Providing Innovative Solutions for the World’s Problems
OSU CIBER Case Competition
Andrea Steinbrenner
Jan Kraaijeveld
Caitlin Parrett
Ganesh Raj
Executive Summary
 Blah
Situation:
 Lack of revenues from filtration segment
 Filtration business segment in need of a successful product
 Global need for clean water
Goal:
 Target the residential market to increase operating income
 Use innovation to address global need of clean water
Approach:
Gain market share though US
residential demand
Generate funding for
global expansion
Implement new
technologies in
developing countries
Results:
 Successfully launch RIMOS into market to generate NPV of $2.4 MM
 Develop ClearAqua® product to meet demand for clean water and drive NPV of $10.1 MM
2
ART is at a critical juncture
STRENGTHS
CHALLENGES
Innovative culture
Information Sharing
Autonomous decision Strengths
making
Credibility
Low morale
Slow product life cycle
Challenges
OPPORTUNITIES
Opportunities
First mover advantage
Partnership with internal units
Increasing demand for
clean water initiatives
Situation
Problem
Threats
THREATS
Lack of funding
Business unit termination
Potential competitors
Short Term
Strategies
Long Term
Strategies
3
After two product failures, ART’s filtration segment is
desperately in need of a successful product
Product 1
Product 2
Target
Market:
Individuals without potable water
Target
Market:
NGOs and Military Personnel
Capacity:
2,000 Liters/day
Capacity:
2,000 Liters/day
Flaw:
Flaw:
Detectable odor in end product
Excessive battery usage
$6 MM Annual Loss
Source: Case Document
Situation
Problem
Short Term
Strategies
Long Term
Strategies
4
The filtration segment’s next product, RIMOS, has made it to the final
stage of product development and is almost ready for beta testing
RIMOS Development Lifecycle
Product Development
Market Analysis
Prototype
Product Testing
Business Plan
Beta Batch Creation
Problem
Identification
Focus Group
Analysis
RIMOS Key Attributes
Target Market:
US Residential Homeowners
Capacity:
10,000 square feet
$2,000 Retail Price
$1,000 Wholesale Price
Cost:
Value Proposition:
Reduces water usage while still giving lawns the care they deserve
Source: Case Document
Situation
Problem
Short Term
Strategies
Long Term
Strategies
5
Initiatives
Introduce RIMOS
Introduce ClearAqua®
6
In order to prove that the filtration unit can be profitable, ART
should fast-track the RIMOS system
Reasons for Fast-Tracking
•Rapid market growth
•Reduced R&D costs from utilization of an existing technology
•Strong managerial confidence
Situation
Problem
Short Term
Strategies
Long Term
Strategies
7
The housing market is growing rapidly, indicating that there will
be strong demand for the RIMOS system
Number of Homes Built
Housing Market
(Thousands of Homes)
2500
Homes built per
year
2000
1500
Projected new
construction
1000
500
•Increase in home
construction increases
demand for RIMOS
•Average household
uses 320 gallons of
water daily
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
Source: US Census Department
Situation
Problem
Short Term
Strategies
Long Term
Strategies
8
ART can offer consumers a strong value proposition and
excellent distribution channels
Value Proposition
Integrated into
new homes
Environmentally
Friendly
Cost Savings
Distribution Channels
Home Depot
Home
Manufacturers
Lowe’s
Situation
Problem
Short Term
Strategies
Long Term
Strategies
9
ART can leverage its partnerships with distributors, as well as
internal corporate synergies, to distribute RIMOS
Initial goals
Attain sales of $5.45M in the first
year
Price point of $1,000 per unit
Logistics
External partnerships with
contractors and retailers
Internal synergy with HVAC and
other segments
Future objectives
Explore harvesting to use RIMOS technology in commercial applications
Source: Case Document
Situation
Problem
Short Term
Strategies
Long Term
Strategies
10
By introducing RIMOS, the filtration unit can realize up to
$2.4MM in profit
Operating Cash
Flow (thousands)
2006
2007
2008
2009
2010
2011
($2,000.0)
$545.0
$1,062.0
$1,772.0
$2,178.0
$2,614.0
1.2
1.2²
1.2³
1.24
1.25
($1,545.83)
($808,33)
$217.13
$1,267.48
$2,317.99
Discount rate
Cumulative NPV
($2,000.0)
NPV Sensitivity to Discount Rate
(Thousands)
Cash Flows
$ 5 000
(Thousands)
$ 5 000
$ 4 000
$ 4 000
$ 3 000
$ 3 000
$ 2 000
$ 1 000
$ 2 000
r = 0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
-$ 1 000
Situation
Problem
2011
2010
2009
-$ 3 000
Cash flows
Source: Case Document
2008
-$ 2 000
$0
2007
-$ 1 000
$ 1 000
2006
$0
Short Term
Strategies
Discounted cash flows
Long Term
Strategies
NPV
11
Initiatives
Introduce RIMOS
Introduce ClearAqua®
12
Access to clean drinking water is a global problem
Global Water Access
1.1 Billion do not have access
to clean water
Need:
Availability:
Low, especially in 3rd world
countries
Spending:
Increasing, driven by NGOs
Source: UN Millennium Development Goals Update
Situation
Problem
Short Term
Strategies
Long Term
Strategies
13
ClearAqua® can have a positive impact on ART both internally
and externally
“We aim to change the world through innovation and to grow our place in it
through entrepreneurship.”
