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