual Property (IP) Protection and Licensing...... 40
6. Financing...... 43
7. Production ...... 45
8. Revenue Stream ...... 49
9. References ...... 60
Commercialization Plan: The Widget System - Project for the Visually Impaired 2 1. Executive Summary
This report is intended to provide recommendations for the commercialization of the Widget
system developed by XYZ, Inc. (XYZ).
Market Analysis:
Target market: Adults in the United States with severe visual disability (low or no vision)
Market Size: 4.2 to 7.7 million individuals
• The Tier 3 system will be limited to distribution within metropolitan statistical areas
(MSAs) due to technical installation requirements. We estimate a total market size of
3.58 million individuals for this model.
Assuming a market penetration of 2.5%, the total obtainable market will include:
• Product Tiers 1 & 2: 105,000 consumers
• Product Tier 3: 89,375 consumers
Conclusion: A large potential customer base exists for the Widget system.
Customer Profile:
We have identified two market segments:
• Individuals who have been blind since birth
• Individuals who have acquired visual disability
Conclusion: XYZ should target individuals aged 65+ for the following reasons:
• The prevalence of visual impairment increases significantly with age
• The number of individuals aged 65+ is expected to increase dramatically in coming years.
Commercialization Plan: The Widget System - Project for the Visually Impaired 3 • This age group is more likely to have acquired visual disability through their lifetimes,
leading to higher savings amounts.
Competition:
• No centralized home control system currently exists for the visually impaired market.
• Several indirect competitors exist, such as smartphone and tablet applications that assist
with specific daily functions.
• Threat of new entrants in coming years is very high if the Widget system is successful.
Production:
• This study contemplated two forms of production represented by scenario A – in-house
production, and scenario B – production outsourced to a third-party manufacturer.
• In-house production by XYZ will likely be required; however this limits the amount of
units that can be generated.
• Outsourced production allows for greater unit production and profitability but is likely
unattainable unless XYZ is able to secure a patent.
Conclusion: We recommend hiring the largest possible amount of workers to support production in order to ensure profitability.
Distribution:
Direct distribution methods:
• Sales through a website specifically designed for the Widget system, Amazon.com,
Apple App Store, and Google Apps Marketplace.
Commercialization Plan: The Widget System - Project for the Visually Impaired 4 Indirect Distribution methods
• Sales through optical centers, medical supply companies, and retailers
• B2B distribution partnerships with existing distributors
Strategic Market Entry:
• Phase 1 (2016): Small-Scale direct operations within the local market
• Phase 2 (2017 – 2020): Expansion through B2B partnerships
Promotion:
• Generate an accessible website exclusive to the Widget product
• Promote both directly to consumers and to possible distribution partners
B2C promotion strategy:
• Promote product through social media and other websites targeted towards the low vision
community
• Advertise in magazines and on television channels geared towards this demographic
• Distribute product information to healthcare and vision centers
B2B Promotion Strategy:
• Attend multiple industry trade shows and events
• Include advertisements in industry journals
• Reach out to possible distributors directly
Intellectual Property
• Estimated 40-50% possibility of patentability
Commercialization Plan: The Widget System - Project for the Visually Impaired 5 Conclusions:
• XYZ should not seek patent protection due to costs involved and low possibility of
success
• XYZ should obtain a freedom to operate letter to protect itself against potential
infringement on existing patents
• XYZ should utilize the name Widget as a trademark to develop the brand
Budgets and financial forecasts:
We generated budgets bases on six unique scenarios. Scenario A involves production in- house and Scenario B includes outsourced production. For both scenarios, three possible levels of financing were measured.
Conclusions:
• Revenues and EBIT: Outsourced production results in a much larger revenue projection
than in-house production.
• Cost margins: Both models achieve COGS as percentage of sales around 62%.
• Market potential: In both scenarios A and B, based on the expected market penetration,
the company will be far from achieving their "potential" market volume by 2020.
• Achievable production levels: With outsourcing the production levels are much greater
than with in-house production, which bears a difference of +180% in produced units.
• ROI and payback: According to our calculations, the ROI is greater than 100% in the first
year, and the payback of the granted funds could occur after the first year.
Commercialization Plan: The Widget System - Project for the Visually Impaired 6 • Cash flows and financial health: After all assumptions have been made, the maximum
production levels have been set to allow for an ending cash surplus at year end of
minimum 10% on investment for the year.
Commercialization Plan: The Widget System - Project for the Visually Impaired 7 2. Project Value, Expected Outcomes, and Impact
Mission Statement: Our mission is to ensure that every visually impaired customer has the
opportunity to dramatically simplify their day-to-day activities by offering them the Widget system. This system will provide a new way of living that will enhance their ability to interact and enhance their enjoyment of life’s most basic pleasures; pleasures they have been restricted from due to their impairment.
As the population of visually impaired individuals increases, the need for assistive
technologies to help these individuals maintain their existing standards of living rises. The need
for technologies which enable the visually disabled to function within their existing homes is of
particular importance. For the visually impaired community, tasks within the home can be
particularly challenging, as the operation of a multitude of devices for different purposes can be
confusing and difficult to operate. In addition, many modern appliance manufacturers have
shifted from tactile buttons to the use of small visual displays (SVDs) for operational product
controls. These SVDs prove to be difficult for individuals with visual impairment to operate due
to potential inability to recognize screen selections and increasing complexity of menu options.
While some solutions do exist to solve individual problems faced within the home, no simple and
centralized method for controlling home devices exists in the current market for this purpose.
After performing a task analysis and a gap analysis, XYZ, Inc. (XYZ) and its commercialization
partners identified a chasm between consumers’ needs and current technology in the area of
coupling universal control with monitoring, reminders and alerts within the home.
Commercialization Plan: The Widget System - Project for the Visually Impaired 8 To address the issues mentioned above, XYZ has created the Widget system as an innovative
new method for simplifying the daily activities of visually impaired individuals. The Widget
system offers simple and accessible control of appliances and electronic devices within the
homes of low and no vision individuals using a single, centralized control mechanism. The
complete integration of unassociated devices and clear ease-of-use for the visually impaired is a key value provided by this system which is not currently offered by any other existing assistive technology products on the market today. The Widget system provides visually impaired- centered smart living technology that can assist our consumers and help them accomplish home- based activities, with the end goal of maintaining independence in their own homes for as long as possible.
With this product, XYZ will fill a clear gap within the assistive technology market with the centralized and user-friendly design of the Widget system. The impact is expected to be approximately 19,000 units of Widget systems over the first five years, which is 0.46% percent of the total market. This impact is due to value-added new features of Widget system that also offers new capability and better efficiency than existing technology. The Widget system is an essential component of XYZ’s intelligent sensor network and devices strategy, and it integrates with the overall business plan of the company. This product fits perfectly within XYZ’s overall mission of providing assistive technology for people with disabilities.
Commercialization Plan: The Widget System - Project for the Visually Impaired 9 3. Company Overview
XYZ, Inc. is dedicated to helping people with disabilities in vocational, educational and
independent living settings. XYZ’s company vision is that focusing on the person’s ability
(versus their disability) empowers the individual, and enables us to develop concepts in the areas
that need support in a given activity, through strategies and the appropriate use of technology.
The company started in 1990 as XYZ Consulting in Texas. XYZ Consulting was focused on helping small research and development-centric assistive technology companies in marketing activities (business development, advertisement, satisfaction surveys, product launch and pricing, support strategies, press releases, focus groups, and outbound customer communications). In
2003, XYZ incorporated and changed its name to better reflect its own efforts in research and development of assistive technology. The company moved its headquarters from Texas to Ohio in 2009, but still maintains many relationships with content specialists in Texas.
Company objectives:
1) Lower the cost of assistive technology by using commercially available hardware over
proprietary development whenever possible, focusing on standards and open systems,
maintaining computing platform independence, and incorporating principals of universal
design to appeal to largest market.
2) Reduce the time from product concept to market through the intelligent usage of:
a. New frameworks and productivity tools to speed development.
b. Collaborations and partnerships: Do not develop everything in-house, form strategic
relationships and leverage research and development from major universities and
companies.
Commercialization Plan: The Widget System - Project for the Visually Impaired 10 c. Utilize third-party logistics companies (3PL) to handle specific segments of the
deployment of our commercialization plan
3) Actively contribute to the advancement of technology for people with disabilities.
4) Invest in a variety of Assistive Technology areas.
