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  1. 1. Northeastern University’sHuntington Management Consulting Team 9Greg Milne | Shilpi Roongta | Andrew Rothbaum | Nick Sammut
  2. 2. Situation AnalysisEnvironmental factors affecting iRobot Robotics Industry iRobotSituation Analysis Alternatives Recommendation Implementation Results HMC
  3. 3. Situation AnalysisEnvironmental factors affecting iRobot Global Market Trends Geographic Distribution  Numerous industry applications  Sensitive to economic downturn Robotics Industry – Industrial robots sold slumped 50% in 2009  Strong recovery during 2010 iRobot – 52% increase in units – 58% increase in dollars  Market sales expected to grow next three years – Professional services robots growing 10 million – 12 million household units will be soldSituation Analysis Alternatives Recommendation Implementation Results HMC
  4. 4. Situation AnalysisEnvironmental factors affecting iRobot Global Market Trends Geographic Distribution Robotics Industry iRobotSituation Analysis Alternatives Recommendation Implementation Results HMC
  5. 5. Situation AnalysisiRobot’s current market position Products R&D Financials IP  Home Care Robots: – Cleaning: homes, pools, gutters Robotics Industry – 5 million sold worldwide – 30 national retailers; international retailers – 55% of revenues iRobot  Government and Industrial Robots: – Ground and maritime unmanned vehicles – Divisions of U.S. military – 46% of revenuesSituation Analysis Alternatives Recommendation Implementation Results HMC
  6. 6. Situation AnalysisiRobot’s current market position Products R&D Financials IP Year Spend 2005 8.17% Robotics Industry 2006 9.01% 2007 6.86% 2008 5.71% iRobot 2009 4.94% 5 Year Average 6.94%  2/3 funded by contracts, 1/3 internally  47% of employees within R&D  Three methods of researchSituation Analysis Alternatives Recommendation Implementation Results HMC
  7. 7. Situation AnalysisiRobot’s current market position Products R&D Financials IP iRobot Revenue Growth $300,000 $250,000 Robotics Industry $200,000 $150,000 Product Revenue $100,000 Contract Revenue $50,000 $0 iRobot 2005 2009  Declining revenues in 2009  Cost-cutting measures to stay profitable  Cash position increased to $72 million  Long-term debt reduced to $4 millionSituation Analysis Alternatives Recommendation Implementation Results HMC
  8. 8. Situation AnalysisiRobot’s current market position Products R&D Financials IP iRobot Patents 160 140 Robotics Industry 120 100 80 60 Patents iRobot 40 20 0 U.S. Patents Pending U.S. International Pending Foreign Patents Patents Applications  Patents held begin to expire in 2019Situation Analysis Alternatives Recommendation Implementation Results HMC
  9. 9. 2010 PerformanceHighlights of iRobot’s most recent year  Successfully grew revenues 33% to $400 million  Addition of $40 million in cash to balance sheet – $110 million in reserves, cash-to-sales ratio of 27%  Expansion into new markets – New Markets: Chile, Mexico, Brazil  Sales office in MiamiSituation Analysis Alternatives Recommendation Implementation Results HMC
  10. 10. AlternativesEvaluating possible alternatives for iRobot Decision Criteria Leverage R&D Across Complement Core Promote Future All Business Competencies w/ Innovation Segments Strategic Alliances Situation Analysis Alternatives Recommendation Implementation Results HMC
  11. 11. AlternativesEvaluating possible alternatives for iRobot Decision Criteria Leverage R&D Across Complement Core Promote Future All Business Competencies w/ Alternatives Innovation Segments Strategic Alliances Focusing On One Business Segment Acquisition Within Health Care Robotics Universal Growth Strategy Situation Analysis Alternatives Recommendation Implementation Results HMC
  12. 12. AlternativesEvaluating possible alternatives for iRobot Decision Criteria Leverage R&D Across Complement Core Promote Future All Business Competencies w/ Alternatives Innovation Segments Strategic Alliances Focusing On One Business Segment Acquisition Within Health Care Robotics Universal Growth Strategy Situation Analysis Alternatives Recommendation Implementation Results HMC
  13. 13. AlternativesEvaluating possible alternatives for iRobot Decision Criteria Leverage R&D Across Complement Core Promote Future All Business Competencies w/ Alternatives Innovation Segments Strategic Alliances Focusing On One Business Segment Acquisition Within Health Care Robotics Universal Growth Strategy Situation Analysis Alternatives Recommendation Implementation Results HMC
  14. 14. AlternativesEvaluating possible alternatives for iRobot Decision Criteria Leverage R&D Across Complement Core Promote Future All Business Competencies w/ Alternatives Innovation Segments Strategic Alliances Focusing On One Business Segment Acquisition Within Health Care Robotics Universal Growth Strategy Situation Analysis Alternatives Recommendation Implementation Results HMC
