A leading controls manufacturer developed a technology that had potential advantages in the aerospace business. Although the Client participated in some segments of the aerospace market, it was unable to determine with confidence to what extent the technology could be used for aerospace applications.
The technology and market development program would cost millions of dollars. Before approving such an investment, the Client needed to examine the business case, considering such issues as the size and growth of the end use markets, how receptive aerospace customers would be to the new technology, which segments offered the best short term and long term sales opportunities, and what technical features and benefits would be required to succeed in the market.
Because the Client lacked critical information and insights necessary to build a credible business case for the investment, it hired RSR Marketing Solutions to fill in the gaps.
- Develop a rigorous, fact-based, analysis to support a “Go/No Go” decision relating to whether or not to invest in the technological and market development program being considered.
- Identify and test the sensitivity of key parameters and assumptions underlying the business case.
- Develop an evaluation framework that leads to consensus among key company leaders and stakeholders regarding the feasibility and attractiveness of this potential investment.
RSR Approach and Methodology
In order to assist the Client in making an informed, confident decision, RSR approached the situation as follows:
- Quantify and evaluate how the markets are currently being served. RSR conducted in-depth interviews with key marketing managers from the major aerospace controls suppliers to quantify and segment the overall market. In addition, we gathered qualitative information regarding the market structure (e.g. who supplies to whom), and gained an overview of the technical requirements in each segment.
- Demand side analysis. We interviewed the key engineering and operations contacts for the primary segments and customers to determine the type and number of controls they use, identify potential sources of dissatisfaction, and project future product / service needs.
- Technical and market feasibility analysis. We interviewed key technical decision-makers to determine the critical performance criteria for the new product, as well as the primary purchasing decision factors. This information was used to project the adoption rate for the technology, so we could calculate five-year sales projections for the proposed new product.
- Develop decision metrics. Once a quantitative decision model was established, we performed sensitivity analysis by simulating best and worst case scenarios to determine the upper and lower bounds around the expected value for the market potential. This was an iterative process, conducted in close collaboration with the Client and revised as new facts and insights became available. Part of this process included the development of ongoing measurement tools to assure that the program, if undertaken, could be measured on a continuous basis.
Research Findings and Business Results
- RSR determined that despite a very large end use market for the controls of interest, a key technical limitation meant that only a small percentage of the market could be effectively served by the potential new product.
- We also discovered that switching costs were substantial, and that these costs raised the cost / performance bar of the new product to even higher levels.
- Projected changes in procurement practices meant that the new product would likely be purchased by highly price-sensitive and risk-averse integrators, rather than directly by OEMs.
- The end result was the Client decided not to invest several million dollars in the new development program, and diverted these funds to other uses.
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