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Socratix Case Study Competition | Strategy Presentation

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Socratix Case Study Competition | Strategy Presentation

  1. 1. LIMITLESS POTENTIAL Team No. 94
  2. 2. “To expand humanity’s potential by offering new abilities through avatars” Avatarin – Executive Summary OPEN INNOVATION Fostering creativity to solve business problems & creation of an ecosystem for innovation through external stakeholders KEY PARTNERS Oita KEY INITIATIVES WINDOW OF OPPORTUNITY COVID-19 accelerated a change in mind-set, creating overfull demand 5.0 SOCIETY LIFE’S BIGGER PURPOSE Team No. 94
  3. 3. 1953 AVATARIN – THE JOURNEY SO FAR 2020 ANA founded as an aviation start-up. Becomes Japan’s largest airline by 1980 Avatarin spun-off as a separate entity after receiving go-ahead from board In-house Development & Launch of flagship robot, newme 2019 2018 Launch of ANA Avatar XPRIZE & creation of ecosystem through collaboration with technology partners 2016 Participation in XPRIZE Visioneering Summit & conceptualizing vision of Robotic Avatars 2010 Akira and Kevin meet each other & gravitate towards the common interest of solving complex global problems Team No. 94
  4. 4. Write your paragraph here Weakness SWOT Analysis O T S W ✓ Open Innovation ✓ Strategic Partnerships ✓ Strong Brand Equity ✓ Huge war chest ✓ First Mover Advantage ✓ Primitive & basic version of Robot ✓ Lack of skilled talent pool ✓ Changing dynamics of human interaction ✓ Govt. support ✓ Favourable industry environment ✓ Data privacy & Cyber security risks ✓ Threat of product imitation by competitors n PESTEL Analysis ✓ Policy Support from Govt. ✓ Society 5.0 ✓ Developed economy with High disposable income (24th in per capita) ✓ Ageing population & affinity for technology adoption ✓ High internet penetration (92%) ✓ Hub for Robotics ✓ Alignment with SDG goals ✓ Strong cybersecurity laws All the macro-economic factors strongly favour Avatarin’s vision Team No. 94
  5. 5. Question 04 (Click on the button to navigate to a question) ? ? ? Q1 Entrepreneurial Culture at ANA Q2 Avatarin spin-off & soft launch Q3 Business Model & Business Plan Q4 Supply-side Priorities & Issues Team No. 94
  6. 6. ANA - Harnessing Entrepreneurial Spirit VRIO Analysis of Entrepreneurial Culture at ANA Inimitable as it’s far reaching and involves both internal & external stakeholders Valuable since it generates new ideas and opens doors for new business propositions Rare since employees are given creative freedom to think outside their core business verticals Organised as they have proper structures that are supportive to nurture new ideas Source of Sustained Competitive Advantage ❖ Entrepreneurship & Innovation was looked at from an ecosystem perspective, rather than an in-house initiative ❖ New ideas nurtured from outside the company were valued in equal regard as the internally generated ones ❖ Various employee-led initiatives enabled employees to think out of the box, which was ably supported by management Team No. 94
  7. 7. Virtual Hollywood Council ✓ A conducive consortium that creates synergies by utilizing the diversity & learning from each other ✓ Fostering an ecosystem for companies that are committed towards innovation Virtual Hollywood Book, launched by the Council is a repository of various proposals developed by ANA Group employees and the inside scoop behind them Key Takeaways ✓ Employee led initiative under which employees with shared passions collaborate on projects that extend beyond their core business ✓ Participation from 1600+ ANA group employees creating more than 180 proposals ✓ Identifying and nurturing the potential of human resources ✓ Promoting group cohesiveness & open communication ✓ Leverage strengths & diversity of different industries & individuals ✓ Fostering a culture that prioritises the group’s collective vision ✓ Driving innovation mindset among employees Flower Jet Drone Project Community Development at a monastery Team No. 94
  8. 8. Key Takeaways ✓ Subsidised airfares for social entrepreneurs who strive to solve global problems ✓ Acts as a catalyst for the general public to contribute towards a social cause by either donating flying miles or sponsoring part of their air tickets to Changemakers PARTNERSHIPS Collaborated with Ashoka, an NGO that champions the cause for social entrepreneurs, with presence in more than 89 countries Supports Endeavor, a global NPO focussed on employment creation and economic development of communities Key Takeaways ✓ Nurtures entrepreneurial spirit at ANA through its commitment to support entrepreneurship in the external environment ✓ Encourages employees to actively involve in solving social problems and create a difference to the society ✓ Promotes entrepreneurship by providing a platform to showcase and commercialize projects ✓ Brought about a cultural shift by changing the perception towards raising funds for new ideas and ventures ✓ Crowdsourcing platform aimed at fostering ideas of entrepreneurs ✓ Provide a common platform to bring investors and entrepreneurs together ✓ Provide a go-to-market strategy for entrepreneurs to take their ideas to the customers Team No. 94
