Launch or Lunch

Launch or Lunch

Bine completed the call with the client and knew that he needed to review his recommendations with the project manager before tomorrows conference call. The last three weeks were quite productive in terms of collecting the teams assessment of Project X.

In addition to the data he obtained within Global Technologies, he had tapped into his own industry experts to expand on the perspective required to make an informed recommendation.

His objective in tomorrows call with the team was to share the preliminary analysis he had compiled and to detail his proposal for the team. This would require the support of the project leader who had resisted attempts to seek his support. It was important that she understand the details and rationale of this work before he delivered the report to his executive sponsor to complete his consulting engagement.

Background

Bine had been summoned by the Executive Vice President for Product Development, I. M. Big Cheez, to offer an external assessment regarding Global Technologies new Project X program. This initiative was intended to drive share and profitability in the emerging biofeedback market segment. A critical step was approaching: the transition from investigation to full-scale development and major funding decisions dependzed on an accurate assessment of the potential success of this project.

Bine and Cheez had worked together in the past and Bine knew that the client wanted to have a candid view of the risks and rewards of this endeavor. As the lead of four divisions, Big knew much about the industry, but was not personally engaged in the planning details. Bine had four weeks to engage the project team, analyze the situation and develop his recommendation.

The project manager, Harried Person, was skilled in the PM role, having been trained and certified as a professional project manager. She had twelve years of experience in this and related responsibilities and had worked in this division for the preceding twenty months.

She saw her role as the facilitator of a multi-functional team of professional experts who needed to collaborate on a critical venture. The division had been successful in the past, with high levels of customer satisfaction and consistent market share, consistently having achieved a top three position in its premier products.

Her strength was in her interpersonal skills, which she employed to maintain a positive team attitude to achieve aggressive deadlines. She admittedly was neither a technologist nor a financial expert, but endured that those skills were available by the individuals she had recruited.

At the initial discussion between Bine, Big and Harried, it was clear that Harried enjoyed strong management support based upon a successful series of similar assignments. Her commitment to deliver a completely documented checkpoint review package on time was not questioned. Bigs request to Harried to support a parallel analysis by Bine was met with some unspoken consternation, but she agreed to allow Bine full access to her team and its resources.

Team Input

At the most recent project team meeting, Harried reviewed the critical items from each of the team members. Bines notes reflected key information (Figure 1) developed by the team as they prepared to deliver a shippable product in a 26-week period.

A demand/revenue forecast (Figure 2) for the first 3 years of sales had been shared at a prior team meeting. This data had been generated by the product manager and had the joint approval of the marketing and sales organizations.

Additional Market Data

An analysis of the Other Side by a financial analyst contact revealed several additional facts. The company was privately held and had strong first and second round financing from the venture capital community. The CEO Al Doright had a strong track record in the high tech business and was known for bringing new products to market ahead of his competitors. There was also a rumor that the chief scientist, recently relocated from Transylvania, had developed a new proprietary approach that was patentable.

The psychic industry was indeed a high growth area, with services revenues increasing by a compound annual growth rate of 38% over the last five years. Sales of products to these psychics were split almost evenly between direct sales organizations and resellers.

Bines Analysis

Bine completed a SWOT and financial cash flow analysis based on the data that was provided. He then developed alternative scenarios to test the effect of modifying key assumptions. Finally, he prepared his four-chart presentation in preparation for his meeting with Big.

Bines Recommendation

Bines presentation was built on his knowledge of Bigs preference for brevity and insight. The four charts were labeled as follows:

Financial Analysis

SWOT Analysis

Risk/Scenario Analysis

Overall Assessment

Should Big Cheez launch Project X or will it be the competitions lunch?----------------------------------------------------------------------------------------On-line Team Exercise - Submit a brief (2 -3 page) write-up: Analysis of the Financials

EFAS/IFAS analysis (include as an addendum or separate Excel document) Recommendations & supporting rationale

(Teams 1 & 3 want the project to proceed; Teams 2 & 4 want to kill it)

Figure 1: Bines Notes Project Meeting #7 Week 3

Marketing:

Message: Power To the Medium = New technology tool for the parapsychologist/psychic

Target Market: 900 service dial-a-future telephone/internet service segment

Promotions Program:

$200K Periodicals Advertising (Crystal Ball Gazette, etc.)

$35K - Inside/Direct Sales Training Program

$65K - Channel Partners Training Program

$50K - Direct Marketing Stimulation/Website modifications

$50K - Investors/Media Events

Early Adopters 3 customers identified as initial users

Technical Support:

Customer Training new technology support is required to have customers manage supernatural plasma flow; one new support engineer requested.

