42629 lecture 5 pt 3
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This document discusses integrated product development and forecasting. It introduces the concept of a "hockey stick" growth curve that investors want to see when evaluating a potential investment. It also discusses requisites for exponential growth like having a solid execution strategy and understanding customer needs. The document then covers forecasting sales through both a bottom-up process of detailing individual sales tasks and timelines, and a top-down process of comparing to competitors' reported sales. The focus for group work is on specifying target customer segments, understanding their needs, and formulating a value proposition.
42629 lecture 5 pt 3
- 1. Integrated Product Development Forecasting Jakob A. Bejbro Andersen jaban@mek.dtu.dk Unless otherwise stated, this material is under a Creative Commons 3.0 Attribution–Share-Alike licence and can be freely modified, used and redistributed but only under the 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”
- 3. Introducing the hockeystick - A market potential has no value to investors in itself. - There has to be a credible plan for realizing this potential. - The following questions need to be answered: - When will you start selling? - When will ”break even” be reached? - When can the investor achieve an ”exit”? - How much can the shares be sold for? Financial Balance Time 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. Requisites for the hockeystick (exponential growth) • A solid execution strategy. – Segment 1, then 2, then 3 ... (remember the bowling pins) • A good knowledge of the customer / market. • A credible sales approach. 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. The lifecycle of a market (segment) • Unexploited markets tend to have the following characteristics: – Early stage sales; driven by enthusiasts, lack of track record. – Breakthrough; track record established, sales increasing drastically. – Business as usual; Market saturated, few new customers. Sales rate Market saturation Early stage sales Breakthrough Business as usual Time 5 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012 Development Department of Mechanical Engineering, The Technical University of Denmark
- 6. Planning for continued growth • As capital (liquidity) and track record is established… • … the basis is formed for going into new segments. • The specific strategy for entering into new Seg 5 segments is a key parameter for investors. Seg 4 Seg 3 Seg 2 Seg 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 6 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012 Development Department of Mechanical Engineering, The Technical University of Denmark
- 7. Projecting sales • Sales are key as they validate the market for the offering. • Investors rate sales over any other dimension. • As with market estimates, there is a top down and a bottom up approach. – Again, it is beneficial to use both approaches. SALES 7 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012 Development Department of Mechanical Engineering, The Technical University of Denmark
- 8. Choosing a sales approach • Business to Business sales (B2B) – The same product can be sold to different levels of an organisation. – As a general rule: • Higher in organisation you find more purchase power, but longer sales cycles. • Lower in the organisation you find smaller budgets, but shorter time from introduction to actual purchase. – Exceptions are however many: • Strategic level can be used to push through sales • The operational level can be to hung up on formal requirements. • Business to Customer (B2C) – Through distributor/partner. – Direct sales. – Web portal. • Composite models (B2B/B2C) – Facebook, adwords etc. 8 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012 Development Department of Mechanical Engineering, The Technical University of Denmark
- 9. Exercise 5a: (You are still with the brewery) For one of the identified segments: Identify two or more sales approaches: 1. _________________________ 2. _________________________ 3. _________________________ 4. _________________________ • How will you sell your own idea? 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. Projecting sales (bottom up) • Describe sales going from day to day • What steps need to be taken for each sale to be made? • Which resources does it require? • How can the resources required be minimised? Establish contact Create materials Specify solution Formulate quotation Negotiate terms Sale! Wk 1 Wk 2 Wk 3 Wk 4 Wk 5 Wk 6 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. To be reduced The sales funnel (bottom up II) Number of Time usage candidates T1 hours First meeting per meeting First meetings N Qualification T2 hours per lead T3 hours Purchase per lead order N/10 (?) 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. Exercise 5b: For one of the identified sales approaches, list important tasks: Task 1: _________________________ Task 2: _________________________ Task 3: _________________________ Task 4: _________________________ Task 5: _________________________ •What tasks will be important for your own product? 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. Projecting sales (top down) • To get a reality check on sales figures, a number of approaches can be used: – Check media for sales intel (companies like to boast). – Look adoption rates in for similar products/services. • As a venture company, you should be ambitious: – ”We expect to match or even beat on the sales figures of Company X” – If you are no better than your competitor – why enter the market? 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. EDGEFLOW EDGEFLOW Sales forecasting (slides courtesy of EdgeFlow Aps)
- 15. EDGEFLOW Sales forecast - bottom up Based on sales to strategic level in large companies. Motivation for sales approach (to strategic level): • Selling to as high a level as possible • Enables us to add CSR arguments to sales pitch • Requires limited sales force (favourable at an early stage) Procedure -Proces validated with sales experts. - Milestones and target sales # validated with customers (where possible) - Projected hit rate (8-12%) Sales forecast excel sheet
- 16. EDGEFLOW Sales forecast – top down Based on sales to strategic level in large companies. Procedure - Identify competitors Comp 1, Comp 2 and Comp 3 (wind turbine manufacturers) - Look for mentioning of sales figures in media (Comp 1 shown as example). - Build sales history and projection from data obtained. ”…ramps up ”…Large order production to 30 with local utility units per month” – 10 turbines ”…40 units sold” ”Comp 1 enters sold in first 8 DE market – 15 months of units already operation…” sold” ”Comp 1 lands Year in framework agreement w…” market Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6
- 17. Q? 17 Original material by Jakob A. Bejbro Andersen for course 42629 – Innovation and Product 2012 Development Department of Mechanical Engineering, The Technical University of Denmark
- 18. Focus for Fridays Group Work (double diamond) • Work on specifying and rating segments. • Knowledge of customer needs required– how will you obtain it? • Start formulating your value proposition. 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