5) Conduct knowledge translation and technology transfer to share best practices and products
that result from grant research.
In-house core competencies at XYZ include: high-tech product marketing, assistive technology research and development, electrical engineering design, software architecture, computer design and programming, system integration, data security, and project management.
XYZ currently has nine full-time and two part-time employees. Current full-time employees include President John Smith (also responsible for coordinating all research and development efforts); four computer scientists; two research assistants; one marketing manager and one sales manager. Skills that are not needed full time, such as financial planning, tax preparation and legal counsel, are contracted. External consultants are also used to supplement design or development expertise that is needed for a specific phase of a project.
XYZ has a history of previous Federal and non-Federal funding. In the past twelve years,
XYZ has received ten Phase I and five Phase II Small Business Innovation Research (SBIR) program awards from the Department of Education's National Institute on Disability and
Rehabilitation Research (NIDRR), and one Phase I grant from the National Institutes of Health
(NIH). XYZ has also received multiple Phase I matching awards from the State of Ohio’s
Commercialization Plan: The Widget System - Project for the Visually Impaired 11 Innovation Fund. Current bookkeeping and project management strategies meet or exceed
Federal regulations.
The Company president and Principal Investigator for this project, John Smith, has over 30 years’ experience with launching high tech products, resulting in the successful commercialization of multiple high technology products. This includes production, release, forecasting, regulatory compliance certification, shipping/distribution channel design, training and development.
Projected company revenue for 2014 is anticipated from three key sources: approximately
$52,000 in consulting services; $148,000 from product sales; and $566,000 in government grants
($268,000 from NIDRR, $209,000 from USDA, and $89,000 from NIH), for a 2014 total revenue of $766,000. The majority of the product sales are from previous Phase IIs that have been commercialized. XYZ is qualified to support new efforts related to the Widget system due to XYZ’s established experience in bringing technology developed under the SBIR program to market.
Commercialization Plan: The Widget System - Project for the Visually Impaired 12 4. Market, Customer, and Competition
4.1 Market Overview
While the number of Americans with visual impairments is approximately 21.2 million (see
Market Size for details), the segment that the Widget system targets consists of approximately
7.7 million people with severe to profound visual impairments, otherwise referred to as people with low vision or no vision. This low and no vision market in the United States currently totals over 7 million individuals, and this population is estimated to grow in coming years. Several
specialized groups and organizations exist to address the specific needs of the visually impaired
population. However, no products currently exist in the realm of home automation targeted
specifically towards this market segment. This marketing plan is designed to identify the target
market for the Widget system and enable XYZ to attract users to this product through careful
promotion and sales support.
4.1.1 Customer Profile
The target market for the Widget system is adults in the United States with a severe to
profound visual impairment, such that it interferes with one or more activities of daily living in a
home setting. Blind and low vision individuals may face varying levels of disability. The Widget
system enables the user to interact with their home environment in new and relevant ways, in a
manner in which they desire. This includes voice control for those facing complete blindness, as
well as simple high-contrast displays for individuals with a lower degree of impairment. Since
the installation of the full-featured Widget system will require advanced technical ability, we
intend for this installation to be facilitated by future business partners. For this reason, we are
focusing our customer base on individuals living within metropolitan statistical areas (MSAs).
We estimate that this will include the majority of our potential customer base.
Commercialization Plan: The Widget System - Project for the Visually Impaired 13 The target customer base for the Widget product can be divided into two distinct groups:
1) Individuals who have been blind since birth. This segment will include consumers of all
age ranges. These individuals typically fall on the low end of the economic scale, as
visual impairment and other disabilities often restrict employment opportunities. For the
visually impaired individuals of working age (21-64), the median annual earnings is
$33,200/year with a full-time employment rate of only 23.8 percent (Erickson, Lee, &
von Schrader, 2012). For this reason, this customer segment is expected to be very price-
conscious as most users from this group will have a low disposable income. These
individuals may be receiving government assistance and may also receive significant
assistance from family or outside agencies. We believe these individuals would be more
likely to opt for the basic model of the Widget system due to its lower price point.
2) Individuals who have developed visual impairment throughout their lifetime.
Customers within this segment will likely have a median age of 65, as studies show a
strong correlation between visual disability and advanced age (Figure 1). Existing data
indicates that the incidence of visual disability significantly increases at age 70 and
onwards, especially after age 75 (Prevent Blindness America, 2012). It is estimated that
approximately 2.74 million individuals age 65 or older currently experience visual
disability (Erickson, Lee, & von Schrader, 2012). Consumers in this category may be
retired from successful working careers, and therefore, it is expected they will be from
the mid-range socio-economic scale and have disposable income and savings available.
This group is expected to include a large number of “aging in place” seniors who may
have recently developed visual disability and now need assistive technology such as the
Widget system to maintain their level of individual independence in their homes.
Commercialization Plan: The Widget System - Project for the Visually Impaired 14 Blindness and Visual Impairment in the United States 30%
25%
20%
15% Prevalence 10%
5%
0% 40-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ Age BLINDNESS VISION IMPAIRMENT COMBINED Figure 1. Visual Impairment in the United States by Age (Prevent Blindness America, 2012).
There are no plans to target children with visual impairment as this market is very small and they may have difficulty operating the device.
4.1.2 Market Size
Recent estimates indicate between 4.2 and 21.2 million adults in the United States suffer from visual disability (U.S. Department of Health and Human Services, Centers for Disease
Control and Prevention, 2011) (Prevent Blindness America, 2012). This wide deviation in prevalence can be attributed to significant differences per study in the definition of visual disability. The levels of visual impairment vary greatly per individual, with the terms “blind” and
“low vision” representing legal definitions based on points on a visual ability spectrum. When measured, the definition of visual disability can range from self-reported survey questions such as “Do you have difficulty seeing even when wearing glasses or contacts?” (U.S. Department of
Health and Human Services, Centers for Disease Control and Prevention, 2011) which generated the 21.2 million estimate, to more restrictive classifications including specific vision correction.
Vision impairment is defined as vision less than 20/40 in an individual’s best eye while using
Commercialization Plan: The Widget System - Project for the Visually Impaired 15 glasses, while the legal definition of blindness is vision correction less than 20/200 or a visual field of a diameter of less than 20 degrees (Prevent Blindness America, 2012). On the more conservative side of estimates, in its 2012 report on Vision Problems in the U.S., Prevent
Blindness America placed the combined prevalence of visual impairment and blindness in the
United States at 4.2 million. This database combines data from multiple studies and surveys to determine the prevalence of eye conditions in the U.S. using strict definitions of disability.
The Widget system is intended for individuals with severe visual disability to the extent that it interferes with day to day tasks within the home. Estimates indicate that this severe level of impairment is faced by between 4.2 million and 7.7 million individuals within the United States.
To determine market size, we used the most conservative measure of 4.2 million affected individuals.
XYZ has generated projected market share estimates based on three possibilities: conservative (1%), typical (2.5%) and optimum (3%) market penetration (Table 1). The basic and mid-range Widget models require minimal installation; therefore distribution will not be geographically constrained. A 2.5% market share presents 105,000 potential customers for these models. For the advanced Tier 3 system, technical installation expertise will be required. For this model, XYZ will focus on consumers in metropolitan statistical areas, which make up approximately 85% of the U.S. population (Office of Management and Budget, 2013). This potential customer base of 3.575 million equates to approximately 89,375 individual consumers assuming typical market penetration.
Commercialization Plan: The Widget System - Project for the Visually Impaired 16 TOTAL MARKET PENETRATION EST. MODEL MARKET CONSERVATIVE TYPICAL OPTIMUM SIZE (1.0%) (2.5%) (3.0%)
Tiers 1 & 2 4,200,000 42,000 105,000 126,000
Tier 3 3,575,000 35,750 89,375 107,250
Table 1. Projected Market Share.
Affordability is an important issue when marketing to the visually impaired community,
specifically regarding consumers who have been blind since birth. A 2011 study found that
approximately 48% of individuals identified as visually impaired have a family income of
$35,000 or less (U.S. Department of Health and Human Services, Centers for Disease Control
and Prevention, 2011).
Current United States population trends project that the number of elderly Americans will increase dramatically in the coming decades. The population of individuals aged 65 and over is expected to more than double from 2010 to 2050 (Vincent & Velkoff, 2010). The largest
expected increase will occur in the population segment aged 75 and over, which experiences a
higher frequency of visual impairment. These trends indicate that the market for adaptive
technologies geared towards the low and no vision community will expand significantly in
coming years, presenting growth opportunities for the Widget system.