Finance/Accounting:

Standard and Variable Cost Estimates

$2000 and 1500 for the base model

$3600 and 2800 for the premium model

DCF return and discount value = 3 year maximum and 20%

Manufacturing:

Design Readiness Assessment Schedule

Prototype due in 14 weeks per current schedule

Need to reduce by 3 weeks to meet prototype target

Tooling requirements could prove to be an obstacle

Component Sourcing Issues

Similar technologies use some obsolete components

Some new technologies are sole-sourced from non-ISO 9000 vendors

Design Engineering:

Resource Priority Constraints

Other project teams have requested priority for common engineering resources

Lead engineer in psychic phenomena is taking a sabbatical

Five engineers were committed to the project; loaded annual rate/Engineer = $150,000

Additional Materials for Design Stage = $500,000

Schedule Commitment = The engineers will do their best to make prototype delivery date

Product Management:

Functional Requirements Document = document completed with in-house expertise

Competitive Assessment = a new similar product has been announced and will be launched in three months; competitor is unknown, startup in San Jose, CA, known as the Other Side; no pricing yet announced

Pricing Schedule

Base Unit list price =

$ 8,000

Premium Unit list price

$12,000

Discount Schedule

Internet

5 to 15% (promotions programs)

Direct 1-30 units/order20%

Direct > 30 units

30%

Channel 1 30

35%

Channel >30

45%

Project Management:

Overall Conformance = Project is on-schedule overall. The team will pick up the slack.

Figure 2: Product Demand Forecast Project X

This Case was Created For Classroom Purposes Only

Any Resemblance To Real Companies or Industries is Purely Coincidental

R. R. Humer 8/2001 All Rights Reserved

_1380540326.xlsdata

Product MixQ1Year1Q2Year1Q3Year1Q4Year1Q1Year2Q2Year2Q3Year2Q4Year2Q1Year3Q2Year3Q3Year3Q4Year3

Market Demand

Lower Bound (20%)

Standard Product121724334552586572788286

Premium Market2356811141719212325

Likely View (50%)

Standard Product162237385562708595105110115

Premium Product238121517202326283032

Upper Bound (30%)

Standard Product2026445566778899110122134155

Premium Product3510162226283235394347

Weighted Forecast

Standard Product172337435765738695105112122

Premium Product348121619222528303336

Channel Assumptions

Internet

Standard Product5%5%5%5%5%5%5%5%5%5%5%5%

Premium Product0%0%0%2%2%2%2%5%5%5%5%5%

Direct

Standard Product25%25%25%25%25%25%25%25%25%25%25%25%

Premium Product50%50%50%40%40%40%40%30%30%30%30%30%

Resellers

Standard Product70%70%70%70%70%70%70%70%70%70%70%70%

Premium Product50%50%50%58%58%58%58%65%65%65%65%65%

Internet

Standard Product122334455667

Premium Market000111122222

total122445577889

Direct

Standard Product5610111517192224272831

Premium Market22457898991011

total7814162225283033363842

Resellers

Standard Product121726314046526167747986

Premium Product22471012131719202224

total14193038505865788694101110

Standard Total182538455867758896107113124

Premium Total448131821232730313437

grand total (w/roundup)22294658768898115126138147161

InternetASP (net)

Standard Product$7$14$14$22$22$29$29$36$36$43$43$50$7

Premium Product$0$0$0$11$11$11$11$22$22$22$22$22$11

total$7$14$14$32$32$40$40$58$58$65$65$72

Direct

Standard Product$30$36$60$66$90$102$114$132$144$162$168$186$6

Premium Product$18$18$36$45$63$72$81$72$81$81$90$99$9

total$48$54$96$111$153$174$195$204$225$243$258$285

Resellers

Standard Product$58$82$125$149$192$221$250$293$322$355$379$413$5

Premium Product$14$14$29$50$72$86$94$122$137$144$158$173$7

total$72$96$154$199$264$307$343$415$458$499$538$586

grand total$127$164$264$343$449$521$578$677$741$807$860$943

annual Sales$898$2,225$3,351

Total COGS - Full

Standard Product$36$50$76$90$116$134$150$176$192$214$226$248

Premium Product$14$14$29$47$65$76$83$97$108$112$122$133

grand total$50$64$105$137$181$210$233$273$300$326$348$381

Annual Total$356$896$1,355

Total COGS- Variable

Standard Product$27$38$57$68$87$101$113$132$144$161$170$186

Premium Product$11$11$22$36$50$59$64$76$84$87$95$104

grand total$38$49$79$104$137$159$177$208$228$247$265$290

Annual Total$270$681$1,030

Note: All units and $ amounts in 1000s

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