Emerging Business Models in Advanced Materials
and Advanced Manufacturing
Emerging Business Models Homepage
Carbon
Nanotechnologies, Inc. - August 2005
by Keia Andrews, Roseanne Ellison, Don
Kendrick, Molly Livingston, and Mitch Ohiwa
Executive Summary
The field of nanotechnology jumped forward in 1985 when Dr. Richard Smalley (Rice University) and Harry Kroto co-discovered a new form of carbon (C60) which they termed "buckyballs." "Buckytubes" (which is a term used interchangeably with the term “nanotubes”), produced by Carbon Nanotechnologies Incorporated (CNI) under exclusive license from Rice University, bridge the gap between nano and micron sizes. Buckytubes have "exceptionally high material properties such as electrical and thermal conductivity, strength, stiffness, and toughness." These characteristics make many potential applications possible. One technology that is close to production is in the area of low-power, high-quality display solutions, namely, advanced flat panel displays.
CNI has positioned itself as "the preeminent producer of buckytubes." As such, they have a differentiated product to service their customers, which currently include over 700 leading academic research centers and a wide variety of small and large companies whose businesses depend on advanced materials. The ultimate end users are the consumers of the products manufactured with buckytube components, such as the flat panel displays. To accomplish this task, CNI maintains a delicate balance with their coopetitors to advance the research and development of products to drive the need for their buckytubes.
The sale of buckytubes seems to be in the growth phase. Since the discovery of them, and the subsequent theoretical application of their properties, more technological firms are seeing a potential future use for them. However, some firms are abandoning buckytube research for nanowire research, given the apparent impossibility of a practical and cost-effective purpose for buckytubes in their industries. The nanotube market is expected to grow to $540 million by 2007.
Currently, there are between 50 and 100 nanotube producers worldwide. Producers can be divided into two categories (captive and open producers). Captive producers produce for internal use only and open producers sell to the general market. The business model CNI is following has great potential to produce positive financial results. CNI certainly faces challenges such as future competition in the nanotube industry and pressures from substitute products for commercial applications. However, it is also possible for CNI to overcome these challenges through effectively and efficiently capitalizing on its cutting-edge research and intellectual property rights.
Full Report:
http://www.geocities.com/innovating_competitively/mtls/Buckytubes.pdf
Kodak's OLED Displays - August 2005
by Muhannad Hammash, David Kelly, Nida Pula-Or, and Ryan Rinder
Executive Summary
Kodak has become a pioneer in Organic Light Emitting Diode (OLED) technology. OLED is a technological advancement in displaying images. OLED displays are used in a variety of applications, and are primarily focused in devices with small displays. Some of these devices include mobile phones, personal digital assistants, camcorders, MP3 players, and others. OLED will eventually have applications in larger-size devices, but at current time, the life expectancy of the pixels in larger OLED displays is only about a year.
OLED display technology is quickly becoming popular due to the benefits that it offers over competing products such as LCD. The main advantages that OLED offers over LCD include excellent image quality, fast refresh rates which makes it great for video, bright display, wide viewing angle, flat profile, lightweight, and low energy consumption.
Kodak’s business model is centered on the fact that they are a pioneer in the industry. They target manufacturers of digital displays and manufacturers of devices which use digital displays. Kodak does not manufacture OLED displays themselves. They provide display manufacturers with the materials and the technological and manufacturing expertise needed to create OLED displays. Since Kodak controls a patent that can allow them to collect royalties on all OLED sales, a portion of all sales revenues can be appropriated by Kodak.
Kodak was slow to change their focus from their traditional film, paper, and non-digital products to today’s new technologically advanced digital products. Kodak now employs a proactive strategy to develop and market new digital products at a record pace to technology-hungry customers. They have invested significantly in R&D, and OLED is just one example of how Kodak is investing in new technology.
Kodak’s strengths lie in their proactive corporate strategy, acquisitions and partnerships, and their brand awareness. As Kodak becomes more of a first-mover rather than a follower in digital technology, their partnerships with other technology firms as well as their high brand awareness should help them to license their technology to other firms. They need to take advantage of the opportunities laid out before them such as investment in digital products and the continuation of new product launches. It may be difficult to pursue some of these strategies due to the diminishing revenues and job losses that Kodak has recently experienced. They also have to contend with fierce competition in technology, the difficulty of risk management, and the decline of the photography market.
