Segway Human Transporter
Management 266A
Product Strategy in the Digital Economy
Charles Chen
Miro Curac
Antonio Gomez
Dwight Huang
Len Tiso

Segway Human Transporter
 Introduction
 Strategic Assessment: Moore Framework
 Stakeholders
 Critical Issues Analysis
 Bayesian Network Analysis
 Strategic Implications and
Recommendations

Segway Human Transporter
 Motor-scooter like device
 Powered by electric motors
 Movement by shifting weight, turning wrist
 Turning radius of zero
 Designed by inventor Dean
Kamen (150 patents)

Segway Human Transporter
 e series - Expeditor (cargo)
 i series - Industrial (business)
 p series - Personal (consumer)
 Commercial models faster, longer range, heavier
 Max speed 10.0 - 12.5 mph
 Maximum distance 14 - 17 miles
(single charge)
 Device weighs 69 - 95 lbs.

Segway Human Transporter
 Segway in infancy stage of TALC
 Discontinuous innovation
 Substitute for walking
 Value proposition (business and consumer)
 Technology enthusiasts
 Amazon.com auction - $100,000 bids
 Visionaries
 Amazon.com - first customer

Segway Human Transporter
 Whole product solutions to niche segments
 Pick on someone your own size
 Enlist the support of the economic buyer
 Government services
 Post office, police departments
 Businesses with warehouses
 Amazon.com, Michelin, GE Plastics

Segway Human Transporter
 Hypergrowth stage years away
 Consumers are ultimate target market
 Production capacity 40,000 units/month
 Need to lower price point from $3,000/unit
 Media coverage is a double edged sword
 Builds awareness
 Overhype sets unrealistic expectations
(e.g. artificial intelligence industry)

Segway Human Transporter
 Consumers


Businesses
Government Services


Regulatory Authorities
Environmental Interests


Electric Industry
Petroleum Industry
 Manufacturing Partners

Segway Human Transporter
Stakeholders: Consumers & Businesses
Stakeholder Groups
Consumers
Businesses
Parties
Individuals
Urban commuters
Local shoppers
Recreational users
Warehouses
Plants
Manufacturing facilities
Interests
Pleasure
Increased mobility
Social acceptance
Increased productivity

Segway Human Transporter
Stakeholders: Government and Regulation
Stakeholder Groups
Government Services
Regulatory Authorities
Parties
Post office
Police departments
Park service
Federal, state and municipal authorities
Department of Motor Vehicles
Interests
Better public service
Increased productivity
Public safety

Segway Human Transporter
Stakeholders: Environmental and Electric
Industries
Stakeholder Groups Parties
Environmental Interests Environmental Protection Agency
Environmental interest groups
Electric Industry Battery manufacturers
Public utilities
Electric vehicle manufacturers
Interests
Environmental preservation
Market demand for electricity
Technological advancement of electric products

Segway Human Transporter
Stakeholders: Petroleum and Manufacturing
Stakeholder Groups
Petroleum Industry
Parties
Automobile, motorcycle and scooter manufacturers
Petroleum exporters
Manufacturing Partners Suppliers of Segway
Interests
Market demand for petroleum products
Corporate profitability

Segway Human Transporter
 Highlight key issue for each area
 Political - Regulatory approval
 Behavioral - Consumer utility
 Economic - Segmentation
 Social - Fad or revolution?
 Technological - Segway imitators

Segway Human Transporter

Segway Human Transporter
 Base scenario
 Tornado viability = 12.10%
 Reasons for low percentage
 Harder to enter Tornado than Bowling Alley




Regulatory hurdles
Consumer value key
Ability to supply
Competitive threats

Segway Human Transporter
Sensitivity Analysis: Primary Branch Nodes
Market Demand
Base Scenario – High Demand
Sensitivity Analysis – High Demand
Sensitivity Analysis – High Demand
Ability to Supply
Base Scenario – Adequate Supply
Sensitivity Analysis – Adequate Supply
Sensitivity Analysis – Adequate Supply
Competitive Threats
Base Scenario – Low Competition
Sensitivity Analysis – Low Competition
Sensitivity Analysis – Low Competition
Probability
20.81%
100.00%
0.00%
56.60%
100.00%
0.00%
46.51%
100.00%
0.00%
Viability
12.10%
46.50%
3.06%
12.10%
16.27%
6.67%
12.10%
16.58%
8.20%
Difference
34.40%
-9.04%
4.17%
-5.43%
4.48%
-3.90%

Segway Human Transporter
Sensitivity Analysis: Regulatory Issues
Difference Regulatory Issues
Base Scenario - Favorable Regulations
Sensitivity Analysis - Favorable Regulations
Sensitivity Analysis - Favorable Regulations
Probability
26.74%
100.00%
0.00%
Viability
12.10%
20.12%
9.17%
8.02%
-2.93%
Federal Approval
Base Scenario - Expedited Approval
Sensitivity Analysis - Expedited Approval
Sensitivity Analysis - Expedited Approval
State Approval
Base Scenario - Expedited Approval
Sensitivity Analysis - Expedited Approval
Sensitivity Analysis - Expedited Approval
Municipal Approval
Base Scenario - Expedited Approval
Sensitivity Analysis - Expedited Approval
Sensitivity Analysis - Expedited Approval
95.00%
100.00%
0.00%
60.00%
100.00%
0.00%
40.00%
100.00%
0.00%
12.10%
12.20%
10.23%
12.10%
13.68%
9.73%
12.10%
15.88%
9.58%
0.10%
-1.87%
1.58%
-2.37%
3.78%
-2.52%