As previously mentioned, a common trend visible in multiple studies is the increasing
prevalence of visual impairment with advanced age. Based on this data, we believe that
individuals with acquired visual impairments will represent a significant amount of Widget sales.
Projections made by the National Eye Institute indicate that the prevalence of severe visual
impairment within the United States will triple by 2050 (Figure 2) (National Eye Institute, 2010).
Commercialization Plan: The Widget System - Project for the Visually Impaired 17 While the Widget system is applicable to low or no vision individuals of all ages, this data suggests that the product may be most successful if is marketed towards individuals aged 65 and over, as this demographic group has the highest rate of visual impairment.
Projected Prevalence of Severe Visual Disability 14.0
12.0
10.0
8.0
6.0
4.0
Population (in millions) 2.0
0.0 2010 2030 2050 Blindness Low Vision
Figure 2. Projected prevalence of visual disability (National Eye Institute, 2010).
4.1.3 Industry Information
There is currently a solid network of well-known organizations within the blind and low vision community that focus on improving the lives of low and no vision individuals, including the American Federation for the Blind and the National Federation for the Blind. Organizations exist within each state or metropolitan area to assist the low vision community and provide recommendations for potential aides. There is an established market for individual visual aide devices. There are also a large number of software applications available to assist the visually impaired with specific tasks. However, in the realm of home automation, no current product exists for services tailored toward the low vision community. For this reason we believe the
Widget system will enjoy a first-mover advantage, which will allow for rapid sales growth.
Commercialization Plan: The Widget System - Project for the Visually Impaired 18 4.2 Marketing Strategy The 4Ps Marketing Strategy (Product, Price, Place, and Promotion) will be applied to the
Widget system as follows:
4.2.1 Product
The Widget product is intended to be used by individuals with severe low or no vision as a
simplified method of interaction with multiple devices throughout the home. Product details
have been removed from this sample report to preserve confidentiality.
4.2.2 Pricing
Determined by an internal corporate analysis, the market price for the product is based on
both the value-based pricing model and the market-oriented pricing model. The company
estimated the value that consumers will gain by utilizing its product and service by analyzing the
market prices of similar types of products in the market. The company aims to maximize the
margin by valuing the product appropriately while also pricing its products lower than competitors to attain price competitiveness. The market price is comprised of three different
levels according to the three different product tiers. Details have been removed from this sample
report to preserve confidentiality.
4.2.3 Distribution
a. Distribution channels
The product will be dispersed to end-consumers through distribution channels comprised of
two parts: direct channels and indirect channels. In direct channels, the company will sell the
product directly to the end-consumers. Indirect channels indicate that intermediaries, such as
wholesalers or retailers, buy the products from XYZ and resell them to the end-consumers.
Commercialization Plan: The Widget System - Project for the Visually Impaired 19 Although the physical product and mobile-based application are distributed through different
channels, they should be presented together when reaching the end-consumer. The product shall
be distributed out directly to the end-consumers through the company’s website, Amazon.com,
and app stores, such as Apple’s App Store and the Android Market. The product should also be
distributed to retailers that have a national presence, such as Walgreens, CVS, Rite Aid, optical
centers, medical supply companies, and electronic appliance retailers. Finally, it is highly
recommended that a partnership with a globally-based logistics company such as UPS, DHL, and
FedEx is considered to improve the efficiency of the distribution process. Below, Table 2 provides a summary of the distribution channels that will be discussed in detail in the following sections.
Sell App, System Tier Sold Direct or Product Distribution Product or Indirect Installer Both Tier 1 Tier 2 Tier 3
XYZ Website Direct Both x x (x) Trained Staff
App Store Direct App x x (x) Trained Staff
Amazon Direct Product x x (x) Trained Staff
Pharmacies Indirect Product x x Trained Staff
Opticians & Indirect Product x x x Trained Staff Optical Centers
Medical Supply Indirect Product x x x Trained Staff Companies
Retailers Indirect Product x x Trained Staff
Table 2. Distribution Channels.
Commercialization Plan: The Widget System - Project for the Visually Impaired 20
a.a. Direct Sales
XYZ Website
The product should be available to customers via the company website. As the information- hub for the product, the website should provide customers with the product, an ordering system, and access to download the mobile-based application for direct sales. The online product catalogue should include benefits and instructions on the products.
Application store
The best channel to bring the mobile-based application to customers is an application store, such as the Apple App store and Android Market. The application stores provide access to the biggest portion of app users. Publishing the application on these markets will allow the company to supply the product to customers in safe condition and expose the application to a larger number of potential customers. In general, the company should conform to the regulations and guidelines given to place the application on the market:
1) Develop an application.
2) Register in the application markets.
3) Submit the application to the app store review team.
4) Get approved.
5) Launch the new application.
Amazon
XYZ will gain exposure to the maximum amount of potential customers by using
Amazon.com as a distribution channel. Amazon is one of the biggest online retailers, and it will
Commercialization Plan: The Widget System - Project for the Visually Impaired 21 allow the company to enter the Widget system into the market with ease. Furthermore, the cost for using Amazon is much cheaper in comparison to that of an ordinary distribution channel. As a seller at Amazon.com, the company can take advantage of the flexibility to modify the product portfolio without heavy restrictions. The plans offered by Amazon.com are as follows:
1) Individual seller: Limited to sell fewer than 40 items a month. Costs are unit-based.
($0.99 per item plus other selling fee - 12% of product price)
2) Professional seller: Unlimited to sell items. Costs are monthly payment. ($39.99 plus
other selling fee - 12% of product price)
It is advised for the company to register as a member under the ‘sell as an individual’ option until they gain a certain level of recognition in the market. Then, the company can change its membership to the ‘sell as a professional’ option, which allows more than 40 items to be sold a month. The company should sell the products under the “Tools & Home Improvement – Safety
& Security” category listed on Amazon.com. The selling fee under this category will be 12% of product price as stated in the Amazon.com policy. In light of the product portfolio, the company should focus on offering only the basic system on Amazon because this type of online retailer normally targets a great number of unspecified consumers with no necessity of consultation about the product. a.b. Indirect Distribution Channels
Optical centers
Optical centers should be considered for a potential distribution channel because its specialization attracts the same customers XYZ is targeting for the Widget system. Furthermore,
Commercialization Plan: The Widget System - Project for the Visually Impaired 22 the opticians are well-educated and have experience with the optical and vision issues with
existing customers, which can lead to the development of effective marketing methods and
providing trained staff for the product.
Medical supply companies
The medical supply companies are a very crucial distribution channel for the company to
develop in the initial phase. The company can make use of the already-settled distribution channels through the local medical supply companies to overcome the difficulty of developing product recognition initially.
Retailers
Electronic retailers are potential distribution channels for the company to use when a certain level of product recognition is established in the market and the product can be supplied in bulk for medium-sized to large-sized retailers. Electronic retailers may be beneficial to the company if they have tech-savvy employees who can be trained to install the product.
Possible Distribution Partnerships
As our research is progressing well, we have come up with the following idea for the distribution channel of the Widget system through B2B partnerships. The assumption is based on a commission-based model and/or contract-based model for a portion of the profit margin. We believe that any potential partner for distribution will ask for at least 8% to 15% commission on the sales they will make. Several potential B2B distribution partners have been identified and brief introductions to these companies along with their web address have been provided in Table
3 below. XYZ will have to contact them at a later stage to begin discussions on a viable partnership. Potential distribution partners identified for the Widget system include:
Commercialization Plan: The Widget System - Project for the Visually Impaired 23 Installatio Business Potential Online Company n Area Role Store Support
Manufacturer/ Company 1 Distributor Low Yes Distributor
Company 2 Retailer Distributor Low Yes
Company 3 Retailer Distributor Low Yes
Service center Company 4 (rehabilitation, Distributor/Installation Mid Yes other activities) Technology support Company 5 Distributor/Installation High No agency for the blind Service center Company 6 (rehabilitation, Distributor/Installation Mid No other activities)
Company 7 Retailer Distributor/Installation High No
Service center Company 8 (rehabilitation, Distributor/Installation Mid Yes other activities) Table 3. Potential B2B Distribution Partners.
Company Descriptions
Details have been removed from this sample report to preserve confidentiality.