Since OLED adaptation is projected to continue to grow at a rapid pace, there is a lot of potential for Kodak to make money. Kodak is a very diversified company, so it is somewhat difficult to tell just how much OLED will contribute to their financial position in the future. Kodak expects digital revenue growth in 2005 of approximately 36% with digital earnings from operations this year in a range of $275 million to $325 million. With the OLED global market expected to grow from $615 million in 2005 to $2.9 billion in 2011, this is a very promising revenue source. We predict that Kodak can reasonably expect OLED revenues of anywhere from $10.4 to $104 million 2008. Kodak should be successful in OLED sales as long as they continue to invest in R&D, focus on the efficiency of their operations, and continue their first-mover strategy.
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NanoFilterCX - August 2005
by Chris Duvall, Amanda George, Michelle
Grilliot, Chris Jefferson, and Lindsay Schoen
Executive Summary
US Global Nanospace is a small applied science company, whose mission is to provide what they believe are promising new technologies in various industries. With that said, the company primarily focuses on the Research and Development aspect of these emerging technologies. One product, which is believed to maintain some degree of promise within the company, is known as the NanoFilterCXTM. The NanoFilterCX is designed to reduce smoking risks and toxin transmission from cigarette use. The product has been a considerable focus for USGN’s Research and Development efforts for the past three years. As many consumers are becoming increasingly concerned with the health risks involved with cigarette use and more information is surfacing regarding various diseases caused by tobacco use, USGN believes that a product which can effectively filter many of these detrimental toxins is long overdue. With over 40 million smokers in the United States and 1.5 billion smokers worldwide, many consumers do not view abstinence from smoking as a viable option. For these consumers the NanoFilterCX would offer a high-efficiency mechanical filtration method, which is said to reduce harmful toxin levels from 38 to 72 percent. Not only is the product a healthier alternative because it filters out a higher percentage of carcinogenic products, USGN points out that it can do so without impeding flow or requiring an increase in air dilution. Simply put, the NanoFilterCX would provide a safer alternative for consumers, while still preserving that same tobacco taste.
In regards to producing the NanoFilterCX, like many of their products, USGN focuses on the Research and Development efforts. The company is currently not capable of distributing or manufacturing the NanoFilterCX through internal means. With that said, it is important to recognize the target market for USGN. USGN primarily exercises a business-to-business model because their target market is the distributors. While the company may develop the technology (to include workable prototypes), USGN depends on a distributor to help their product reach manufacturers and eventually the end users. Due to a lack of bargaining power in the cigarette industry, USGN has given distribution rights to Vitusa; a company they believe has the capability and influence to further the interests of the product. Unfortunately, as the sole distributor, Vitusa has shown little resolve in pushing the NanoFilterCX to cigarette manufacturers. While market factors and competitor demands also play an important role, USGN’s distribution agreement is arguably a substantial contributing factor to the company’s inability to generate revenue.
In addition to understanding target markets, customers and capabilities, it is also important to explore USGN’s competitive forces in the cigarette industry in the form of rivals and substitutes. Our team has not been able to identify any direct rivals developing nanotechnology filters specifically for the tobacco products industry. There are a number of nanotechnology research firms that may be capable of similar technology; however, the strongest competitive pressures acting on USGN are from substitutes. USGN faces competition from many large firms in the industry including RJ Reynolds, Phillip Morris, Japan Tobacco, as well as from filter manufacturers like Filtrona and Wellstone. Many of these companies have internal R&D departments, whose responsibility is to determine ways of producing healthier cigarettes with the same tobacco taste. These large companies have a significant advantage in that many of them do not depend on outside firms for R&D, distribution and manufacturing. With that said, many of these competitors offer products that advertise similar benefits as the NanoFilterCX (although perhaps not to the same degree). It is further important to note that while USGN has initiated a patent to protect the NanoFilterCX from duplication, inimitability in our opinion remains relatively low based on the number of firms involved with nanotechnology research and the shear size of the industry and its main players. Additionally, market forces have demonstrated that there is little difference between the pricing structures of cigarettes offering higher filtration versus those that do not. In that regard, demand for the NanoFilterCX might be negatively impacted because manufacturers are likely to have little interest in paying additional cost for a product that is sold at the same price. With a market heavily dependent on tightly held complementary assets, a product maintaining low inimitability, and little brand recognition, USGN is at a competitive disadvantage with respect to its potential rivals and substitutes.
While the financials of USGN reveal that the company has yet to generate positive revenue from the NanoFilterCX, the company is hopeful that government intervention through agencies such as the FDA will create a bigger push for “safer” cigarette alternatives. In the coming years, the company also hopes to create an effective pull strategy by promoting and demonstrating the added benefits of the NanoFilterCX. In addition to government regulations and marketing, factors such as branding, manufacturing, and distribution will play critical roles in defining the future success of USGN’s NanoFilterCX.
