osu ciber case competition

Providing Innovative Solutions for the World’s Problems

OSU CIBER Case Competition

Andrea SteinbrennerJan KraaijeveldCaitlin ParrettGanesh Raj

2

Executive Summary

Goal:

Approach:

Results:

Gain market share though US residential demand

Generate funding for global expansion

Implement new technologies in

developing countries

Blah

Target the residential market to increase operating income Use innovation to address global need of clean water

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

Situation: Lack of revenues from filtration segment Filtration business segment in need of a successful product Global need for clean water

3Situation Short TermStrategies

Long Term StrategiesProblem

ART is at a critical juncture

Strengths

ThreatsOpportunities

Challenges

STRENGTHS

Innovative cultureInformation Sharing

Autonomous decision making

THREATS

Lack of fundingBusiness unit termination

Potential competitors

OPPORTUNITIES

First mover advantagePartnership with internal units

Increasing demand for clean water initiatives

CHALLENGES

CredibilityLow morale

Slow product life cycle



After two product failures, ART’s filtration segment is desperately in need of a successful product

Product 1

Target Market:

Capacity:

Flaw:

Individuals without potable water

2,000 Liters/day

Detectable odor in end product

Product 2

Target Market:

Capacity:

Flaw:

NGOs and Military Personnel

2,000 Liters/day

Excessive battery usage

$6 MM Annual Loss

Source: Case Document



The filtration segment’s next product, RIMOS, has made it to the final stage of product development and is almost ready for beta testing

Product Development Product Testing

Market Analysis Prototype Business Plan Beta Batch Creation Problem Identification

Focus Group Analysis

RIMOS Key Attributes

Target Market:

Capacity:

Cost:

US Residential Homeowners

10,000 square feet

$2,000 Retail Price$1,000 Wholesale Price

Value Proposition: Reduces water usage while still giving lawns the care they deserve


RIMOS Development Lifecycle

6

Initiatives

Introduce RIMOS

Introduce ClearAqua®



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



The housing market is growing rapidly, indicating that there will be strong demand for the RIMOS system

20002001

20022003

20042005

20062007

20082009

20100

500

1000

1500

2000

2500

Housing Market(Thousands of Homes)

Homes built per year

Projected new con-struction

Num

ber o

f Hom

es B

uilt

•Increase in home construction increases demand for RIMOS

•Average household uses 320 gallons of water daily

Source: US Census Department



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 Lowe’s Home Manufacturers



ART can leverage its partnerships with distributors, as well as internal corporate synergies, to distribute RIMOS




By introducing RIMOS, the filtration unit can realize up to $2.4MM in profit

2006 2007 2008 2009 2010 2011

Operating Cash Flow (thousands) ($2,000.0) $545.0 $1,062.0 $1,772.0 $2,178.0 $2,614.0

Discount rate 1.2 1.2² 1.2³ 1.24 1.25

Cumulative NPV ($2,000.0) ($1,545.83) ($808,33) $217.13 $1,267.48 $2,317.99

r = 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8

-$ 1,000

$ 0

$ 1,000

$ 2,000

$ 3,000

$ 4,000

$ 5,000

NPV Sensitivity to Discount Rate(Thousands)

2006

2007

2008

2009

2010

2011

-$ 3,000-$ 2,000-$ 1,000

$ 0$ 1,000$ 2,000$ 3,000$ 4,000$ 5,000

Cash Flows (Thousands)

Cash flows Discounted cash flowsNPVSource: Case Document

12

Initiatives

Introduce RIMOS

Introduce ClearAqua®



Access to clean drinking water is a global problem

Source: UN Millennium Development Goals Update

Global Water Access

Need:

Availability:

Spending:

1.1 Billion do not have access to clean water

Low, especially in 3rd world countries

Increasing, driven by NGOs



ClearAqua® can have a positive impact on ART both internally and externally

• Positive impact on people, development, organizations and society

• Integrative effect on inter-team communication within ART

• Diversifying effect on ART’s product portfolio

“We aim to change the world through innovation and to grow our place in it through entrepreneurship.”