Logistics partnership
Partnering with logistical companies like UPS, DHL, and FedEx to directly distribute the products makes the process more efficient and effective. By doing so, the logistic company will pick up the product from the producer and deliver it to the end-user. While this partnership could enhance quick delivery, we believe that the factors below should be considered to ensure a successful partnership:
Commercialization Plan: The Widget System - Project for the Visually Impaired 24 • What to do when a customer refuses a shipment
• Damage
• Complaints
• How to handle orders for customers’ continuous replenishment process
In addition, the company should establish a memorandum of understanding (MOU), which
creates competitive advantages for them, such as special product treatment.
We believe that having an external logistic partner like UPS to optimize distribution will not
only help enhance performance, but it will also allow XYZ to focus more on its core business and strategies. b. Distribution Strategies b.a. Trained Staff for Installation
Employing trained staff to install specific versions of the product is essential for the success of distribution. This is especially true for the full-feature system, which requires trained staff to assist in installation. Due to the nature of the market, the company’s customers are spread across the entire nation. The company should station trained staff in strategic geographical locations, such as state capitals and metropolitans, in order to cover the entire market. The company can execute partnerships with local medical supply companies to appoint a certain amount of workers to be trained to install the full-feature product. The trained staff at each strategic point will be responsible for the respective areas and may be paid a unit base salary by the company.
In this way, XYZ is able to sell all levels of the Widget system through the online-based distribution channels such as its own website, Amazon, and app stores.
Commercialization Plan: The Widget System - Project for the Visually Impaired 25 Durable Medical Equipment (DME) companies may be a viable distributor, as they are seeking new avenues since The Affordable Care Act is expected to significantly decrease their profit margins. While typical pharmacies are not a viable channel, there is a new breed of hybrid pharmacy/DME that is being test-marketed with leaders, such as Walgreens, who have recently started an experimental rehab component in more affluent areas. b.b. 5-Year Distribution Development Plan
Two different plans for percentage change between direct sale channels and indirect sale channels are shown below in Table 4. Plan a includes both the basic system and the mid-level system, which do not require a high level of assistance for installation. Plan b is solely based on the full-feature system. In both plans, a higher portion of sales is expected from direct sales channels in the early stages. This is due to the difficulty of obtaining supply contracts with offline retailers. Nevertheless, the portion of indirect sales channels increases gradually year by year since the absolute growth of sales highly depends on the offline markets.
Year 2016 2017 2018 2019 2020 Plan a Basic/Mid-Range System Direct Sales 80% 60% 50% 40% 30% Indirect 20% 40% 50% 60% 70% Sales Plan b Full-Feature System Direct Sales 100% 95% 85% 70% 50% Indirect 0% 5% 15% 30% 50% Sales Plan a & b Plan Total Direct Sales 90% 78% 68% 55% 40% Indirect 10% 22% 32% 45% 60% Sales Table 4. Five-Year Distribution Development Plan.
Commercialization Plan: The Widget System - Project for the Visually Impaired 26
c. Strategic Market Entry
We propose a gradual market entry strategy for the Widget System. Due to the variation in installation requirements, the market entry strategy has been delineated differently for the full feature and basic/mid-range system models. Both models will be offered through a mix of direct and indirect sales channels. The direct and indirect distribution models referenced below are explained in further in section 3.2.3.
Consumer feedback is essential to the development of successful new products. A user survey has been developed as a method of obtaining such feedback prior to the launch of the product. This survey is intended to gain insight from consumers regarding the potential usefulness of the Widget system through the inclusion of several questions regarding the operation of various devices within the home. It will also be extremely useful in gathering information regarding the disposable income levels of the potential customer base and their willingness to spend money on assistive technology for their homes. This data will be incorporated into the final pricing strategy to ensure product pricing aligns with consumer purchasing capacity. We recommend that XYZ distribute this survey to a large number of participants before launching the product.
Prior to the launch of the product, we recommend XYZ undergo a thorough trial phase involving installation of the Widget systems in the homes of multiple visually impaired individuals. The product would then be utilized within each home for a trial period of at least one month. This will allow XYZ to perfect the technology and identify any potential issues in the installation or operation of the product before initiating larger scale operations. We recommend that all levels of the Widget system (Tiers 1, 2, and 3) be tested, and XYZ handle the
Commercialization Plan: The Widget System - Project for the Visually Impaired 27 installations directly to limit installation costs. Participants in this trial may be identified through partnerships with local vision rehabilitation centers. These individuals would be offered this service for the testing period significantly reduced cost, if not at zero cost, in exchange for their honest feedback and patience throughout the setup process.
Advanced Model
The advanced Widget model shall be rolled out in a two-phase process:
1) Phase 1 (2016) - Small-Scale direct operations within the local market
• XYZ sells this system directly to consumers in the Columbus area.
• Possible partnership with local organizations for the blind and visually impaired to
test and promote the product.
2) Phase 2 (2017 – 2020) - Expansion through B2B partnerships
• XYZ will offer the Widget system through B2B partnerships with medical device
companies.
• We suggest that they initially focus on groups within their own geographic region,
and expand annually to create a larger offering area.
Entering the market in a small area and slowly expanding will allow XYZ to test out their system and correct any technical or production issues that may arise before attempting to achieve large scale operations. This will also allow XYZ to quickly address any customer concerns. A key benefit of starting small initially is that any issues that arise can be corrected at a lower cost.
Basic and Mid-Range Models
Indirect Sales
Commercialization Plan: The Widget System - Project for the Visually Impaired 28 The basic and mid-range Widget system would be offered through the same indirect B2B
venues as the advanced model. Although these products do not require the same technical level
of installation, offering them through the B2B partnerships could be beneficial because B2B
players offer additional service and market exposure. Additionally, it is important that all three
products are available so that price-conscious consumers have low cost options. We expect that
customers happy with the lower priced models may decide to upgrade to a full feature system at
a later time, so it is important that all options are available from the same source.
Additional Direct Web and App-based Sales
The basic and mid-range models will be sold directly to consumers over the Web and through mobile app stores. Since these models do not require advanced installation, they can be sold directly to consumers with no B2B partnership required. This will increase potential revenues, as there will be no fees paid to the business partner. We anticipate that the lack of technical installation requirements will allow XYZ to reach a wider range of customers and will allow the Widget system to be introduced to the market more quickly.
To enter into this market, a key initial consideration would be to contact the Apple App Store and the Google Android Marketplace to allow the software to be downloaded onto their platform. As previously discussed, XYZ will also need to generate a website for the product on which the basic system and unique modules can be purchased. This may be done through
Amazon.com, and also directly though the future Widget website.
4.2.4 Promotion a. Public Relations
Commercialization Plan: The Widget System - Project for the Visually Impaired 29 In order to develop public relations, the owner, John Smith, will be visiting local events
related to the healthcare industry and must be willing to visit any information sessions provided
for people with visual impairments at eye care clinics. Taking part in these events will allow
XYZ to introduce the Widget system to customers and inform them of its advantages. The
company’s spokesperson should follow a clear plan of action at the events, with established
goals to clearly define what the Widget system does for people with visual impairments, and how
it works. Additionally, press members will be invited to information sessions. John Smith and his
associates should always look for any public speaking opportunities related to health and visual
impairments.
Furthermore, John and his team will create an online news blog about the Widget system.
This news blog would mainly serve as a public relations tool. The blog will provide weekly news
and updates about how positively the Widget system has changed the lives of people with visual
impairments. It will contain interview messages and video posts. The blog will have several
ways of delivering the message in order to suit the needs of every audience. Sometimes the
interests of differing audiences necessitate the creation of several distinct but complementary
messages. Blogging websites are not always accessible, which might make navigation difficult
and challenging for people with visual impairments. Therefore, care must be taken to ensure
accessibility of the website (American Foundation for the Blind, 2014). Blogs are a rapidly
growing avenue to self-expression. John and his team could reach out to famous blog developers
for people with visual impairments and partner with them to endorse the Widget system.
b. Direct Marketing
XYZ will benefit from a variety of direct marketing tools in order to contact customers directly. These tools are interactive consumer websites, online display ads, database marketing,
Commercialization Plan: The Widget System - Project for the Visually Impaired 30 fliers, catalog distribution, targeted television commercials, response-generating newspaper and
magazine advertisements, and outdoor advertising.
