1/24/2020 Strategic Innovation Simulation: Back Bay Battery

Strategic
Innovation
Simulation:
Back Bay 4
PREPARE ANALYZE DECIDE NEWS
Battery

Welcome to Strategic
Innovation Simulation: Back
Bay Battery

You are the president of Back Bay Battery,

Inc., a $240 million revenue division of a $40
billion consumer electronics manufacturer.
Back Bay Battery produces two types of
batteries, the absorbed glass mat (AGM)
battery and a new supercapacitor (SC)
battery. The AGM is a heavy, lead-acid
battery that is easy to handle, withstanding
vibration and extreme conditions well. AGM
batteries represent 80% of the company's
revenue and have been a mainstay of the
business. The newer supercapacitor
batteries make up the remaining 20% of
revenue.

Back Bay Battery sells its batteries to

businesses. There are three primary
markets:

Automobiles. Several
characteristics of AGM batteries
make them attractive for high end
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1/24/2020 Strategic Innovation Simulation: Back Bay Battery

vehicles. They can be placed

somewhere in the interior of the
vehicle or the trunk since they
are sealed. The rising popularity
of start-stop engine technology
(which improves fuel economy)
means an increased demand from
automakers because AGM
technology is well suited to the
increased power demands and
frequent cycling. They are also
beginning to be used for braking
energy recovery (regenerative
braking). A generator attached to
the drivetrain of a popular
European SUV captures the
energy released during braking
and uses it to power the many
electrical subsystems on the
vehicle. Both of these
applications improved fuel
efficiency.

Warehouse equipment.
Automated logistics warehouses
use many pieces of equipment
that use electrical power, such as
stackers and robots, and Back
Bay has carved out a growing
niche, supplying batteries for
these systems. Many of these
systems draw high startup power
and they need to undergo
frequent charging cycles.

Uninterruptible power systems

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(UPS). This segment includes

backup power systems for large
datacenters. Warehouse-sized
rooms are filled with batteries
that are switched in to provide
power in the event of an outage.
The batteries only need to supply
electricity for about 15 seconds,
which is the amount of time it
would take to spin up standby
diesel generators.

The two battery types vary in their

performance across five distinct features:
energy density, number of recharge cycles,
self-discharge to 50%, recharge time, and
price. Markets vary in terms of how these
features are ranked relative to each other.

Market pressures on pricing mean that Back

Bay Battery never has quite enough R&D
money to spend on everything its research
staff would like to do. On the one hand, the
team gets daily pressure from the sales
organization to improve the company’s AGM
battery offerings because, in this commodity
business, small performance or technical
advantages can swing a large order as pricing
is pretty competitive. The company can
tweak its demand by adjusting prices, but
needs to be careful not to lose a big
customer in the process. Back Bay also has to
factor in how long it will take for those
investments to bear fruit. While some of the
scientists wax poetic about the potential of
supercapacitors, the technology has major
shortcomings for Back Bay’s core markets

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1/24/2020 Strategic Innovation Simulation: Back Bay Battery

today, and the company has to be careful not

to dig too deep a hole financially.

The product manager at a major auto maker

(who happens to be one of Back Bay’s largest
customers) has been encouraging the
company to focus on its specific needs for an
upcoming refresh of its SUV line. The
customer is looking for higher power density
and lower unit battery costs, as they are
feeling market pressure from Asian
competitors. He has been shopping for
competitive AGM batteries sourced
offshore, and has made clear to Back Bay the
importance of remaining price competitive.
The rapid recharge time for supercapacitors
would be appealing if the storage capacity
were much larger. Focusing on this customer
would consume essentially all of the
company’s limited R&D resources.

To learn more about this game, play through

the tutorial here.

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