Business Plan Development for a Major Engineering Company Revealed Necessity to Expand R&D Effort to Several of the Company’s Products.

A global engineering company had initiated an effort to develop a business plan for a new technology under development—technology specifically intended for a key product but with the potential to be repurposed for several additional products. SDG was brought in to support the development team in creating a business plan for the new technology—a plan that would cover the technical as well as the commercial details.

Situation Analysis

A global engineering company had initiated an effort to develop a business plan for a new technology under development—technology specifically intended for a key product but with the potential to be repurposed for several additional products.

The company had to decide whether to continue the development of the technology and to continue to provide budget and resources for the project team. The project team faced significant uncertainty with regard to the technology; while the team was familiar with the technical hurdles they faced in development, they had little knowledge about the potential value the technology could generate in the market, or the commercial risks associated with implementation. In addition, the project team faced potential pushback from internal stakeholders who were developing competing products at the same time.

Discovery & Solution

Strategic Decisions Group was brought in to support the development team in creating a business plan for the new technology—a plan that would cover the technical as well as the commercial details.

In meetings with the internal team, SDG’s team was able to quickly generate a clear evaluation structure that captured the important technical complexities including the various interconnections between technical and commercial uncertainties. By assessing key technical and commercial uncertainties as ranges instead of point estimates, the project team was able to consider different cost and benefit scenarios. SDG leveraged the company’s own tools including calculations of service contract scenarios to build a detailed decision model to evaluate the potential value of the opportunity. SDG was able to identify the major drivers of value and to quantify the uncertainty as well as to reveal the investment productivity of the R&D effort. The financial model allowed the client to compare this development project to other internally competing projects. In addition, because the model was developed using a reusable structure, the client was able to make updates on their own as the project moved through the stage-gate process.

Results & Impact

SDG facilitated fast and focused communication within the project team and was able to build a meaningful structure of the decision problem in very short time. Specifically, SDG’s analysis revealed that most of the potential value would be generated by capturing a portion of the benefits the end customers get from using the new technology. This customer perspective was a key insight, as until then, the project team had been focused only on internal cost benefits. In addition, the analysis revealed the importance of coupling the new technology with planned product upgrades to minimize the negative effects of the new technology on the existing product.

Above all, the clear insight from this effort was that the business case was not strong enough if the technology were to be implemented in only one product.