• Targeted television commercials through specified channels only for visually impaired
(channels and shows specifically directed for people with visual impairments) Available
channels: City TV, Narrative Television Network and etc.
• Radio stations that reach listeners of difference age groups. For example: 20th Century
Radio, Live 365 and etc.
• Health magazines and journals. XYZ will buy electronic and print magazine ads in health
magazines and journals that are made available in health centers.
• In the early stages of the Widget systems sales, XYZ could focus on short-term
advertising in eye care centers.
• XYZ would need to buy data-based marketing in order to send out customized fliers
about the Widget system to people with visual impairments.
• Printed brochures can be distributed to healthcare centers, eye care clinics, health
insurance agencies, and government health agencies. c. Advertising
XYZ should focus on how to effectively promote the Widget system at healthcare centers, eye care clinics, health insurance agencies, and government health agencies. XYZ should also focus on how to effectively promote the Widget system through long-term opportunities with
B2B partnerships. If an agreement is made with any of the previously mentioned potential B2B distribution partners, the first step in the B2B partnership would be to introduce the Widget system. Over time, there may be a potential for other projects.
Commercialization Plan: The Widget System - Project for the Visually Impaired 31 On the other hand, a simple promotion or referral system can be created between different agencies and XYZ to promote the Widget system based on commissions, with the exception of the government agencies (not-for-profit organizations). d. Online Marketing
Internet marketing is a necessary part of most business models. If you don't sell directly online, you want to encourage consumers to come to your website. Online marketing is one of the fastest adverting tools. It is also one of the cheapest forms of advertising. Online marketing currently plays a main role in product recognition and increased sales. Through increasing accessibility features of modern computers, the internet has become very accessible for the visually impaired. However, some features of modern websites can make navigation difficult for low vision users. It is essential that the Widget website be specifically designed for ease of access for individuals with visual impairments.
Key steps to initiate online marketing:
1) Create a webpage exclusively for the Widget product.
A new website will be setup exclusively for the Widget product. This site will include a brief description of the product features and tiers offered, as well as a video with narration that clearly explains the product and demonstrates its use. Although XYZ does have an existing company webpage at this time, we believe a unique site is needed for this product for ease of accessibility.
The domain name widget.net will be purchased by XYZ for this purpose, and the existing company website will link to it. It is essential that this page be setup in a simple format which is easily navigated by individuals with visual impairments.
Commercialization Plan: The Widget System - Project for the Visually Impaired 32 This webpage will be made be accessible at least four to six months preceding product
launch, and should offer individuals the ability to sign up for email notifications regarding the
product (Candrlic, 2012). This will allow XYZ to begin to build a list of potential users or other
interested individuals (distributions, opticians, etc.) early on. Pre-launch, these contacts could be used as a possible source of participants for a survey, or other questions surrounding the product that require customer feedback. Once the system is launched, this contact list can be used to send email promotions, providing a free version of advertising which will be sent directly to the target market.
XYZ will use tools such as Google Adwords to ensure the Widget system appears early in online search results. This will be very important to ensure the systems are easily located online.
Specific key words such as “low vision”, “blind”, “visually impaired”, “assistive technology”,
“low vision aids”, and “home automation” will be selected. Additionally, Google Analytics tools will be used on the product website to track the number of views and traffic sources (Candrlic,
2012).
2) Create social media accounts for the Widget brand
These accounts can be used to make announcements regarding the product and build brand recognition. The following social media networks will be utilized:
• Google +
Commercialization Plan: The Widget System - Project for the Visually Impaired 33 • AudioBoo
3) Connect with existing key influencers within the blind community
Once convinced of the value of the product, key influencers will be important to promoting the Widget system on social networks and offline (Candrlic, 2012). Blogging is popular within the low and no vision community. XYZ will contact popular bloggers within this segment and request reviews of the Widget system. See Table 5 below for some well-known low vision bloggers to approach.
Name Written By Website
Collaboration between the American VisionAware Foundation for the blind and Reader’s http://www.visionaware.org/blog.aspx Blog Digest partners for sight
AFB Blog American Foundation for the Blind http://www.afb.org/blog.aspx?BlogID=7
Table 5. Low vision blogs (VisionAware, 2014) (American Foundation for the Blind, 2014).
Key bloggers will be selected and contacted in the months preceding product launch. Model systems will be provided to a select group of bloggers to test in exchange for posting reviews of the system.
In addition, there are several other key websites and publications that are targeted towards the low vision community. XYZ will promote the Widget system in the American Foundation for the Blind (AFB)’s online journal, AccessWorld, through purchased advertising and by requesting a technology evaluation of the product.
Commercialization Plan: The Widget System - Project for the Visually Impaired 34 Promotion/Advertising Channel Size/Measure Cost Full page $ 2,475 Magazine Pages - American Journal of Ophthalmology Half Page $ 1,695 Fourth Page $ 1,085
TV Commercials/Ads 30 seconds $ 200 - $1,500
Social Website Ads - Facebook Per click $ 0.50
Blogs Per month $ 200
Table 6. Direct Promotion/Advertising Costs.
B2B Promotion
A key element in the commercialization of the Widget system is the development of business partnerships for the distribution and installation of the system, and possibly production as well.
For this reason it will be very important for XYZ to build awareness with businesses in this industry with the intention of developing future B2B partnerships. We suggest that XYZ market this product to potential business partners through both trade shows and industry journals.
We recommend that XYZ exhibit the Widget system at the following conferences found in
Table 7. These conferences will serve as crucial networking events for XYZ to build awareness amongst potential distributors and initiate business relationships.
Commercialization Plan: The Widget System - Project for the Visually Impaired 35 Conference Pricing Contact Information
Foundation Fighting Blindness VISIONS $825 Exhibition Booth www.blindness.org/visions Conference
$1990 Single Booth M-Enabling Summit www.m-enabling.com (Concourse Area)
Assistive Technology Industry $3550 Exhibition Booth Association (ATIA) http://www.atia.org/ (Regular Size) Conference
$850 Exhibition Booth Envision Conference http://www.envisionconference.org/ $300 Ad in Program
Table 7. Potential exhibition conferences for the Widget system.
4.3 Competitive Analysis
The market landscape of both institutional and unorganized competitors is quite wide. There are very few direct competitors of the Widget system, however, several indirect competitors exist. Numerous devices can be utilized in a variety of environments to assist those with low vision. In the current market, assistive technology software applications and in-home care services are both commonly utilized by the low vision and no vision communities; however no combined centralized solution exists.
Many mobile applications for Apple iPad and Android devices are designed to assist the visually impaired. As many of these programs are readily available at little or no cost in mobile app marketplaces, an Apple iPad or Android tablet using these special apps could be considered a competitor to our product. Some useful apps currently offered for Apple devices include
Magnifier, Talking Scientific Calculator, Calendar, MapQuest, and Money Reader (Kellogg Eye
Center, 2014). Through the wide variety of available mobile apps, these mobile devices combine necessary daily services for people with low vision into a single controlling device. While such
Commercialization Plan: The Widget System - Project for the Visually Impaired 36 existing applications may mirror some of the intended functions of the basic Widget system, our product is unique in that it provides a centralized interface for all interactions. The integration of features the Widget system provides will offer simplicity of function to the user and will make the product more attractive than individual applications.
In addition to mobile apps, many other specially designed devices and products are obtainable to help individual with visual impairments lead more active and independent lives.
The large variety of low vision aids and devices available for both blind and visually impaired consumers include items such as telescopes, video magnifiers, CCTVs, and talking or sensor- operated appliances. Combined, these devices already serve many of the needs of the blind and visually impaired community. If individuals already own these devices to assist with their daily lives, they may be satisfied to continue with current methods rather than purchase the Widget system. Therefore, these individual adaptive products can also be considered indirect competitors.
Home automation systems can also be considered a competitor of the Widget system.
However, these devices are known to be complicated, and to date have not been designed specifically for the visually impaired population. Also, the existing systems typically have a very high price point, which is beyond the accessibility of the majority of the low vision population.
Future Competitive Landscape
The threat of new market entrants is very high. Competitors' capabilities to create products with comparable technologies could lead to increased competition in this market in future years.
This risk is exacerbated by the off-the-shelf nature of many of the Widget system components.
One means to tackle this problem is to obtain patent protection.
