Attachment.ashx 5

Northeastern University’s Huntington Management Consulting

Team 9

Greg Milne | Shilpi Roongta | Andrew Rothbaum | Nick Sammut

HMC

Situation AnalysisEnvironmental factors affecting iRobot

Robotics Industry

iRobot

Situation Analysis Alternatives Recommendation Implementation Results

HMC


Robotics Industry

iRobot

Global Market Trends Geographic Distribution


Numerous industry applications

Sensitive to economic downturn– Industrial robots sold slumped 50% in 2009

Strong recovery during 2010– 52% increase in units– 58% increase in dollars

Market sales expected to grow next three years– Professional services robots growing 10 million– 12 million household units will be sold

HMC


Robotics Industry

iRobot

Global Market Trends Geographic Distribution


HMC

Home Care Robots:– Cleaning: homes, pools, gutters– 5 million sold worldwide– 30 national retailers; international retailers– 55% of revenues

Government and Industrial Robots:– Ground and maritime unmanned vehicles– Divisions of U.S. military– 46% of revenues

Situation AnalysisiRobot’s current market position

Robotics Industry

iRobot

Products R&D Financials IP


HMC

2/3 funded by contracts, 1/3 internally 47% of employees within R&D Three methods of research


Robotics Industry

iRobot



Year Spend

2005 8.17%

2006 9.01%

2007 6.86%

2008 5.71%

2009 4.94%

5 Year Average 6.94%

HMC


Robotics Industry

iRobot



2005 2009$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

iRobot Revenue Growth

Product Revenue

Contract Revenue

Declining revenues in 2009 Cost-cutting measures to stay profitable Cash position increased to $72 million Long-term debt reduced to $4 million

HMC


Robotics Industry

iRobot



U.S. Patents Pending U.S. Patents

International Patents

Pending Foreign Applications

0

20

40

60

80

100

120

140

160

iRobot Patents

Patents

Patents held begin to expire in 2019

HMC

2010 Performance

Successfully grew revenues 33% to $400 million

Addition of $40 million in cash to balance sheet– $110 million in reserves, cash-to-sales ratio of 27%

Expansion into new markets– New Markets: Chile, Mexico, Brazil

Sales office in Miami

Highlights of iRobot’s most recent year


HMCSituation Analysis Alternatives Recommendation Implementation Results

AlternativesEvaluating possible alternatives for iRobot

Decision Criteria

Promote Future Innovation

Leverage R&D Across All Business

Segments

Complement Core Competencies w/

Strategic Alliances


Alternatives

Decision Criteria

AlternativesPromote Future

Innovation


Segments


Strategic Alliances

Focusing On One Business Segment

Acquisition Within Health Care Robotics

Universal Growth Strategy

Evaluating possible alternatives for iRobot


Alternatives

Decision Criteria


Innovation


Segments


Strategic Alliances

XXFocusing On One Business Segment





Alternatives

Decision Criteria


Innovation


Segments


Strategic Alliances

XX

X

Focusing On One Business Segment





RecommendationSteps to iRobot’s continued success

Objective: Maximize value before patent expiration

Focus on creating awareness for iRobot capabilities

1

Objective: Complement core competencies with informal alliances

Leverage existing R&D across business segments

2

Objective: Continue to maintain relevance through innovation

Develop and foster new talent and product pipeline

3

HMC

Three Step ApproachEnhancing iRobot’s product and contract strategies

Maximize Patent Value

Awareness Campaign

International Presence

Customer Adoption

Leverage R&D

Mitigate Contract Risk

Create® for Military

Informal Alliances

Promote Innovation

Robotics Competition

Academic Research

weRobot Solutions


HMC



Awareness Campaign


Customer Adoption

Goal: Customer recognition of existing product line

Leverage R&D



Informal Alliances


Promote Innovation


Academic Research

weRobot Solutions


Maximize Patent Potential

High sunk costs in R&D

Pending patent expiration 2019

Issues Solutions

• Market consumer products heavily prior to patent expiration

• Complement social media with

demonstrations

iRobot needs product awareness, not competitors

Addressing patent issues moving forward


iRobot’s Target ConsumerCharacteristics of a Roomba customer

Customer Traits

Above average incomeMeticulously clean homes

Belief in technology

In Need Of:

ProofBrand trust

Source: Q3 2010 Earnings


iRobot’s Target ConsumerCharacteristics of a Roomba customer

Customer Traits

Above average incomeMeticulously clean homes

Belief in technology

In Need Of:

ProofBrand trust

Source: Q3 2010 Earnings

How is this accomplished?

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“Choose Your Dirt”

In-mall demonstrations of product effectiveness– NYC, Miami, Hong Kong, Santiago and London– Defined area in mall space with different flooring panels

Ex. wood, tile and carpet

Participants select material to cover the floor– Ex. dirt, sand and other synthetic materials

Sales reps provide information and answer questions

Ability to purchase Roomba after demonstration

Building brand loyalty through proof of concept


Cost• 2011: $22,400

Return• 2011 Sales: $64,000

Strategic Benefit• Creating believers

HMC

The Adoption Process

Step Goal Met?