Full Report: 144 KB pdf format. Send e-mail to the following address to request the full report.
Nanofilm Anti-Fog Windshield Wipes - June 2005
by Virginia Martin, Larry Schankin, Estelle Staine and Kevin Weyandt
Executive Summary
Nanofilm is one of the few profitable companies in the high-tech field of nanotechnology. Since 1985, they have developed and sold a variety of products pertaining to eyeglasses including anti-reflective coatings, scratch resistant coatings, UV coatings and anti-fog wipes.
With their success in applying nanotechnology to glass products, they have also developed Clarity Defender. This product is applied to the outside of a car’s windshield to repel water, ice and animal stains. They are also producing an extended product of their Clarity Fog Eliminator for the inside of windshields. This is the product for discussion in this paper.
Nanofilm has made excellent inroads into the eyeglass field with their various products. Now their move into the totally unrelated field of automotive products means they will encounter different obstacles. The automotive products field is highly competitive, however, for the need Nanofilm is trying to meet, there is only one serious competitor. Rain-X has products that are targeted for both the inside and outside of the windshield. Their Rain-X product for the outside of the windshield has proven itself to be a quality product. The Rain-X anti-fog for the inside of the windshield has gotten very mixed reviews. The Rain-X anti-fog product only lasts about three months where the Clarity Fog Eliminator for windshields will last a year. This is where Nanofilm can produce a product that can compete against this well-known brand.
As mentioned, Nanofilm’s move into the automotive products arena is going to be very difficult. It is dominated by big branding that requires serious marketing dollars to succeed. And that is where Rain-X stands. The product is manufactured by Pennzoil-Quaker State which is owned by the Shell Oil Company. Not only do they have deep pockets for marketing, but they also have quite a few successful products to build upon. This gives them power with after-market resellers for shelf space. For Nanofilm to try and overcome this by themselves would be extremely difficult and costly. Nanofilm needs to form a strategic alliance with a company that already has the complementary assets required to succeed in the automotive products field. One such product line identified is the Armor All suite of products. The Armor All line is owned by Clorox Company and thusly gives them substantial marketing power. Armor All also has the name recognition with a variety of high quality and successful automotive products. The line also doesn’t have products to compete against the Rain-X windshield offerings. If Nanofilm can form this alliance (either with the Armor All line or another similar line), they will be able to offer their superior product, at a competitive cost, and take advantage of the marketing and distribution channels inherent with the right choice of strategic partner.
With 700,000,000 cars worldwide, growing at 30,000,000 each year, the market for a quality anti-fog product is substantial. With capturing only 5% of the targeted market share in 2006 to 40% in 2011 with a strategic partner and aggressive marketing, revenues ranging from about $3,000,000 in 2006 to $46,000,000 in 2011, can be realized.
Full Report:
http://www.geocities.com/innovating_competitively/mtls/Nanofilm-Anti-Fog-Wipes.pdf
LiftPort Group -
July 2005
by Renate Hanby, Ahmmed Rahman, Janice Scherman & Brian Stirmers
Executive Summary
LiftPort Group is one of the few companies pursuing strength and endurance applications of carbon nanotubes in conjunction with a host of other industries and fields. Founded in 2003 by Michael Laine, LiftPort Group has set a goal of having a fully functional, operational and profitable space elevator by April 2018. The space elevator would not have gotten past the hypothetical if not for the discovery of carbon nanotubes in 1991. Carbon nanotubes possess the tensile strength necessary to span the proposed 62,000 mile ribbon, the main component of the space elevator.
Though there are skeptics, LiftPort is growing a following of supporters including those from NASA and other government agencies and groups. The idea, design and details of a space elevator are sound and are becoming widely accepted thanks to the efforts of designer Dr. Brad Edwards. The business plan, however, is attributed to Laine. LiftPort Group has the goal of building and operating a space elevator. Supporting that goal are five subsidiaries that each contribute to a portion of the elevator while attempting to become profitable in their own right – a boon to investors that want a quicker return than the 15-year timetable of the elevator itself. This is important since LiftPort needs approximately $10 billion to make the project work.
The space elevator will likely have no direct competition for several decades, but it will compete against many agencies and private companies that use rockets. LiftPort will attempt to send cargo into space for $400 per pound of cargo, far lower than the current estimated average of $10,000 per pound of cargo. This will make space available to entities for which it was previously unattainable, and it will alter the direction of research, technology and space exploration.