Commercialization Plan: The Widget System - Project for the Visually Impaired 37 4.4 Barriers to Consumer Acceptance
As no clear direct competition exists, the main potential obstacle in commercialization of the
Widget device is gaining acceptance from customers and the market quickly. The potential
customer pain points are listed below, along with a plan to overcome these issues.
a. Cost
The price of the service may serve as a large initial barrier in attracting customers.
Affordability is a key issue when marketing towards people with visual impairments, as this
demographic group typically has lower than average income. This concern will be addressed
though the offer of our basic system at a lower price point, which will allow for increased
customer adoption from individuals in lower income brackets.
b. Compatibility
The Widget system may face issues with compatibility during the initial launch, as potential customers may wish to integrate devices from a vast range of different manufacturers that may not be coded within the existing software. However, XYZ has the ability to quickly address any such issues that may arise with additional programming to match the presented device. We estimate that this will not be a large issue as the software will be designed to incorporate the majority of major appliance and electronic device manufacturers and models.
c. Consumer Awareness
Initially, the main obstacle toward consumer acceptance of the product will be low consumer
awareness. In order to gain service subscribers, the Widget system will need to become known
within the low vision and no vision communities. XYZ plans to increase product awareness
through a variety of methods, as described in our promotion and public relations strategy.
Through partnerships with organizations throughout the low vision community and extensive
Commercialization Plan: The Widget System - Project for the Visually Impaired 38 promotion via tradeshows, conferences, and new media, XYZ will be able to significantly increase product awareness in a short period of time. d. Low Consumer Preference
A large number of products exist in the market to assist low and no vision individuals with specific daily tasks. If these needs are already being met, users may be reluctant to switch to the
Widget system as it may require additional training to operate. Additionally, the Widget system is based mainly on a smartphone application. Some individuals with visual disabilities continue to use tactile button phones, which help users identify the placement of the keys more easily.
Reluctance towards smartphone and tablet technology could lead to low consumer preference for the Widget system. This issue will be addressed through trial offerings and demonstrations, which will make customers more familiar with the service.
Commercialization Plan: The Widget System - Project for the Visually Impaired 39 5. Intellectual Property (IP) Protection and Licensing
Note: Some information from this section was taken from an informal report compiled by a group of students at the University at Buffalo Law School. This is not an official legal opinion, and we recommend XYZ seek professional legal counsel to review this information.
A license agreement can be made with a manufacturer of the physical component of the product; the module. Licensing this portion of the product for manufacture, rather than sub- contracting, will shift the cost of manufacturing and risks to the manufacturer. Also, XYZ can rely on the manufacturing company’s experience and established business to develop and market the product.
The licensing agreement between XYZ and the manufacturer could address these issues:
• Modifications of the product
• Information sharing: how XYZ can protect the IP of the product
• Quality control
• How to prevent competitors from developing a similar product
• Warranty
The necessary steps to take before reaching a licensing agreement with a manufacturer are
(Zimmer, 2004):
1) Develop draft license agreement
2) Assess need for nondisclosure agreement
a. Fees, grant rights, indemnification and insurance etc.
3) Negotiate Term Sheet: field of use, the intellectual property that is used, restrictions etc.
Commercialization Plan: The Widget System - Project for the Visually Impaired 40 4) Negotiate license language
5) Execute license
6) Manage commitment
Since this might be a whole new concept to XYZ, it is advisable to use an attorney to ensure
you are safe under the agreement. Also, set the license agreement for a period of time; such as
two years, and at the end of the agreement, XYZ may either renew or end the agreement.
Additionally, XYZ can come up with a trademark to differentiate itself from the manufacturing firm, which in turn will prevent confusion as to who exactly owns the product.
Patenting
It is advisable to get the patent approved before tackling the issue of licensing. This will prevent a manufacturing company from taking advantage of XYZ’s ideas or concepts, even if the manufacturing firm has already come up with a new product based upon XYZ’s patented product. In order to qualify for a patent, and as stated by the University at Buffalo Law students, the invention must be:
• New and Novel
• Useful
• Non-obvious
If any of these three criteria is not met, the patent will not be granted. Based upon our conversation with the UB Law students, the first two points, new and novel and useful, could be satisfied, but the obviousness is the hardest requirement to satisfy. Patent reviewers will contemplate on the points below to determine whether an invention is obvious or not:
• Level of ordinary skill in the art;
Commercialization Plan: The Widget System - Project for the Visually Impaired 41 • Scope and content of the prior art;
• Differences between claimed invention and the prior art; and,
• Secondary considerations (i.e., objective indicia of non-obviousness)
- Failure of others to solve the problem
- Commercial success of invention
- Existence of a long-felt need
- Licensing of Patent
- Acquiescence
- Copying by others
A preliminary novelty search was conducted for the Widget system using Google Patents and the USPTO website. The following references were discovered in the search and are considered to be the most pertinent:
Patent / Patent Relevance Assignee Application No.
xxx1 Mobile terminal comprising... Company 1
xxx2 A system for controlling… Company 2
xxx3 An apparatus that provides… Company 3
xxx4 An apparatus that provides… Company 4
Table 8. Relevant Patents and Patent Applications Identified. Details have been removed from this sample report to preserve confidentiality.
Commercialization Plan: The Widget System - Project for the Visually Impaired 42 6. Financing
Assuming XYZ is awarded the SBIR Phase II Grant of $500,000, 100 percent of the initial
investment will be covered. However, XYZ estimates a significant amount of the grant funding
would be used in pre-launch product development and testing. In the event that additional
outside funds are required for initial investment and future capital injection for project
expansion, XYZ has several options to choose from.
a. Fundraising
XYZ needs to look into potential investor candidates. The target group consists of people who have experienced the challenges that come with being visually impaired, either through personal experience or the experience of a loved one. These types of candidates might be willing to invest in the project given the potential of positive changes the Widget system will provide for
individuals with visual impairments.
XYZ will organize fundraising events and will make a significant effort to meet with key
figures, such as CEOs, journalists or other potential wealthy investors, to promote the project.
The fundraising events will require a clear, direct message on how the Widget system would
change the lives of many.
b. Bank Loan
Since XYZ already has a good-standing business relationship with ABC Bank, it could
present the project’s business plan to a bank of its choice to apply for a short- or long-term loan.
If the bank were to approve the credit, acceptance of the loan would depend on how high the
interest rate would be for this loan. In order to analyze this project, we would then perform a
financial analysis from our cash flows to calculate the net present value (NPV) and internal
Commercialization Plan: The Widget System - Project for the Visually Impaired 43 required rate of return (IRR) of the project. The portion of the loan would be included in the payback period calculation to project the payback amount and the period it will require so that
XYZ could decide for short- or long-term loan. c. Venture Capital
If XYZ could not secure a bank loan to raise capital, it could opt for the Venture Capitalist option to raise the needed capital. Of course, this option will provide some conflict of interest for
XYZ because a Venture Capital firm usually gets significant control over company decisions in addition to a significant portion of the company’s ownership in return for the high risk investment it has made. As a result, this option is to be considered last when determining the financing for the Widget project. d. Financing Alternatives: Angel Investors and Crowd Funding
Rather than seeking large amounts from a few individuals, crowd funding seeks small investments from many people. There are three primary forms of repayment in the context of a for-profit, product-based investment: loans, equity, and revenue sharing. Of these three, revenue sharing may be the best option.
Commercialization Plan: The Widget System - Project for the Visually Impaired 44 7. Production
In the current production process, the Widget system physical components, including the
RFID receiver and appliance customization modules, are purchased through a select group of
retailers. The products are shipped to XYZ and modified before they can be used within the
system. All software development and coding will be completed by the XYZ team.
For the production aspects completed by XYZ, the company will be required to add
additional employees each year to meet rising demand. We estimate a need for 5.0 full time
employees (FTEs) dedicated to production (combined estimate for all three system models). By
2020, we estimate this number will increase to 13.0 FTEs.
We feel a key task for XYZ will be locating a supplier that would make the technical modifications required for the Widget system. This would reduce labor costs as well as production time. From previous discussions, the current distributor, General Electric (GE), has not shown interest in producing a customized product at current purchasing levels. XYZ may need to locate an alternative supplier that can deliver the products with modifications complete.
