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Segway Human Transporter

Segway Final Presentation


Can Segway Enter the Tornado?

Management 266A
Product Strategy in the Digital Economy
Charles Chen
Miro Curac
Antonio Gomez
Dwight Huang
Len Tiso
Segway Human Transporter
Presentation Overview
Introduction
Strategic Assessment: Moore Framework
Stakeholders
Critical Issues Analysis
Bayesian Network Analysis
Strategic Implications and
Recommendations
Segway Human Transporter
Introduction
Motor-scooter like device
Powered by electric motors
Movement by shifting
weight, turning wrist
Turning radius of zero
Designed by inventor Dean
Kamen (150 patents)
Segway Human Transporter
3 Product Models
e series - Expeditor (cargo)
i series - Industrial (business)
p series - Personal (consumer)
Commercial models faster,
longer range, heavier
Max speed 10.0 - 12.5 mph
Maximum distance 14 - 17 miles
(single charge)
Device weighs 69 - 95 lbs.
Segway Human Transporter
Strategic Assessment: Crossing the Chasm
Segway in infancy stage of TALC
Discontinuous innovation
Substitute for walking
Value proposition (business and consumer)
Technology enthusiasts
Amazon.com auction - $100,000 bids
Visionaries
Amazon.com - first customer
Segway Human Transporter
Strategic Assessment: In the Bowling Alley
Whole product solutions to niche segments
Pick on someone your own size
Enlist the support of the economic buyer
Government services
Post office, police departments
Businesses with warehouses
Amazon.com, Michelin, GE Plastics
Segway Human Transporter
Strategic Assessment: Inside the Tornado
Hypergrowth stage years away
Consumers are ultimate target market
Production capacity 40,000 units/month
Need to lower price point from $3,000/unit
Media coverage is a double edged sword
Builds awareness
Overhype sets unrealistic expectations
(e.g. artificial intelligence industry)
Segway Human Transporter
Stakeholders
Consumers
Businesses
Government Services
Regulatory Authorities
Environmental Interests
Electric Industry
Petroleum Industry
Manufacturing Partners
Segway Human Transporter
Stakeholders: Consumers & Businesses
Stakeholder Groups Parties Interests
Consumers Individuals
Urban commuters
Local shoppers
Recreational users
Pleasure
Increased mobility
Social acceptance
Businesses Warehouses
Plants
Manufacturing facilities
Increased productivity
Segway Human Transporter
Stakeholders: Government and Regulation
Stakeholder Groups Parties Interests
Government Services Post office
Police departments
Park service
Better public service
Increased productivity
Regulatory Authorities Federal, state and municipal authorities
Department of Motor Vehicles
Public safety
Segway Human Transporter
Stakeholders: Environmental and Electric
Industries
Stakeholder Groups Parties Interests
Environmental Interests Environmental Protection Agency
Environmental interest groups
Environmental preservation
Electric Industry Battery manufacturers
Public utilities
Electric vehicle manufacturers
Market demand for electricity
Technological advancement of
electric products
Segway Human Transporter
Stakeholders: Petroleum and Manufacturing
Stakeholder Groups Parties Interests
Petroleum Industry Automobile, motorcycle and scooter
manufacturers
Petroleum exporters
Market demand for petroleum
products
Manufacturing Partners Suppliers of Segway Corporate profitability
Segway Human Transporter
Critical Issues Analysis
Highlight key issue for each area
Political - Regulatory approval
Behavioral - Consumer utility
Economic - Segmentation
Social - Fad or revolution?
Technological - Segway imitators
Segway Human Transporter
Bayesian Network
Segway Human Transporter
Bayesian Network Analysis
Base scenario
Tornado viability = 12.10%
Reasons for low percentage
Harder to enter Tornado than Bowling Alley
Regulatory hurdles
Consumer value key
Ability to supply
Competitive threats