Awareness

Interest

Evaluation and Trial

Adoption


Taking the consumer from start to finish

HMC



Awareness Campaign


Customer Adoption

Goal: Complement core competencies with informal strategic alliances

Leverage R&D



Informal Alliances


Promote Innovation


Academic Research

weRobot Solutions

HMC

Revenue Stream Analysis

“Want to continue to leverage R&D across business segments, as well as a create a 3rd party development

community” – 2009 iRobot 10K Report

How do you hedge against this contract risk?


Concentrated areas of revenues

40%

55%

5%

Revenues

Government ContractsHome RobotsOther


Market OpportunityBroad products result in greater prospects

Broad product

Semi-specialized product

Niche

As specialization increases…

…Market opportunity decreases

HMC

Develop customizable platform for defense businesses– Leverage iRobot Create for military applications

Use field-tested robotic hardware with open platform– With intention of creating informal strategic alliances

Sturdy and scalable base– Ability for 3rd party government contractors to build upon

Indirectly capture additional government funds


iRobot “Construct”A military grade, field tested version of the iRobot Create

HMC

Raytheon designs a variety of sensors– Ex. radioactive materials– Useful in current Japan crisis

iRobot robotic base for Raytheon’s sensory technology Both firms create defense products


Sample Informal Strategic AllianceSynergies between iRobot and similar government contractors

Cost Return Strategic Benefit

HMC



Awareness Campaign


Customer Adoption

Goal: Build product pipeline and develop “Blue Ocean” markets

Leverage R&D



Informal Alliances


Promote Innovation


Academic Research

iRobot SPIRAL Initiative

HMC

Future robotics consumption remains undefined Demand has to be created, and not competed over “robotics” technology has endless applications

CleanTech, Pharmaceutical, Automotive, Healthcare, Food & Beverage

Buyer value is promoted and raised by: Offering products the market has never seen Product positioning along the technology adoption curve


Blue Ocean StrategyCreating and supplying demand in unknown markets

Market InstigatorMarket

Potential

HMC

Future robotics consumption remains undefined Demand has to be created, and not competed over “robotics” technology has endless applications

CleanTech, Pharmaceutical, Automotive, Healthcare, Food & Beverage

Buyer value is promoted and raised by: Offering products the market has never seen Product positioning along the technology adoption curve


Blue Ocean StrategyCapitalizing on the two sides of new market growth

Market InstigatorMarket

Potential

iRobot

Develop additional markets

iRobot

Support new market leaders

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Host Annual Robotics Competition Building on the FIRST model Initial launch in two U.S. markets

Boston, Massachusetts & Cupertino, California

Engineering Research Center (ERC) Partnerships Industrial partner with ERC’s focused on robotics Identify


“iRobot Innovation Challenge”Promote and identify innovation within robotics technology

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Blue market demand is generated by industry incumbents Existing


Supporting New Market Demands Promote and identify innovation within robotics technology


XXXXXX

Cost Return Strategic Benefit

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Locations:– Massachusetts: MIT, Olin Engineering, UMass Amherst– California: CalTech, Stanford, UC Berkeley, UC Los Angeles

Marketing:– University-based programs utilizing social and traditional – Robotics clubs and engineering forums– Flyers and school newspapers– Guest speakers from iRobot and other industry members

HMC

Red Ocean Versus Blue Ocean Strategy

Red Ocean Strategy

Compete in existing market space

Beat the competition

Exploit existing demand

Make the value/cost tradeoff

Differentiation OR low cost

Blue Ocean Strategy

Create uncontested market spaces

Make the competition irrelevant

Create and capture new demand

Break the value/cost tradeoff

Differentiation AND low cost

HMC

Timeline

2011 2012 2013 2014 2015+

Choose Your Dirt

iRobot Construct

New Competitions

School Research

iRobot SPIRAL

Schedule of important events


SummaryResults of implementation

Initiative


iRobot Construct

Robotics Competition & SPIRAL

Impact

Awareness & Adoption

Hedging Contract Risk

Technological Leadership

Discussion

HMC

Q&AAppendix

Financials Strategy Implementation IDEA Box IDEA Box

Awareness Campaign

Cost-Return-Strategic Benefit

Market Capture Scenarios

XX

Why Chile?

Blue Ocean vs. Red Ocean

Why Not India or China?

SWOT Analysis

Choose Your Own Dirt

Risks

Competition

XX

Refer A Friend

Bottom Billion

Potential Joint Venture

Radioactive

Control-A-BOT

International Opportunities

XX

Team Biographies

HMC

Why Chile?