Manufacturing B2B Partnership
Since XYZ’s goal is to outsource its production, we have looked into various areas and
possible partnerships in the US market. Most importantly, XYZ will need to ensure that the
Widget system will be patented and protected against any illegal action before proceeding to
B2B partnerships. In order to outsource its production, XYZ will need to consider all the related
costs involved within these partnerships. These costs include transportation of the parts to the
manufacturing site, marginal fees paid to the manufacturing partner that will range from 30% to
40%, and transportation costs of the end goods from the manufacturing site to the end
Commercialization Plan: The Widget System - Project for the Visually Impaired 45 distributors. Below, we have listed several potential companies (B2B partners) that are probable candidates for outsourcing the manufacturing of the Widget system. a. The Carroll Center for the Blind
The Carroll Center serves the needs of blind people by providing various rehabilitation services, skills training, and educational opportunities for an independent life at home (The
Carroll Center for the Blind, 2015). The company is located in Newton, Massachusetts. Since technology is evolving every day, the Center also offers all facets of product testing, including usability testing and testing by customers with vision impairments. The Center has the necessary facilities and assistive technologies to perform the trial testing. The following website will provide all necessary information for XYZ to proceed further: http://carroll.org
b. Enhanced Vision
Enhanced Vision is a leading developer of assistive technology for the visually impaired,
including those with macular degeneration, glaucoma, cataracts, retinitis pigmentosa and diabetic
retinopathy (Enhanced Vision, 2015). Low vision assistive technology enables people to read,
write, and fully participate in life. The company develops products that serve an everyday
purpose for people with vision impairments. Moreover, the company ensures those products are
of high quality. Enhanced Vision is located in Huntington Beach, California. We believe
Enhanced Vision will provide high potential partnership opportunities for XYZ to outsource its
production. The following website will provide all necessary information for XYZ to proceed
further: http://www.enhancedvision.com
Commercialization Plan: The Widget System - Project for the Visually Impaired 46 c. Freedom Scientific
Another big B2B opportunity for outsourcing production is Freedom Scientific. Freedom
Scientific is the largest worldwide manufacturer of assistive technology products for those who are blind or have low vision (Freedom Scientific, 2015). It is also the only company with a complete line of products for those with vision impairments. All of these products are tested and guaranteed to work together. Freedom Scientific has been in business for over ten years and its products are sold in 55 countries and translated into 24 languages. Freedom Scientific is located in St. Petersburg, Florida. The following website will provide all necessary information for XYZ to proceed further: http://www.freedomscientific.com/default.asp
Additionally, Vision Dynamics, LS&S Products, and HumanWare are companies similar to those mentioned above, and are potential candidates for XYZ to outsource its production to third parties. The following websites will provide further information for these candidates: http://visiondynamics.com/index.php/, http://www.lssproducts.com, http://www.hum anware.com/en-usa/home .
We recommend that XYZ appoints a process monitoring manager for the entire B2B business model of the Low Vision and No Vision project. In order for the entire process to run smoothly in every stage there has to be responsible monitoring. In stage one, when parts are being shipped from GE to the manufacturing partner, the monitoring manager will ensure the right parts are delivered on schedule. In stage two, the production process, close monitoring is required to manage any setbacks in production due to complications or required improvements to the product. In stage three, end goods are ready for shipment, and the monitoring manager ascertains that the right amount of product is being shipped to the correct retailers and
Commercialization Plan: The Widget System - Project for the Visually Impaired 47 distribution partners. Overall, XYZ must either monitor the operational B2B process itself or appoint a supervisor to monitor the process to ensure the smooth execution of the project.
Commercialization Plan: The Widget System - Project for the Visually Impaired 48 8. Revenue Stream Budgets
This section includes a potential cost structure for the Widget project that details what assumptions were made from current business process observations and projections. These projections correspond to six scenarios detailed later in the report that deliver a spectrum of possible results. The analyses correspond to a 5-year budget forecast from 2016 to 2020. A bottom-up approach was used to create this set of budgets. Initial assumptions were gathered, and initial production levels, costs per unit, fixed costs and desired prices were established to calculate the resulting revenue and profit forecasts.
The scenarios described in the Comparison of Revenues section were calculated using an
Excel modeling tool that was created by the Technology Transfer and Commercialization class students at Niagara University. This tool allowed for the manipulation of various inputs, such as budgets for staffing, marketing, profit margins, and pricing. It then provided comparisons of the financial implications of these various inputs for different scenarios involving in-house versus outsourced production, and the acquisition of different levels of financing. Though the tool is being maintained by XYZ as confidential, the following listing describes the components considered by the model.
This study contemplates two forms of production:
• Scenario A: Production occurs in-house.
• Scenario B: Production is outsourced to a third-party manufacturer.
Furthermore, there are three levels of financing in each scenario, namely:
• Level 1 financing: $500,000 USD available in financing from Phase II Federal grants.
Commercialization Plan: The Widget System - Project for the Visually Impaired 49 • Level 2 financing: $750,000 USD from Federal grants and $250,000 USD in revenue
sharing programs.
• Level 3 financing: $1,000,000 USD from Federal grants and revenue sharing plus
$50,000 USD from angel investors or venture capitalists.
The results of the financial forecast are separated in to different budgets that take into account the following considerations:
• Production & Service Budget: Details how the units produced are planned depending
on the productivity of labor and amount of workers for scenario A and the required units
ordered for scenario B.
• Labor Budget: Here the company plans for the necessary employees in several areas. In
scenario A, the number of "Production & Service" Full-Time-Employees (FTEs) needed
is much higher because they are responsible for producing and servicing the products. In
scenario B, the number of "Production & Service" FTEs needed are kept at a minimal
level as production is executed by an outsourced partner.
• Material Costing Budget: This budget contains the cost breakdown of unit material
costs in terms of cost of hardware, maintenance, and yearly maintenance of subscriptions.
• Sales Channels Structure: This analysis details where the company expects their future
revenues to stem from, specific to direct and indirect channels, depending on the product
tier (Tier 1, 2, or 3).
• Sales Distribution and Traffic Expenses: This budget is the cost foundation upon which
the unit costs and Cost of Goods Sold (COGS) are derived, namely taking the production
levels from the "Production & Service budget" and later distributed by the relations
specified in the "Sales Channels Structure". This budget contains the cost framework
Commercialization Plan: The Widget System - Project for the Visually Impaired 50 from each of the proposed sales channels, both direct and indirect, and detailed by
product Tier 1, 2 or 3.
• Sales Pricing [MSRP]: The pricing section explains how products should be priced and
the revenues to be gained. For this analysis, there are two separate pricing segments - a
monthly subscription fee and a "one-time" unit hardware price. This is one of the most
influential budgets for the entire forecast method.
• Sales Projection: This projection is composed of two sections:
o Potential Market Sales: This number explains the total number of customers that the company could be serving, should it be able to provide to the market fully. For
the whole extent of this analysis, the maximum customer number is much larger
than the production capabilities of the company. This is a positive forecast sign as
it explains that there is much more demand than can be covered, suggesting that
there is high probability that the desired cash flows can be achieved. The potential
total units sales is calculated by multiplying the total customer group by a
coefficient of market penetration, namely the audience that is aware of the
existence of the product and could purchase it.
o Actual Market Sales: Since the demand for these products are forecasted to be much larger than the production & service levels, the actual market sales are taken
as the totality of the units produced. Therefore, the total production potential is
limited by the levels of production which are in turn limited by available
financing, explained later in the report.
• Revenue Streams - Income Statement: This section takes into account all of the
previously mentioned budgets and forecasts to calculate total revenue, broken down by
Commercialization Plan: The Widget System - Project for the Visually Impaired 51 product tier and sales channel. Furthermore, the Cost of Goods Sold (COGS) details the
total cost of production, delivering a Gross Margin (GM) figure, which is the gross profit
upon which all other expenses will be deducted from.
• Comprehensive Projected Income Statement: This section details the expense
provision for several areas of the business such as Research & Development (R&D) and
Marketing and Administrative expenses, among others. It also includes the costs for the
planned FTEs in each area. Finally, after subtracting all expenses from the Gross Margin
(GM), the Earnings Before Interest and Taxes (EBIT) is achieved.
• Cash-flow Analysis - Required Investment for Operation: This budget details at
year's beginning how much financing will be needed to start a financially healthy
operation, and to make and grow revenue. These figures are in terms of FTE
remuneration, costs of purchasing products, and expenses that make up certain
percentages of funds that need to be available at the beginning of the year. The initial
investment will allow a certain level of financing for each of the expenses. In the second
part of this report, the rest of the financing needed to conduct operations is detailed.
