Value Proposition and Market

1. Integrated Product Development
Value Proposition and Market
Jakob A. Bejbro Andersen
jaban@mek.dtu.dk
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same licence and if including the following statement:
“Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product
Development Department of Mechanical Engineering, The Technical University of Denmark”

2. Formulating a Value Proposition
Getting the message across to key stakeholders.

3. Communicating value
•Knowing the needs, how does
your product/service help?
•… You need to formulate a clear
”value proposition”.
•Ideally this statement should be
”catch all”.
•Many recipies for getting it
right.
3 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

4. Recipé for Value Proposition
You start out by forming a long sentence using the
following:
CROSSING THE CHASM VALUE PROPOSITION
“For >>bulls-eye customer<<
…Who >>Key purchase motivation insight<<
…Our product is a >>customer language<<
…That >>key benefit<<
…Unlike >>key competitors<<, Ours >>key differentiators<<
…At a price >>less than, equal to, or higher than
competitors<<”
… Then add eggs and
- Then reduce the statement until it is only 2-3 lines.
4 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

5. EDGEFLOW
EDGEFLOW
(slides courtesy of EdgeFlow Aps)

6. EDGEFLOW
“For large energy consuming consumers who need ways for strengthening a
triple bottom line, the EdgeFlow wind turbine is a visible and green power provider
that effectively cuts CO2 emissions and clearly communicates the customer’s
environmental awareness to its employees and customers. Unlike Quiet
Revolution, Turby and conventional wind turbines, our EdgeFlow wind turbine is
part of a whole product framework that includes communication services to
accelerate learning and changing of behavior at our customers – all at a
significantly reduced price.”
Condensate
Companies focus increasingly on changing toward a more sustainable business.
EdgeFlow offers a financially viable investment in sustainable energy production
as well as a framework for integrating technology and idea into the corporate
culture, thus forming a first step toward and a framework for change.”
Condensate
“For customers working toward a more sustainable business, EdgeFlow’s wind
turbines constitute the next pragmatic investment as well as a visionary blueprint
for pervasive change.”

7. EDGEFLOW
A real world example: EdgeFlow II
Sound financials: Technical/
• Payback < 5 years Financial
Siting &
• Life time value > DKK 1,6 million Structural/
Financing
options
• Various financing options Electrical
Integration*
Strong environmental profile: PR Material
• Payback on CO2 < 1 year (internal &
Service/
• Annual CO2 saving of ~ 24 tonnes Repairs*
Wind turbine external)
• Direct value chain integration.
• Strong coupling to product.
An instrument for change Value chain
integration
Organizational/
Customer
• Integrated with organisational learning.
learning
• Affects behavior of employees and customers
• Leading by (clear) example. Behavioral/
Cultural

8. The Market
Realizing the potential, finding out where to begin.

9. What is the market?
• The place where the value of your product can be realised.
• The opportunity for you to establish a business.
• Your idea and business defines the reach of the market.
• Is inherently complex and likely to change over time.
#
• A healthy business knows the complexities of its market and
is able to adapt to the changes.
•Market size is given as:
- Number of sales
£
- Turnover = Number of sales * Sales price
- Gross Margin = Number of sales * (Sales price – Cost of product)
- Other: EBIT, EBITDA, ...
9 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

10. Dimensions of the market
• To get an overview, the market needs to be structured.
• To establish a structure, one should pinpoint dimensions
critical to your product.
• Define characteristics of the perfect customer.
10 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

11. Exercise 3a:
Company X wants to sell:
Non-alcoholic beer
You are the new marketing executive at the brewery:
• Define favourable characteristics for a customer
1. _________________________
Drinks large quantities of beer
2. _________________________
Cannot / may not consume alcohol
3. _________________________
Part of well defined
4. group
?
_________________________
5. _________________________
• Now list favourable characteristics for
your own idea.
11 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

12. Market Segmentation
• Groups of customers with similar traits and needs are
likely to be found.
• These ”segments” are require less complex value
propositions. Company size
Segment 1:
Large
Large Danish
companies
Entire market
Segment 2:
Medium sized
Medium
German
companies
DK UK DE Country
12 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

13. Exercise 3b:
You still have the job:
•List customer segments for the non-
alcoholic beer.
1. _________________________
The elderly
2. Pub guests who need to drive
_________________________
3. home
_________________________
?
4. _________________________
5. _________________________
•List as many segments as you can for
your own idea.
13 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

14. Choosing a place to start
• Think of the segments as pins on a bowling alley...
• ...if you get the the first one, the others should follow.
• Start with the most easiest segment (pin) first.
• A solid base in seg 1 makes entering new segments easier.
4
2 3
1
4
2 3
4
3
4
14 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

15. Evaluating segments
• Use your customer characteristics to describe the
accessibility and attractiveness of each segment.
Characteristic Compliance
(1-5) or yes/no
Large profit potential 1
2 3
Placed close by 1
Ease of sale 4
2 3
C4
4
C5 3
...
4
15 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