U.S. Chile Free Trade Agreement established 1/1/2004 Benefits

– Lower duty rates– Stronger protection and enforcement provisions for copyrights,

trademarks, patents, and trade secrets– Removal of restrictive regulatory barriers in place for US service

providers

• Distributor TD S.A.– 36 Falabella department stores

throughout Chile• 14 Falabellas within Santiago area• Upper-middle-income country with per

capita GNP PPP of $13,440• ~90% of Chileans own televisions• ~82% own cell phones

HMC

Blue Ocean vs. Red Ocean

Red Ocean Strategy Blue Ocean Strategy

Complete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make value/cost trade-off Break the value/cost trade-off

Source: http://www.roisbs.com/uploads/HBR_Blue_Ocean_Strategy_white_paper.pdf

iRobot Blue Ocean Strategy

iRobot Military Construct Create uncontested market space

Provide platform for competitors Make the competition irrelevant

Contracts that were unreachable Create and capture new demand

Become only robotic option Break the value/cost trade-off

HMC


• Enter 5 cities over three years– New York City; Santiago, Chile;

London; Hong Kong; Miami

• Rent large/open spaces in malls

• 2 sales personnel per location

• Month long demonstrations

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Refer a Friend

“Choose Your Dirt” promotion– Participants receive 10% off

Option to refer a friend – Enter name and email address to provide friends and family

with 10% coupon

E-mail blast includes direct message connecting e-mail receiver to the participant’s experience and coupon

Spread knowledge of the demonstration and product– Build brand awareness

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Projected Revenues for Awareness Campaign

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Why Not India or China?

China IP issues, lack of patent

protection Lack of infrastructure for

distribution Would need to create

demand Inherent cultural

differences

India• IP issues, lack of patent

protection• Lack of infrastructure for

distribution• Cultural differences

– Home care traditionally designated to lower class

• Would need to create demand

HMC

Product Line for “Bottom Billion”

Opportunity to introduce disruptive technology to “bottom billion” and cause systemic change

Can dedicate portion of resources to developing tech for economic segment– Increase efficiencies in common processes such as: collecting

water and firewood Lower margins, volume based

– Opportunity to partner with Micro-Finance institutions to provide small loans for purchasing power

Bottom billion proven to pay premiums for valuable products– Ex. Selco Solar Systems, Kickstart Technologies

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Risks of Implementation

Risks Mitigation

No traction from marketing efforts Launch in two cities; resort to traditional marketing

Development of Construct not feasible Look for opportunities to expand into military niche segments

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Cost-Return-Strategic Benefit


2011: $22,400

2011 Sales: $64,000

Creating Believers

iRobot Construct

Cost

Return

Strategic Benefit

Innovation Efforts

Cost

Return

Strategic Benefit

HMC

Joint Ventures

Partner with another small technology startup

iRobot would provide robotic end

Acquired company would provide supplemental technology.

Ex. A small sensory manufacturer for home or military applications

Innovation through acquisition

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Potential “Construct” Applications

An iRobot Construct robot built with radioactive sensors

Launch in highly radioactive areas in Japan

Explore unsafe areas that humans are unable to

Save lives while searching for survivors

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“Control-A-BOT” Mobile Application

Create a mobile application for the Roomba

Provide cleaning and runtime statistics– How many feet have been cleaned

since purchase– Battery meter

Allow users to change settings via mobile application

Control-A-BOT

HMC

Team Biographies

Gregory Milne• Concentrations:

– Finance, Accounting• Work Experience:

– Insurance, Computer Security

Shilpi Roongta• Concentrations:

– Marketing, Finance, Social Entrepreneurship

• Work Experience: – Insurance, Microfinance

Andrew Rothbaum• Concentrations:

– Finance, Accounting• Work Experience:

– Private Equity, Venture Capital

Nicholas Sammut• Concentrations:

– Finance, Marketing• Work Experience:

– Asset Management, Venture Capital, Investment Banking

HMC

International Opportunities

THALES Corporation (France) OHB Corporation (Germany)

ITAR Regulation– Sell goods via partnerships or strategic alliances– Ex. Lockheed Martin has ITAR approval for a certain product

Foreign DefenseContractors

HMC

Market Capture Scenarios

Market Share Revenue

5.00% $200,000,000

5.10% $204,000,000

5.20% $208,000,000

5.30% $212,000,000

5.40% $216,000,000

5.50% $220,000,000

6.00% $240,000,000

7.00% $280,000,000

8.00% $320,000,000

9.00% $360,000,000

10.00% $400,000,000

Assumed capture of $4 Billion vacuum market of $200 or less

HMC

Competition

Company Competes with

AB Electrolux Roomba vacuum cleaner

Alfred Kärcher GmbH & Co. Roomba vacuum cleaner

Samsung Electronics Roomba vacuum cleaner

QinetiQ Unmanned vehicles (PackBot)

Lockheed Martin Unmanned vehicles (PackBot)

HMC

SWOT Analysis

Strengths• Large R&D budget• Existing alliances • Healthy financial positioning• Long-term manufacturing contract• Government contracts• U.S. market penetration

Weaknesses• Limited visibility• Patents expiring in less than 10 years• Dependent on 3rd party suppliers• Highly dependent on government• Sensitive to economic climate

Opportunities• Expand marketing efforts• Entry into new markets• Product expansion• Lower-tiered / priced goods• International presence

Threats• Competitors have more money and knowledge in consumer space• Other companies copying IP• Reduced government spending• Break-up / non-renewing alliances• Employees leaving

Attachment.ashx 5

Technology

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