Nevertheless, this operation is not only financed by the initial investment, it is also
financed by the on-going generation of revenues that occurs during the year.
• Profit Forecasts: In the concluding forecast, we can see the final gross profit and EBIT
figures. Furthermore, the interest expense (if applicable) and taxes are calculated using a
specified corporate tax rate (forecasted with 35% tax rate) in order to determine the
available Earnings before Taxes (EBT). From the EBT, further deductions can be made
to pay external stockholders, resulting in the final "Available Free Profit" figure, which is
the net profit available for reinvesting in the business.
Commercialization Plan: The Widget System - Project for the Visually Impaired 52 • Financing Control Panel: This final budget takes into consideration the payments done
at year's beginning plus the revenues generated throughout the year, minus the expenses
paid during the year in order to calculate the Statement of Cash Flows. The result of this
budget is independent from the profit figure and will explain if at the end of each year the
company will have sufficient cash in its accounts to continue their operations. The figure
named "Excess or Shortfall in Financing" explains if it is necessary to acquire a new type
of financing to keep liquidity in the project and avoid bankruptcy (shortfall), or if the
company has excess cash it can use to finance part of the next year's operations.
The above-mentioned considerations are explained further in the following graphs to deliver a complete view of the business finances and explain where the revenues and costs come from, what the performance of the project will be in terms of profit, and if the project has the ability to remain solvent throughout its existence.
Major findings upon comparison of results for six scenarios of financing and operations.
As mentioned previously, this study contemplated two forms of production represented by scenario A – in-house production, and scenario B – production outsourced to a third-party manufacturer. Within each scenario, three levels of financing were considered:
• Level 1 financing: $500,000 USD available in financing from Phase II Federal grants.
• Level 2 financing: $750,000 USD from Federal grants and $250,000 USD in revenue
sharing programs.
• Level 3 financing: $1,000,000 USD from Federal grants and revenue sharing plus
$50,000 USD from angel investors or venture capitalists.
Commercialization Plan: The Widget System - Project for the Visually Impaired 53 The results found below are broken down by scenario (production) and then by financing.
For example, A1 indicates production of the product takes place in-house and is financed by the
$500,000 USD available from Phase II Federal grants, while B3 indicates production will be outsourced, financed by $1 million in federal grants and revenue sharing and $50,000 from investors.
Comparison of Revenues
As it can be observed in Figure 3, the revenues from scenario B are much stronger than those of scenario A. This is because the outsourcing that occurs in scenario B allows the company to expand its production levels past the in-house production capabilities that are restricted by a limited capacity.
Revenues for Levels [A1-A2-A3] Revenues for Levels [B1-B2-B3]
$300 $300 $250 $250 Millions Millions $200 $200
$150 $150
$100 $100
$50 $50
$0 $0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 A1 Revenues A2 Revenues A3 Revenues B1 Revenues B2 Revenues B3 Revenues
Figure 3. Comparison of revenues between scenarios A and B.
Comparison of EBIT
Scenario B shows much higher projections of EBIT than scenario A, as can be seen in Figure
4. However, it is important to note that while scenario A1 has the lowest financing and performance, it still delivers an EBIT of about $6 million USD in 2020.
Commercialization Plan: The Widget System - Project for the Visually Impaired 54 EBIT for Levels [A1-A2-A3] EBIT for Levels [B1-B2-B3]
$80 $80 $70 $70 Millions Millions $60 $60 $50 $50 $40 $40 $30 $30 $20 $20 $10 $10 $0 $0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 A1 EBIT A2 EBIT A3 EBIT B1 EBIT B2 EBIT B3 EBIT
Figure 4. Comparison of EBIT between Scenarios A and B.
Comparison of COGS as a percentage of sales
In the long run, scenarios A and B do not seem to differ much in their COGS cost structure.
The COGS of scenarios A and B converge towards a similar figure of approximately 62.5% of sales at the end of the 5-year projections, as shown below in Figure 5. The major difference is that in the beginning, the scenario B has a lower COGS as a percent of sales because the fixed costs can be distributed over a larger amount of produced units, allowing economies of scale to be recognized at a faster pace.
Commercialization Plan: The Widget System - Project for the Visually Impaired 55 COGS as % of Sales decreases over COGS as % of Sales remains stable time in Scenario A over time in Scenario B 71% 71% 70% 70% 69% 69% 68% 68% 67% 67% 66% 66% 65% 65% 64% 64% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
A1 COGS A2 COGS A3 COGS B1 COGS B2 COGS B3 COGS
Figure 5. Comparison of COGs as a percentage of sales for scenarios A and B.
Comparison of Market Potential vs. Total Sales
Figure 6 shows the potential market sales if the company was able to reach all the customers
in this market and had an unlimited production capacity, as well as the potential number of actual sales under each scenario. As previously discussed, it is rare that the capacity of a company can reach a substantial part of the proposed market potential in the beginning of a project.
Nevertheless, Figure 6 shows scenario B does in fact reach a substantial part of the market. At that point in this given scenario, it is advised that a major restructuring of the business framework takes place in order to avoid running out of potential market.
Commercialization Plan: The Widget System - Project for the Visually Impaired 56 Scenario A Sales Potential Scenario B Sales Potential
140 140 120 120 100 100 Thousands 80 Thousands 80 60 60 40 40 20 20 0 0 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Sales Potential A3 Units sold Sales Potential B3Units sold A2 Units sold A1 Units sold B2 Units sold B1 Units sold
Figure 6. Estimated unit sales as a portion of market potential for scenarios A and B.
Comparison of Production Levels
Figures 7 and 8 compare the production levels for each scenario. It is expected that all units produced will result in sales because customer demand is much higher than the production capacity. When comparing figures 7 and 8 it was found that by 2020, the production levels of scenario B double that of scenario A. This is because production is outsourced in scenario B, allowing the company to expand its production levels past the in-house production capabilities that are restricted by a limited capacity. In addition to production capacity, production levels are dependent on the amount of financing available to support the operation.
Commercialization Plan: The Widget System - Project for the Visually Impaired 57 Production Levels at [A1-A2-A3] 70,000 60,000 50,000 40,000 30,000 A1 Units sold 20,000 A2 Units sold 10,000 A3 Units sold 0 2016 2017 2018 2019 2020 A1 Units sold 2,338 3,361 4,763 7,166 11,850 A2 Units sold 3,912 6,002 10,584 18,919 36,175 A3 Units sold 5,486 8,883 16,934 32,105 62,370
Figure 7. Production levels in scenario A are limited by capacity and finances available.
Production Levels at [B1-B2-B3] 120,000
100,000
80,000
60,000 B1 Units sold 40,000 B2 Units sold 20,000 B3Units sold
0 2016 2017 2018 2019 2020 B1 Units sold 1,500 2,707 5,127 10,271 21,200 B2 Units sold 3,197 6,992 15,291 33,442 73,137 B3Units sold 4,306 9,607 21,433 47,816 106,677
Figure 8. Production levels in scenario B are only limited by the financing available.
Commercialization Plan: The Widget System - Project for the Visually Impaired 58 Results Analysis
Based on our current revenue forecasts, an initial investment of approximately $750,000 will be required to launch the product. If the SBIR phase II grant of $500,000 is received, the remaining $250,000 must be obtained from outside investments. The company is expected to experience a loss in the first year of production; however, in subsequent years they will make increasing profits from the Widget system. Based on these projections, XYZ will breakeven in approximately five years. The breakeven point was estimated to be 6,985 total units, with a breakdown of 65%, 23% and 12% respectively for the Tier 1, 2, and 3 Widget system models.
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Commercialization Plan: The Widget System - Project for the Visually Impaired 60 The Carroll Center for the Blind. (2015). Retrieved from The Carroll Center for the Blind: http://carroll.org U.S. Department of Health and Human Services, Centers for Disease Control and Prevention. (2011). Summary health statistics for U.S. adults: national health interview survey. (DHHS Publication No. PHS 2013-1584). Washington, DC: U.S. Government Printing Office. Vincent, G., & Velkoff, V. (2010). The next four decades: the older population in the United States 2010 to 2050. Washington, DC: U.S. Census Bureau, U.S. Government Printing Office. VisionAware. (2014). Blogs. Retrieved from VisionAware: http://www.visionaware.org/blog.aspx Zimmer, E. (2004). New Product Licensing. Retrieved from The Entrepreneur Network: http://tenonline.org/art/0402.html
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