Segway Human Transporter
Sensitivity Analysis: Customer Value
Customer Value
Base Scenario - High Customer Value
Sensitivity Analysis – High Customer Value
Sensitivity Analysis – High Customer Value
Consumer Value
Base Scenario - High Consumer Value
Sensitivity Analysis – High Consumer Value
Sensitivity Analysis – High Consumer Value
Probability
39.62%
100.00%
0.00%
66.68%
100.00%
0.00%
Viability
12.10%
19.64%
7.15%
12.10%
14.15%
8.01%
Difference
7.54%
-4.95%
2.05%
-4.09%

Segway Human Transporter
Sensitivity Analysis: Ability to Supply
Distribution Channels
Base Scenario – Sufficient Channels
Sensitivity Analysis – Sufficient Channels
Sensitivity Analysis – Sufficient Channels
Production Capacity
Base Scenario – Adequate Capacity
Sensitivity Analysis – Adequate Capacity
Sensitivity Analysis – Adequate Capacity
Probability
60.00%
100.00%
0.00%
68.36%
100.00%
0.00%
Viability
12.10%
13.33%
10.25%
Difference
1.23%
-1.85%
12.10%
13.77%
8.48%
1.67%
-3.62%

Segway Human Transporter
Sensitivity Analysis: Competitive Threats
Existing Transportation
Base Scenario - Effective Substitute
Sensitivity Analysis - Effective Substitute
Sensitivity Analysis - Effective Substitute
Alternative Electric Transportation
Base Scenario - High Threat
Sensitivity Analysis - High Threat
Sensitivity Analysis - High Threat
Probability
20.00%
100.00%
0.00%
62.22%
100.00%
0.00%
Viability
12.10%
11.30%
12.30%
12.10%
10.55%
14.65%
Difference
-0.80%
0.20%
-1.55%
2.55%

Segway Human Transporter
Comparable Industry: Motorcycle and Bicycle Manufacturing
Unit Sales Price (000s)
% of Target Production
Units Produced per Year (000s)
Year 1
$3.0
2%
9.6
Year 2
$2.5
10%
48
Revenue
COGS
Gross Margin
Operating Expenses
Operating Income/EBITDA
Depreciation/Amortization
EBIT
Interest Expense
EBT
Income Taxes
Net Income
Capital Expenditures
FCF
Discounted FCF
$
$
$ 8,813
$ 6,624
$
$ -
$ 2,189
$
$ 2,189
$ 766
$
$
$
$
28,800
19,987
2,189
-
1,423
5,000
(3,577)
(3,111)
$ 120,000
$ 83,280
$ 36,720
$ 27,600
$
$ 500
$ 8,620
$ -
$ 8,620
$ 3,017
$
$
9,120
5,603
6,000
$ 103
$ 78
Year 3
$2.0
30%
144
Year 4
$1.5
40%
192
$ 7,412
$ 4,874
$ 6,224
$ 3,559
Year 5
$1.0
100%
480
$ 288,000
$ 199,872
$ 88,128
$ 66,240
$ 21,888
$ 1,100
$ 20,788
$ -
$ 20,788
$ 7,276
$ 13,512
$ 288,000
$ 199,872
$ 88,128
$ 66,240
$ 21,888
$ 1,820
$ 20,068
$ -
$ 20,068
$ 7,024
$ 13,044
$ 480,000
$ 333,120
$ 146,880
$ 110,400
$ 36,480
$ 2,684
$ 33,796
$ -
$ 33,796
$ 11,829
$ 21,967
$ 7,200 $ 8,640 $ 10,368
Tornado
Year 6
$0.3
500%
2,400
Year 7
$0.3
5000%
24,000
$ 720,000
$ 499,680
$ 220,320
$ 165,600
$ 54,720
$ 3,721
$ 50,999
$ -
$ 50,999
$ 17,850
$ 33,149
$ 7,200,000
$ 4,996,800
$ 2,203,200
$ 1,656,000
$ 547,200
$ 4,965
$ 542,235
$ -
$ 542,235
$ 189,782
$ 352,453
$ 12,442 $ 14,930
$ 14,283
$ 7,101
$ 24,429
$ 10,561
$ 342,488
$ 128,754
Preliminary Valuation $2,984,401

Segway Human Transporter
 Preliminary valuation = $2.98 billion
Scenario
Base case
Hi Market Demand
Lo Market Demand
Adequate Ability to Supply
Inadequate Ability to Supply
Weak Competition
Strong Competition
Probability Expected of Viability Valuation ($M)
12.10% $ 361
46.50% $ 1,387
3.06%
16.27%
6.67%
16.58%
8.20%
$ 91
$ 485
$ 199
$ 494
$ 245

Segway Human Transporter
Strategic Implications and Recommendations
 Prioritize regulatory approval efforts


Municipal approval is key
Beta testing with government services
 Consider international consumer market first
 Less automobile oriented urban infrastructure, but less Segway friendly infrastructure
 More receptive to cheaper transportation technology
(higher customer value)

Segway Human Transporter
Strategic Implications and Recommendations
 Continue expanding production capacity
 Hypergrowth demands rapid scalability
 Continue conservative patent protection policy
 Barrier to entry in a new market
 Alternative electric transportation threat

Segway Human Transporter

Segway Human Transporter
Link: http://www.segway.com/connect/multimedia.html