The first to benefit from such a price reduction will be the telecommunications industry, which must replace satellites every 8-12 years. Other industries will benefit as well, and new industries will arise from this endeavor, such as robotics and solar energy transfer systems. Michael Laine estimates an $800 million revenue stream from the space elevator alone and perhaps hundreds of millions more from the subsidiaries along the way. The space elevator could usher in a new way of life for humanity.
It won’t be an easy task, however, because LiftPort faces huge financial, legal, social, technical, political and security obstacles. According to Michael Laine, LiftPort must raise $4 billion through various means from the U.S. government for research, with the other $6 billion coming from private investors, from profit from the revenues of subsidiaries and eventually from the sale of the subsidiaries. Currently no laws exist covering the exploration of space, so LiftPort will have to attempt to influence Congress to pass favorable ones, especially those concerning airspace and salvage rights. The research must produce composites and technology that can be used successfully, or the space elevator will not be built, and more support will have to come from highly ranked political figures. Security is a major concern, and although the remote location of the space elevator makes a terrorist attack or an accident highly unlikely, nevertheless LiftPort will likely need to enlist the support of the U.S. military. Even if these concerns are addressed, unforeseen problems may still arise – many things can happen in 13 years.
If all the potential—and real—problems are worked out, and the price holds, LiftPort stands to gain a substantial portion of the market currently served by rockets and by government agencies. LiftPort will not stop with just one elevator, however. Economies of scale will make a second elevator cost just $1-$2 billion, and with the assistance of the first elevator it will take just two years to produce. Each successive elevator will potentially bring in more money and spread out the fixed costs, creating a larger profit for LiftPort and hopefully springing humanity to new heights. Building the first one will be the major challenge.
Full Report: 132 KB pdf format. Send e-mail to the following address to request the full report.
Fuel Cell
Technologies: Provider of Solid-Oxide Fuel Cells - July 2005
by Scott Bauer, Dorothy Henderson & Leslie Perry
Executive Summary
Solid-Oxide Fuel Cells are a new technology poised on the edge of commercialization. Fuel Cell Technologies is a pioneer in this nascent industry. There are a multitude of competitors within the industry. All have similar strengths and weaknesses and are operating at substantial losses at this time. The commercialization of the fuel cells has proven to be a difficult proposition. In addition to the pressures from direct competitors, suppliers in the industry hold substantial bargaining power. The special components necessary to manufacture the fuel cells offer suppliers a high degree of leverage. The buyers also have high bargaining power in this industry due to the many alternatives and substitutes available to them. The need for the competing firms to establish a customer base early in the life cycle of the product adds to the bargaining power of buyers in this market.
A comparison of cost structures between FCT and its competitors places FCT at the low end of the spectrum, but not far from the industry average. Any firm operating a research and development enterprise engages in a high risk, high potential gain venture. FCT is representative of this kind of high risk business model. FCT’s product base lacks inimitability and tightly controlled complementary assets, the combination of which results in a low probability for appropriating value.
FCT’s historical records tell very little about its business model. The majority of its revenues come from grant funding. FCT has a growing net loss. Their revenue is earned from research and development contracts. They incurred $4.3 million in costs on $2.1 million in revenue. A major expense to the firm is the tubular solid-oxide cells which account for approximately 50% of the SOFC unit cost. FCT should migrate to a different business model as it moves from a research and development firm to a product and innovation company.
In order to survive as a business entity FCT must increase awareness of its product offerings in the domestic and worldwide markets. FCT must end its reliance on a single supplier for the core component of the fuel cells. FCT should strategically position itself to acquire companies which will complement its product base.
Full Report: 147 KB pdf format. Send e-mail to the following address to request the full report.
Portable Fuel Cells
- July 2005
by Jeff Alexander, Jack Hu, Asim Ilyas, Ramesh Iyer & Milind Kulkarni
Executive Summary
This paper outlines a business model for a company that will manufacture portable fuel cells. The model will focus specifically on the cell phone market as a strategy for entry into the wider market of providing fuel cells for all personal, portable electronic devices. Portable fuel cells are a potential replacement of the traditional lithium-ion batteries used to power today's cell phones.
Cell phones have become power-hungry devices as providers expand services to include accessing to the internet, sending and receiving digital multimedia messages, GPS positioning, and even television reception. Traditional lithium-ion cell-phone batteries provide only up to 4 hours of talk time before recharging compared to a fuel cell charged cell phone, which could provide a continuous 20 hours of talk time. The long battery life of the fuel cell could provide superior customer value to users of cell phones and product differentiation for cell phone retailers and providers.