  15. 15. RecommendationSteps to iRobot’s continued success 1 Objective: Maximize value before patent expiration Focus on creating awareness for iRobot capabilities 2 Objective: Complement core competencies with informal alliances Leverage existing R&D across business segments 3 Objective: Continue to maintain relevance through innovation Develop and foster new talent and product pipeline Situation Analysis Alternatives Recommendation Implementation Results HMC
  16. 16. Three Step ApproachEnhancing iRobot’s product and contract strategies Maximize Patent Value Leverage R&D Promote Innovation Awareness Campaign Mitigate Contract Risk Robotics Competition International Presence Create® for Military Academic Research Customer Adoption Informal Alliances weRobot Solutions Situation Analysis Alternatives Recommendation Implementation Results HMC
  17. 17. Three Step ApproachEnhancing iRobot’s product and contract strategies Maximize Patent Value Leverage R&D Promote Innovation Awareness Campaign Mitigate Contract Risk Robotics Competition International Presence Create® for Military Academic Research Customer Adoption Informal Alliances weRobot Solutions Goal: Customer recognition of existing product line Situation Analysis Alternatives Recommendation Implementation Results HMC
  18. 18. Maximize Patent PotentialAddressing patent issues moving forward Issues Solutions Pending patent • Market consumer expiration 2019 products heavily prior to patent expiration • Complement social High sunk costs in media with R&D demonstrations iRobot needs product awareness, not competitorsSituation Analysis Alternatives Recommendation Implementation Results HMC
  19. 19. iRobot’s Target ConsumerCharacteristics of a Roomba customer Customer Traits Above average income Meticulously clean homes Belief in technology In Need Of: Proof Brand trustSource: Q3 2010 Earnings Situation Analysis Alternatives Recommendation Implementation Results HMC
  20. 20. iRobot’s Target ConsumerCharacteristics of a Roomba customer Customer Traits Above average income Meticulously clean homes Belief in technology In Need Of: Proof Brand trust How is this accomplished?Source: Q3 2010 Earnings Situation Analysis Alternatives Recommendation Implementation Results HMC
  21. 21. “Choose Your Dirt”Building brand loyalty through proof of concept  In-mall demonstrations of product effectiveness – NYC, Miami, Hong Kong, Santiago and London – Defined area in mall space with different flooring panels  Ex. wood, tile and carpet  Participants select material to cover the floor – Ex. dirt, sand and other synthetic materials  Sales reps provide information and answer questions  Ability to purchase Roomba after demonstration Cost Return Strategic Benefit • 2011: $22,400 • 2011 Sales: $64,000 • Creating believers Situation Analysis Alternatives Recommendation Implementation Results HMC
  22. 22. The Adoption ProcessTaking the consumer from start to finish Step Goal Met? Awareness Interest Evaluation and Trial Adoption Situation Analysis Alternatives Recommendation Implementation Results HMC
  23. 23. Three Step ApproachEnhancing iRobot’s product and contract strategies Maximize Patent Value Leverage R&D Promote Innovation Awareness Campaign Mitigate Contract Risk Robotics Competition International Presence Create® for Military Academic Research Customer Adoption Informal Alliances weRobot Solutions Goal: Complement core competencies with informal strategic alliances Situation Analysis Alternatives Recommendation Implementation Results HMC
  24. 24. Revenue Stream AnalysisConcentrated areas of revenues Revenues 5% Government 40% Contracts Home Robots 55% Other “Want to continue to leverage R&D across business segments, as well as a create a 3rd party development community” – 2009 iRobot 10K Report How do you hedge against this contract risk?Situation Analysis Alternatives Recommendation Implementation Results HMC
  25. 25. Market OpportunityBroad products result in greater prospects Broad product Semi-specialized As product …Market specialization opportunity increases… decreases Niche Situation Analysis Alternatives Recommendation Implementation Results HMC
  26. 26. iRobot “Construct”A military grade, field tested version of the iRobot Create  Develop customizable platform for defense businesses – Leverage iRobot Create for military applications  Use field-tested robotic hardware with open platform – With intention of creating informal strategic alliances  Sturdy and scalable base – Ability for 3rd party government contractors to build upon  Indirectly capture additional government funds Situation Analysis Alternatives Recommendation Implementation Results HMC
  27. 27. Sample Informal Strategic AllianceSynergies between iRobot and similar government contractors  Raytheon designs a variety of sensors – Ex. radioactive materials – Useful in current Japan crisis  iRobot robotic base for Raytheon’s sensory technology  Both firms create defense products Cost Return Strategic BenefitSituation Analysis Alternatives Recommendation Implementation Results HMC