Segway Human Transporter
Sensitivity Analysis: Primary Branch Nodes
Market Demand Probability Viability Difference
Base Scenario High Demand 20.81% 12.10%
Sensitivity Analysis High Demand 100.00% 46.50% 34.40%
Sensitivity Analysis High Demand 0.00% 3.06% -9.04%
Ability to Supply
Base Scenario Adequate Supply 56.60% 12.10%
Sensitivity Analysis Adequate Supply 100.00% 16.27% 4.17%
Sensitivity Analysis Adequate Supply 0.00% 6.67% -5.43%
Competitive Threats
Base Scenario Low Competition 46.51% 12.10%
Sensitivity Analysis Low Competition 100.00% 16.58% 4.48%
Sensitivity Analysis Low Competition 0.00% 8.20% -3.90%
Segway Human Transporter
Sensitivity Analysis: Regulatory Issues
Regulatory Issues Probability Viability Difference
Base Scenario - Favorable Regulations 26.74% 12.10%
Sensitivity Analysis - Favorable Regulations 100.00% 20.12% 8.02%
Sensitivity Analysis - Favorable Regulations 0.00% 9.17% -2.93%
Federal Approval
Base Scenario - Expedited Approval 95.00% 12.10%
Sensitivity Analysis - Expedited Approval 100.00% 12.20% 0.10%
Sensitivity Analysis - Expedited Approval 0.00% 10.23% -1.87%
State Approval
Base Scenario - Expedited Approval 60.00% 12.10%
Sensitivity Analysis - Expedited Approval 100.00% 13.68% 1.58%
Sensitivity Analysis - Expedited Approval 0.00% 9.73% -2.37%
Municipal Approval
Base Scenario - Expedited Approval 40.00% 12.10%
Sensitivity Analysis - Expedited Approval 100.00% 15.88% 3.78%
Sensitivity Analysis - Expedited Approval 0.00% 9.58% -2.52%
Segway Human Transporter
Sensitivity Analysis: Customer Value
Customer Value Probability Viability Difference
Base Scenario - High Customer Value 39.62% 12.10%
Sensitivity Analysis High Customer Value 100.00% 19.64% 7.54%
Sensitivity Analysis High Customer Value 0.00% 7.15% -4.95%
Consumer Value
Base Scenario - High Consumer Value 66.68% 12.10%
Sensitivity Analysis High Consumer Value 100.00% 14.15% 2.05%
Sensitivity Analysis High Consumer Value 0.00% 8.01% -4.09%
Segway Human Transporter
Sensitivity Analysis: Ability to Supply
Distribution Channels Probability Viability Difference
Base Scenario Sufficient Channels 60.00% 12.10%
Sensitivity Analysis Sufficient Channels 100.00% 13.33% 1.23%
Sensitivity Analysis Sufficient Channels 0.00% 10.25% -1.85%
Production Capacity
Base Scenario Adequate Capacity 68.36% 12.10%
Sensitivity Analysis Adequate Capacity 100.00% 13.77% 1.67%
Sensitivity Analysis Adequate Capacity 0.00% 8.48% -3.62%
Segway Human Transporter
Sensitivity Analysis: Competitive Threats
Existing Transportation Probability Viability Difference
Base Scenario - Effective Substitute 20.00% 12.10%
Sensitivity Analysis - Effective Substitute 100.00% 11.30% -0.80%
Sensitivity Analysis - Effective Substitute 0.00% 12.30% 0.20%
Alternative Electric Transportation
Base Scenario - High Threat 62.22% 12.10%
Sensitivity Analysis - High Threat 100.00% 10.55% -1.55%
Sensitivity Analysis - High Threat 0.00% 14.65% 2.55%
Segway Human Transporter
Market Valuation (all units in 000s)
Comparable Industry: Motorcycle and Bicycle Manufacturing Tornado
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Unit Sales Price (000s) $3.0 $2.5 $2.0 $1.5 $1.0 $0.3 $0.3
% of Target Production 2% 10% 30% 40% 100% 500% 5000%
Units Produced per Year (000s) 9.6 48 144 192 480 2,400 24,000
Revenue 28,800 $ 120,000 $ 288,000 $ 288,000 $ 480,000 $ 720,000 $ 7,200,000 $
COGS 19,987 $ 83,280 $ 199,872 $ 199,872 $ 333,120 $ 499,680 $ 4,996,800 $
Gross Margin 8,813 $ 36,720 $ 88,128 $ 88,128 $ 146,880 $ 220,320 $ 2,203,200 $
Operating Expenses 6,624 $ 27,600 $ 66,240 $ 66,240 $ 110,400 $ 165,600 $ 1,656,000 $
Operating Income/EBITDA 2,189 $ 9,120 $ 21,888 $ 21,888 $ 36,480 $ 54,720 $ 547,200 $
Depreciation/Amortization - $ 500 $ 1,100 $ 1,820 $ 2,684 $ 3,721 $ 4,965 $
EBIT 2,189 $ 8,620 $ 20,788 $ 20,068 $ 33,796 $ 50,999 $ 542,235 $
Interest Expense - $ - $ - $ - $ - $ - $ - $
EBT 2,189 $ 8,620 $ 20,788 $ 20,068 $ 33,796 $ 50,999 $ 542,235 $
Income Taxes 766 $ 3,017 $ 7,276 $ 7,024 $ 11,829 $ 17,850 $ 189,782 $
Net Income 1,423 $ 5,603 $ 13,512 $ 13,044 $ 21,967 $ 33,149 $ 352,453 $
Capital Expenditures 5,000 $ 6,000 $ 7,200 $ 8,640 $ 10,368 $ 12,442 $ 14,930 $
FCF (3,577) $ 103 $ 7,412 $ 6,224 $ 14,283 $ 24,429 $ 342,488 $
Discounted FCF (3,111) $ 78 $ 4,874 $ 3,559 $ 7,101 $ 10,561 $ 128,754 $
Preliminary Valuation $2,984,401
Segway Human Transporter
Sensitivity Analysis - Expected Valuation
Probability Expected
Scenario of Viability Valuation ($M)
Base case 12.10% 361 $
Hi Market Demand 46.50% 1,387 $
Lo Market Demand 3.06% 91 $
Adequate Ability to Supply 16.27% 485 $
Inadequate Ability to Supply 6.67% 199 $
Weak Competition 16.58% 494 $
Strong Competition 8.20% 245 $
Preliminary valuation = $2.98 billion
Segway Human Transporter
Strategic Implications and Recommendations
Prioritize regulatory approval efforts
Municipal approval is key
Beta testing with government services

Consider international consumer market first
Less automobile oriented urban infrastructure, but
less Segway friendly infrastructure
More receptive to cheaper transportation technology
(higher customer value)

Segway Human Transporter
Strategic Implications and Recommendations
Continue expanding production capacity
Hypergrowth demands rapid scalability

Continue conservative patent protection policy
Barrier to entry in a new market
Alternative electric transportation threat
Segway Human Transporter
The Future?
Segway Human Transporter
Segway Videos
Link: http://www.segway.com/connect/multimedia.html