ClearAqua® has a…



ART can introduce a new mini oxidation water filter called ClearAqua® to increase water availability and drive growth

Size AvailabilityCost

Key Success Factors

Product Development

Product Development Product Testing

Market Analysis Prototype Business Plan Beta Batch Creation Problem Identification

Focus Group Analysis



Introducing ClearAqua® matches well with ART’s corporate goals

Social Responsibility

Employee Satisfaction

Innovation

ClearAqua® Promotes… Company Goals

“We aim to change the world through innovation”

“We were so excited by that decision[to continue the

project]”

“Innovation and entrepreneurship are the twin engines driving this company”



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 $ 21,000,000.00 $ 21,000,000.00 $ 21,000,000.00 $ 21,000,000.00 $ 21,000,000.00 Operating Margin 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

Sensitivity Analysis

Source: World Bank, MDG Assessment0.050% 0.075% 0.100% 0.125% 0.150%

$-

$2

$4

$6

$8

$10

$12

$14

$16

$5.04

$7.56

$10.08

$12.60

$15.12

Net

Pre

sent

Val

ue ($

Mill

ions

)

Percent of MDG for Water Funds

18

Executive Summary

Goal:

Approach:

Results:

Gain market share though US residential demand

Generate funding for global expansion

Implement new technologies in

developing countries

Blah

Target the residential market to increase operating income Use innovation to address global need of clean water

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

Situation: Lack of revenues from Filtration segment Filtration business segment in need of a successful product Global need for clean water

19

QUESTIONS?

20

Our Team

Jan Kraaijeveld

• Erasmus University

• International Business Administration

• Likes long walks on the beach and man purses

Caitlin Parrett

• Michigan State University ’11

• Marketing

• Can iron a mean shirt

Andrea Steinbrenner

• San Diego State University ’11

• Accounting

• Mega bytes are bigger than kilo bytes!

Ganesh Raj• University of North Carolina ’12

• Economics, minor in Mathematical Decision Sciences

• Likes Diet Coke and not telling jokes

21

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

Procurement: Utilizing corporate resources and ART’s image to secure stable and reliable suppliers in order to meet production needs

Mar

ketin

g &

Sal

es:

Cate

ring

to th

e ne

eds o

f the

resid

entia

l m

arke

t by

foc

suin

g on

cos

t le

ader

ship

and

sust

aina

bilit

y

Inbo

und

logi

stics

: Se

curin

g co

ntra

cts

with

su

pplie

rs

to

ensu

re ti

mel

y de

liver

y of

raw

m

ater

ials

Ope

ratio

ns:

Enfo

rce

dead

lines

and

kee

p a

stro

ng

focu

s on

qua

lity

cont

rol

and

econ

omie

s of s

cale

Out

boun

d lo

gisti

cs:

Ensu

ring

timel

y de

liver

y of

pr

oduc

ts

and

info

rmati

on t

o cl

ient

s by

fo

cusin

g on

robu

st lo

gisti

cs

Serv

ice:

Pr

ovid

ing

exce

llent

pr

e- a

nd a

fter s

ale

supp

ort b

y ha

ving

qu

alifi

ed

engi

neer

s av

aila

ble

to c

usto

mer

s

22

Appendix 2: U.S. Water Industry Revenue

33%

32%

11%

9%7%

4% 2%2% 1%

U.S. Water Industry Revenues (millions)

Drinking Water Utilities Wastewater UtilitiesDelivery Equipment Water Treatment

EquipmentConsulting/Engineering ChemicalsContract Operations Maintenance ServicesInstruments and Testing


23

Appendix 3: Daily Water Use in the Average US Household

Daily Use of Water in Average US Household

ShowerBrushing teethShaving Washing dishes by handWashing dishes in dishwasherFlushing toilet

35%

2%17%

23%

14%

8%

osu ciber case competition

Documents

residential market

housing market

water usage

global need of clean

strong demand

gain market share

product failures

filtration unit