  28. 28. Three Step ApproachEnhancing iRobot’s product and contract strategies Maximize Patent Value Leverage R&D Promote Innovation Awareness Campaign Mitigate Contract Risk Robotics Competition International Presence Create® for Military Academic Research Customer Adoption Informal Alliances iRobot SPIRAL Initiative Goal: Build product pipeline and develop “Blue Ocean” markets Situation Analysis Alternatives Recommendation Implementation Results HMC
  29. 29. Blue Ocean StrategyCreating and supplying demand in unknown markets  Future robotics consumption remains undefined  Demand has to be created, and not competed over  “robotics” technology has endless applications  CleanTech, Pharmaceutical, Automotive, Healthcare, Food & Beverage  Buyer value is promoted and raised by:  Offering products the market has never seen  Product positioning along the technology adoption curve Market Market Instigator PotentialSituation Analysis Alternatives Recommendation Implementation Results HMC
  30. 30. Blue Ocean StrategyCapitalizing on the two sides of new market growth  Future robotics consumption remains undefined  Demand has to be created, and not competed over  “robotics” technology has endless applications  CleanTech, Pharmaceutical, Automotive, Healthcare, Food & Beverage  Buyer value is promoted and raised by:  Offering products the market has never seen  Product positioning along the technology adoption curve iRobot Market iRobot Support new market Market Instigator Potential Develop additional leaders markets Situation Analysis Alternatives Recommendation Implementation Results HMC
  31. 31. “iRobot Innovation Challenge”Promote and identify innovation within robotics technology  Host Annual Robotics Competition  Building on the FIRST model  Initial launch in two U.S. markets  Boston, Massachusetts & Cupertino, California  Engineering Research Center (ERC) Partnerships  Industrial partner with ERC’s focused on robotics  Identify Situation Analysis Alternatives Recommendation Implementation Results HMC
  32. 32. Supporting New Market DemandsPromote and identify innovation within robotics technology  Blue market demand is generated by industry incumbents  Existing Situation Analysis Alternatives Recommendation Implementation Results HMC
  33. 33. XXXXXX Cost Return Strategic BenefitSituation Analysis Alternatives Recommendation Implementation Results HMC
  34. 34. Robotics Competition  Locations: – Massachusetts: MIT, Olin Engineering, UMass Amherst – California: CalTech, Stanford, UC Berkeley, UC Los Angeles  Marketing: – University-based programs utilizing social and traditional – Robotics clubs and engineering forums – Flyers and school newspapers – Guest speakers from iRobot and other industry members HMC
  35. 35. Red Ocean Versus Blue Ocean Strategy Red Ocean Strategy Blue Ocean Strategy Compete in existing market space Create uncontested market spaces Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value/cost tradeoff Break the value/cost tradeoff Differentiation OR low cost Differentiation AND low cost HMC
  36. 36. TimelineSchedule of important events 2011 2012 2013 2014 2015+ Choose Your Dirt iRobot Construct New Competitions School Research iRobot SPIRAL HMC
  37. 37. SummaryResults of implementation Initiative Impact “Choose Your Dirt” Awareness & Adoption iRobot Construct Hedging Contract Risk Robotics Competition Technological Leadership & SPIRAL Situation Analysis Alternatives Recommendation Implementation Results HMC
  38. 38. Discussion HMC
  39. 39. Q&A Appendix Financials Strategy Implementation IDEA Box IDEA Box Awareness Choose Your Why Chile? Refer A Friend Control-A-BOT Campaign Own Dirt Cost-Return- Blue Ocean vs. International Strategic Risks Bottom Billion Red Ocean Opportunities BenefitMarket Capture Why Not India Potential Joint Competition XX Scenarios or China? Venture Team XX SWOT Analysis XX Radioactive Biographies
  40. 40. Why Chile?  U.S. Chile Free Trade Agreement established 1/1/2004  Benefits – Lower duty rates – Stronger protection and enforcement provisions for copyrights, trademarks, patents, and trade secrets – Removal of restrictive regulatory barriers in place for US service providers • Distributor TD S.A. – 36 Falabella department stores throughout Chile • 14 Falabellas within Santiago area • Upper-middle-income country with per capita GNP PPP of $13,440 • ~90% of Chileans own televisions • ~82% own cell phones HMC
  41. 41. Blue Ocean vs. Red Ocean Red Ocean Strategy Blue Ocean Strategy Complete in existing market space Create uncontested market space Beat the competition Make the competition irrelevant Exploit existing demand Create and capture new demand Make value/cost trade-off Break the value/cost trade-off iRobot Blue Ocean Strategy iRobot Military Construct Create uncontested market space Provide platform for competitors Make the competition irrelevant Contracts that were unreachable Create and capture new demand Become only robotic option Break the value/cost trade-off Source: http://www.roisbs.com/uploads/HBR_Blue_Ocean_Strategy_white_paper.pdf HMC