The innovative fuel cell technology shows lots of promise. However, there are many hurdles to overcome, including cost, technological efficiency, a widely available fuel supply, global competition, and competitive pricing before it can achieve rapid commercialization and become a replacement of traditional lithium-ion batteries. The firms that will enjoy success in the fuel cell market will have a business model that can quickly and efficiently overcome the hurdles mentioned above. Innovation and patent protection would be two of the key success factors for these companies. Successful fuel cell firms would develop their human capital to maintain a knowledge base that keeps them ahead of the competition on the learning curve. The company would invest heavily in research and development and hire the best scientists from across the world.
A portable fuel cell company would benefit by establishing strategic alliances with suppliers of fuel, suppliers of component parts, and potential customers like the cell phone manufacturers and service providers. The relationship with fuel suppliers is particularly import as the timing of entry into the market is critical. For portable fuel cells to be commercialized on large scale, the market for the fuel itself will have to be established.
Because it is a new technology, the first mover advantage will build brand value, allow price premiums for the value, and develop a revenue stream that can be reinvested into research and development and establishing economy of scale. Success in the cell phone market will establish the firm’s brand and provide a platform for expanding their product line to target other market segments like the military, health care, and consumer electronics; where there are many potential uses for fuel cells instead of batteries.
The bulk of the firm’s cost will be associated with its R&D functions. The firm will contract initial production to existing companies in Asia (India, China) which can produce the product at a lower cost by providing cheap labor and low cost infrastructure. It will be essential to maintain low production cost as most of the initial investment will be in research and development and retention of skilled engineers. The initial contribution margin would be low. Over time, the successful business model will increase market share through economies of scale thereby increasing the contribution margin to recover start up cost and achieve profitability.
Finally, the company will work with federal and local government to take advantage of grants and research assistance which will help to get the much needed capital for R&D and lower cost. There is also a chance that the new power source will be subject to regulation. A relationship with the government will allow the firm to align their strategy with potential legislative risk.
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Fuel Cells for Uninterruptible Power Supply - June 2005
by Rachel Crouse, Scott Teeters, Melissa Wasson
Executive Summary
Fuel cells are growing in popularity and gaining acceptance in the business world. They offer power supplies for many operations. One of which is to provide businesses with an uninterruptible power supply (UPS). As more electronics are introduced into the business world, the demand for a constant supply of electricity increases. Fuel cells can be installed to provide a power source that is 99.999% reliable without the negative environmental impacts such as noise and pollution as the current offerings. This will play a major role as changes in air quality and noise ordinances have an impact on the macro environment.
There is currently a market for the installation and maintenance of fuel cells as a UPS. The technology is new and the market is young, but has the potential to expand rapidly. As the number of businesses that require a constant supply of electricity increases, so will the market. Businesses within this market include hospitals, nursing homes, transportation, communication providers, retail outlets and emergency services. The aging population and proliferation of wireless communication providers makes these two industries especially attractive.
The financial projections for the venture are extremely promising. Initially, attempts to minimize costs are going to be imperative. Minimal human resources are being utilized to reduce costs and yet meet the needs of the customers and develop the market potential. Additional resources will be added in the future as demand dictates. Positive EBIT is projected for year two with earnings in excess of $1 million in year three. EBIT for the first year is projected to be negative. This is attributed to the fact that the market is new and will require a development period. This also provides the venture with the opportunity to gain experience as a first mover during the market development period and use that information to capture market share in the future. Detailed financial projections are represented in Appendices I-IV.
The team’s recommendation is to initiate implementation of establishing a business unit to install and service fuel cells as a UPS. The installation will provide one source of revenue while the maintenance contracts will provide another source of revenue. Since fuel cells are capital intensive, a leasing program will be established to make them more affordable and also to increase sales. The recommended type of fuel cell is the Proton Exchange Membrane Fuel Cell (PEM). This unit is offered in a variety of sizes to meet client’s needs and also operates on natural gas as well as hydrogen. This will maximize installation flexibility and broaden overall market potential. The areas of operations will be limited to Cincinnati, Dayton and Columbus at the present time. Currently, there are approximately 48,000 businesses within that area that could potentially use this type of product. Concentrating efforts geographically, will provide sales and installation crews the opportunity to obtain valuable experience and also provide the opportunity to capture a significant portion of the market share. As experience and knowledge improve, growth outside the Cincinnati, Dayton and Columbus Area will be pursued. This strategy will allow for future growth and increased earnings.
Full Report: 128 KB pdf format. Send e-mail to the following address to request the full report.
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