ClearAqua® has a…
• Positive impact on people, development, organizations and
society
• Integrative effect on inter-team communication within ART
• Diversifying effect on ART’s product portfolio
Situation
Problem
Short Term
Strategies
Long Term
Strategies
14
ART can introduce a new mini oxidation water filter called
ClearAqua® to increase water availability and drive growth
Key Success Factors
Size
Cost
Availability
Product Development
Product Development
Market Analysis
Prototype
Situation
Product Testing
Business Plan
Problem
Beta Batch Creation
Short Term
Strategies
Problem
Identification
Long Term
Strategies
Focus Group
Analysis
15
Introducing ClearAqua® matches well with ART’s corporate
goals
ClearAqua® Promotes…
Company Goals
Social
Responsibility
“We aim to change the
world through innovation”
Innovation
“Innovation and
entrepreneurship are the twin
engines driving this company”
Employee
Satisfaction
“We were so excited by that
decision[to continue the
project]”
Situation
Problem
Short Term
Strategies
Long Term
Strategies
16
ClearAqua® can also be a growth driver for the filtration unit
Yearly Estimated Cost of MDG for Water
$ 21,000,000,000.00
Estimated Percent of MDG Grant
0.10%
2007
2008
2009
2010
2011
Revenue
Operating Margin
$
21,000,000.00 $ 21,000,000.00 $ 21,000,000.00 $ 21,000,000.00 $ 21,000,000.00
10%
15%
20%
20%
20%
Operating Income
$
2,100,000.00 $ 3,150,000.00 $ 4,200,000.00 $ 4,200,000.00 $ 4,200,000.00
Discount Rate
20%
NPV
$10,081,404.32
Net Present Value ($Millions)
Sensitivity Analysis
$15,12
$16
$14
$12,60
$12
$10,08
$10
$7,56
$8
$6
$5,04
$4
$2
$0,050%
0,075%
0,100%
0,125%
0,150%
Percent of MDG for Water Funds
Source: World Bank, MDG Assessment
Situation
Problem
Short Term
Strategies
Long Term
Strategies
17
Executive Summary
 Blah
Situation:
 Lack of revenues from Filtration segment
 Filtration business segment in need of a successful product
 Global need for clean water
Goal:
 Target the residential market to increase operating income
 Use innovation to address global need of clean water
Approach:
Gain market share though US
residential demand
Generate funding for
global expansion
Implement new
technologies in
developing countries
Results:
 Successfully launch RIMOS into market to generate NPV of $2.4 MM
 Develop ClearAqua® product to meet demand for clean water and drive NPV of $10.1MM
18
QUESTIONS?
19
Our Team
Jan Kraaijeveld
• Erasmus University
• International Business
Administration
• Likes long walks on the
beach and man purses
Ganesh Raj
Caitlin Parrett
• Michigan State
University ’11
• Marketing
• Can iron a mean shirt
Andrea Steinbrenner
• University of North
Carolina ’12
• San Diego State
University ’11
• Economics, minor in
Mathematical Decision
Sciences
• Accounting
• Likes Diet Coke and not
telling jokes
• Mega bytes are bigger
than kilo bytes!
20
Appendix 1: Corporate value chain
Firm infrastructure: Autonomous decision making; holistic sharing of ideas,
expertise, and knowledge
Human resource management: Taking advantage of global talent by setting up
departments abroad, according to the congregation of skilled employees
Technology development: Developing new solutions by investigating and refining the latest trends
such as ultrasound wave technology
Service: Providing excellent
pre- and after sale support by
having qualified engineers
available to customers
Outbound logistics: Ensuring
timely delivery of products and
information to clients by
focusing on robust logistics
Operations: Enforce deadlines
and keep a strong focus on
quality control and economies
of scale
Inbound logistics: Securing
contracts with suppliers to
ensure timely delivery of raw
materials
Marketing & Sales: Catering to
the needs of the residential
market by focsuing on cost
leadership and sustainability
Procurement: Utilizing corporate resources and ART’s image to secure stable and reliable suppliers
in order to meet production needs
21
Appendix 2: U.S. Water Industry Revenue
U.S. Water Industry Revenues (millions)
1%
2% 2%
Drinking Water Utilities
4%
Wastewater Utilities
7%
33%
8%
Delivery Equipment
Water Treatment
Equipment
11%
Consulting/Engineering
Chemicals
32%
Contract Operations
Source: Case Document
22
Appendix 3: Daily Water Use in the Average US Household
Daily Use of Water in Average US Household
Shower
8%
Brushing teeth
14%
35%
Shaving
Washing dishes by hand
23%
17%
2%
Washing dishes in
dishwasher
Flushing toilet
23