  42. 42. “Choose Your Dirt” • Enter 5 cities over three years – New York City; Santiago, Chile; London; Hong Kong; Miami • Rent large/open spaces in malls • 2 sales personnel per location • Month long demonstrations HMC
  43. 43. Refer a Friend  “Choose Your Dirt” promotion – Participants receive 10% off  Option to refer a friend – Enter name and email address to provide friends and family with 10% coupon  E-mail blast includes direct message connecting e-mail receiver to the participant’s experience and coupon  Spread knowledge of the demonstration and product – Build brand awareness HMC
  44. 44. Projected Revenues for Awareness Campaign HMC
  45. 45. Why Not India or China? China India  IP issues, lack of patent • IP issues, lack of patent protection protection  Lack of infrastructure for • Lack of infrastructure for distribution distribution  Would need to create • Cultural differences demand – Home care traditionally  Inherent cultural designated to lower class differences • Would need to create demand HMC
  46. 46. Product Line for “Bottom Billion”  Opportunity to introduce disruptive technology to “bottom billion” and cause systemic change  Can dedicate portion of resources to developing tech for economic segment – Increase efficiencies in common processes such as: collecting water and firewood  Lower margins, volume based – Opportunity to partner with Micro-Finance institutions to provide small loans for purchasing power  Bottom billion proven to pay premiums for valuable products – Ex. Selco Solar Systems, Kickstart Technologies HMC
  47. 47. Risks of Implementation Risks Mitigation Launch in two cities; resort to traditional No traction from marketing efforts marketing Look for opportunities to expand into military Development of Construct not feasible niche segments HMC
  48. 48. Cost-Return-Strategic Benefit “Choose iRobot Innovation Your Dirt” Construct Efforts 2011: Cost Cost $22,400 2011 Sales: Return Return $64,000 Creating Strategic Strategic Believers Benefit Benefit HMC
  49. 49. Joint Ventures  Partner with another small technology startup  iRobot would provide robotic end  Acquired company would provide supplemental technology.  Ex. A small sensory manufacturer for home or military applications  Innovation through acquisition HMC
  50. 50. Potential “Construct” Applications  An iRobot Construct robot built with radioactive sensors  Launch in highly radioactive areas in Japan  Explore unsafe areas that humans are unable to  Save lives while searching for survivors HMC
  51. 51. “Control-A-BOT” Mobile Application  Create a mobile application for the Roomba  Provide cleaning and runtime statistics – How many feet have been cleaned Control-A-BOT since purchase – Battery meter  Allow users to change settings via mobile application HMC
  52. 52. Team Biographies Gregory Milne Shilpi Roongta • Concentrations: • Concentrations: – Finance, Accounting – Marketing, Finance, Social • Work Experience: Entrepreneurship – Insurance, Computer Security • Work Experience: – Insurance, Microfinance Andrew Rothbaum Nicholas Sammut • Concentrations: • Concentrations: – Finance, Accounting – Finance, Marketing • Work Experience: • Work Experience: – Private Equity, Venture Capital – Asset Management, Venture Capital, Investment Banking HMC
  53. 53. International Opportunities  THALES Corporation (France) Foreign Defense  OHB Corporation (Germany) Contractors  ITAR Regulation – Sell goods via partnerships or strategic alliances – Ex. Lockheed Martin has ITAR approval for a certain product HMC
  54. 54. Market Capture Scenarios Market Share Revenue 5.00% $200,000,000 5.10% $204,000,000 5.20% $208,000,000 5.30% $212,000,000 5.40% $216,000,000 5.50% $220,000,000 6.00% $240,000,000 7.00% $280,000,000 8.00% $320,000,000 9.00% $360,000,000 10.00% $400,000,000 Assumed capture of $4 Billion vacuum market of $200 or less HMC
  55. 55. Competition Company Competes with AB Electrolux Roomba vacuum cleaner Alfred Kärcher GmbH & Co. Roomba vacuum cleaner Samsung Electronics Roomba vacuum cleaner QinetiQ Unmanned vehicles (PackBot) Lockheed Martin Unmanned vehicles (PackBot) HMC
  56. 56. SWOT Analysis Strengths Weaknesses • Large R&D budget • Limited visibility • Existing alliances • Patents expiring in less than 10 years • Healthy financial positioning • Dependent on 3rd party suppliers • Long-term manufacturing contract • Highly dependent on government • Government contracts • Sensitive to economic climate • U.S. market penetration Opportunities Threats • Expand marketing efforts • Competitors have more money and • Entry into new markets knowledge in consumer space • Product expansion • Other companies copying IP • Lower-tiered / priced goods • Reduced government spending • International presence • Break-up / non-renewing alliances • Employees leaving HMC
  57. 57. HMC
  58. 58. HMC

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