16. EDGEFLOW
EDGEFLOW
Revisited (slides courtesy of EdgeFlow Aps)

17. EDGEFLOW
Segments
The many pins on the bowling alley
Good
Compliance
Medium Poor
Strong Free High # per # facilities Strong No access
Segment subsidies Very tall standing facility per sale CSR barriers
High bay warehouses
Airports
Big box warehouses
Industrial buildings
Agricultural facilities
Hyper markets
Office/hotel buildings
C8
C9
Something missing?
C10
C11
What about market size?
C12
C13
C14

18. Exercise 3c:
You still have the job:
•Rate your segments by favourable
characteristics
Favourable Characteristics s1 s2 s3 s4
•Now rate your own segments!
18 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

19. Total market size (and other ridiculous notions)
• It is next to impossible to pinpoint total market size.
– Moon rockets (12 pcs.) and air for breathing (all living creatures) can
be seen as exceptions.
• Investors want (big) figures.
• The solution is to pinpoint parts of the market.
PART OF
MARKET
TOTAL MARKET
19 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

20. Estimating (sub-) market sizes
• Good and bad types of market data
- Bad data (needs additional qualification)
- Good data
• ”At least as big as ...” better than
”no bigger than ...”.
• If possible, link to
segments. MARKET
DATA
MARKET TOTAL MARKET
DATA
20 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

21. Sources of info for market estimation
• Estimation can be done using a ”bottom up” and/or a ”top
down” approach.
• To figure out market sizes, one has to be creative!
21 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

22. Market estimation: Bottom up
• Describing the market by going ”door to door”.
• Look up adresses of potential customers.
– Krak, Bing, Google Maps etc.
• Find users in fora.
• Do surveys
– Google docs, Forms
• Take contact.
• Use kickstarter.com or similar sites.
– quantification + validation + financing = great!
13 14 15
7 8 9 10 11 12
1 2 3 4 5 6
22 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

23. Market estimation: Top down
• Market intelligence reports (for the lucky few).
• Statistics.
• Articles.
• References:
– Who else is i the business?
23 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

24. Market size and actual sales
• A bottom up approach is likely to yield info on what it
takes to sell
– ”60% of the respondants showed interest”
• However, good intentions are free of charge.
• Actual sales numbers are likely to be lower.
• A good match between needs and value proposition is
good for sales.
– Less complex segments = less complex needs = easier sale / stronger product
Interested in buying? Interested in signing
purchase order?
Yes
No
Yes
No
24 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

25. EDGEFLOW
EDGEFLOW
Market size estimation (slides courtesy of EdgeFlow Aps)

26. EDGEFLOW
1st Estimate
Danish statistics and user survey
Parameter: Parameter: Parameter: Parameter: Parameter:
Total number of Number of wind Share of suitable Share of Share of actual
buildings of proper turbines per building. buildings interested signed purchase
size in DK. (height, placement, o customers. orders.
rientation)
Source/Method:
* Source/Method:
* Source/Method:
* Source/Method:
* Source/Method:
Danish Geometrical study of Bing maps, survey Survey of 30 Survey of 30
Statistics, buildings buildings of industrial areas. industrial industrial
by floor area and companies. companies.
type.
=
potential # of turbines sold in DK*

27. EDGEFLOW
2nd Estimate
Door to door – bottom up.
Same Same
Parameter: Parameter: Parameter: Parameter:
Number of Number of wind Share of Share of actual
interesting turbines per building interested signed purchase
buidlings. customers. orders.
Source/Method:
* Source/Method:
* Source/Method:
* Source/Method:
Building hunting on Building plans, bing Survey of 30 Survey of 30
Google earth, bing. maps, google earth. industrial industrial
companies. companies.
=
potential # of turbines sold to 30
known UK customers.

28. EDGEFLOW
3rd Estimate
Starting from a segment – high bay warehouses
Same Same
Parameter: Parameter: Parameter: Parameter:
Number of high bay Number of wind Share of Share of actual
warehouses. turbines per building interested signed purchase
customers. orders.
Source/Method:
* Source/Method:
* Source/Method:
* Source/Method:
Reference list for Looking up Survey of 30 Survey of 30
high bay warehouse reference buildings. industrial industrial
suppliers. companies. companies.
=
potential # of turbines sold to high
bay warehouses in EU (specific to certain suppliers)

29. EDGEFLOW
Further estimates
The list goes on, but the point has been made.
Suddenly, out of the blue – a market intelligence report

30. Exercise 3d:
Your time to shine:
•Pick a segment and do a quick market estimate.
(Use Google, wikipedia, articles, ...)
You have 10 minutes(!):
5 minutes for planning
5 minutes for ”Googling”
What was your approach?
How far did you get?
•On Friday – figure out ways of doing
The same for your own idea.
30 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

31. A few notes on pricing
• Number of sales is not interesting if there is no profit –
you therefore need to estimate a price.
• Try to estimate a price by:
– Looking at competing products
– Products of similar complexity/size/type
– Describing product costs and estimating sales price
• Prices should vary between customers/segments
– Look for ways of selling at a high price in the early stages.
– This is your ”pricing strategy”.
Price of product
Profits
Costs
31 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark

32. Q?
32 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012
Development Department of Mechanical Engineering, The Technical University of Denmark