a.t. kearney—firstbuild model for self-funding r&d

The FirstBuild Modelfor Self-Funding R&DBringing Entrepreneurial Innovation to Large, Traditional Companies

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Start-ups and mature companies have very di�erentstrengths and weaknesses, separated by a chasmin capabilities.

The FirstBuild Model for Self-Funding R&D

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Start-up Phase

Freedom to take risks,speed, closeness tomarket

Low capacity to scaleproducts after marketvalidates

Ability to profitablyproduce and commercializereliable products at scale

Low tolerance for risk andexpense of disruptive innovation

Growth or Maturity Phase

Cha

sm+

–

+

–

To bridge this gap, GE Appliances launched FirstBuildwhich validates products with the early market for the parent company to bring to the mainstream market.

The FirstBuild Model for Self-Funding R&D

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Early Market(People who wantthe newest things)

Mainstream Market(People who want complete

proven solutions and convenience)

Innovators LaggardsEarly

adoptersEarly

majorityLate

majority

16% 84%

FirstBuild operates as a complete end-to-end enterprise.

The FirstBuild Model for Self-Funding R&D

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Design Build Sell• Open platform innovation• Fast cycles• Flexible teams• Lean work streams

• Low volume• Low capital, crowdfunding• High craftsmanship• Failure = learning

• Internet sales channels • Target early adopters• Sales volume as market validation• Independent brand does not dilute parent brand

FirstBuild is self-funding, delivering free R&Dto the parent company.

The FirstBuild Model for Self-Funding R&D

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• Product concepts posted on Indiegogo to attract crowdfunding investment• Profitability attainable at very low volumes• Business model delivers steady flow of self- funding R&D• Innovations validated by early adopters transitioned to parent company’s branded mainstream market product lines at zero net cost

Time to market

Market entry

Marketvalidation

Sale

s qu

antit

y

1–10

11–100

101–1,000

100,000+ (mass production)

FirstBuild attracts and hosts an open communityof inventors, tinkerers, engineers, and builders.

The FirstBuild Model for Self-Funding R&D

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Ideas are sparked byconstructive collisionsbetween creative innovatorsand technical experts.

Teams form organicallyto develop ideas andbuild prototypes.

Innovation is spurred bycommunity hardwarehackathons.

Participants can explore theirinnovative impulses in acreative space withoutdisrupting the mothership.

This open community elevates FirstBuild beyond incubators.

The FirstBuild Model for Self-Funding R&D

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Drivers of success

Vision andleadership

Passionand talent

Connectionalintelligence (CxQ)Partnership

Impa

ct o

f inn

ovat

ion

on P

&L

Investingin spite of

potential risks

Rallyinga gifted team

around animpactfulproduct

Collaboratingand bartering

to optimizescarcity

Tapping thepower of an

open community

FirstBuildIncubators

Source: CxQ is a concept developed by Erica Dhawan and Saj-Nicole Joni

FirstBuild and A.T. Kearney work together to help largecorporations deploy self-funding R&D.

The FirstBuild Model for Self-Funding R&D

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Self-fundingR&D

Source: CxQ is a concept developed by Erica Dhawan and Saj-Nicole Joni

Phase 1Visit FirstBuild in Louisville, KY

The FirstBuild Model for Self-Funding R&D

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• Understand self-funding R&D, both theoretically and practically• Observe community of innovators in action• Assess applicability of FirstBuild model to your company• Decide on best path forward 1

1Phase 2Prepare and pilot

The FirstBuild Model for Self-Funding R&D

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• Gain hands-on experience launching a product using self-funding R&D methodology• Identify target platforms and partnerships• Construct a self-funding deployment strategy 2

2Phase 3Launch and deploy

The FirstBuild Model for Self-Funding R&D

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3• Deploy your own self-funding R&D center• Instill best practices and support launch of first product

3The FirstBuild Model for Self-Funding R&D

A.T. Kearney is a leading global management consulting firm with o�ices in 40 countries. Since 1926, we have been trusted advisors to the world’s foremost organizations. A.T. Kearney is a partner-owned firm, committed to helping clients achieve immediate impact and growing advantage on their most mission-critical issues. For more information, visit www.atkearney.com.

Take the next step towardself-funding R&D.

Read more about FirstBuildon Harvard Business Review.

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