  9. 9. Analysis of Current Culture Gap between Corporate & Operational Levels Pigeon-holing operational personnel as just implementers and discouraging their ideas What could have been done better? - Conduct town hall meetings to engage and connect with employees across domains to open up lines of communication Talent Management & Career Progression Non-deployment of personnel at right positions, resulting in lack of motivation & dissatisfied employees What could have been done better? - Take employees’ aspirations into account and chart career plans to facilitate their professional development No Fear of Failure (BlueWing 2.0) Viewing failures as an opportunity to learn and signalling a no- blame culture Promoting Disruptive Innovation Nurturing ideas based on merit, without fear of disrupting the core business Creative Freedom Liberty to think out of the box and encouraging people to pursue their passions Playing the long game Focussing on long-term vision even if it means not achieving short term payoffs Significance of Human Touch Overcoming cultural and geographical barriers through in-person meetings and open communication Top Management’s backing Key personnel in upper echelons who imbibe and support entrepreneurial spirit Team No. 94
  10. 10. TIME RATE OF ADOPTION INTRO GROWTH MATURITY DECLINE Law of Leadership It’s better to be first than it is to be better 22 IMMUTABLE LAWS OF MARKETING ADOPTION CURVE OF AVATAR ROBOTS Normal Curve Accelerated adoption due to Covid-19 ✓ It’s much easier to get into the mind first than to convince the customer about a better product that is to be launched in future ✓ In today’s VUCA world, timing is of critical importance. Your first could be too late ✓ Covid-19 changed the way of living, accelerated a change in mindset & ignited public interest to adopt avatar robots ✓ With the market primed for acceptance, it is important for the product to hit the market ASAP Team No. 94
  11. 11. Product & Technology Leadership Control of Value Chain ❖ Forge & secure long-term strategic partnerships with component manufacturers & assemblers ❖ Establish robust relationships with players at all levels of value chain ❖ Identification of new use cases through feedback from market Leveraging ready customer base ❖ Become a name to reckon with in the market, which helps draw talent in fields like Haptics, AI and VR ❖ Collaborate with Govt. on regulations & favourable policy making ❖ Tap the overfull demand stemming from change in mindset of customers ❖ Evaluation of product-market fit to enable better product iteration ❖ Creation of technological moat by developing & iterating superior product offerings ❖ Gain head start in manufacturing & achieve economies of scale Why Soft Launch? Team No. 94
  12. 12. Opportunities Challenges & Mitigation Strategies Avatarin – Spin off Focused talent with technical expertise to innovate & having a formal structure Dedicated Resources Agile Decision Making Avatarin is free from corporate bureaucracy that inhibits speed & innovation, enabling faster value creation Fund Mobilisation Since avatars are the core value proposition, they gain access to unconstrained budgets for R&D and innovation Nil Agency Costs Corporate Identity Eliminates conflicting interests between shareholder & mgmt., resulting in efficient utilisation of time & money Unique identity that resonates with Avatarin’s vision; non-interference from ANA’s identity as a conservative company Investors will get a clear view of business operations through KPIs, which will attract investment LACK OF DEDICATED PERSONNEL Since ANA didn’t have expertise in the field Robotics, there is a dearth of talent & technical expertise in Avatarin Mitigation - Build talent pool immediately in line with the vision & mission of Avatarin to plug knowledge & skill gap ABSENCE OF DEFINED KRAs Since the market is in its nascent stages, employees may not know their KRAs, which can result in loss of productivity & morale Mitigation – Clearly communicate roles & deliverables with employees and take periodic performance reviews Distinguished Reporting Team No. 94 Avatarin has to freshly draft major contractual obligations like vendor contract, support agreement etc. Mitigation – Employ a legal firm to revise and draft contracts & ensure that agreements are in place RESTRUCTURING OF CONTRACTS
  13. 13. Business Model Canvas Channels Value Proposition Cost Structure Revenue Streams Customer Segments Organisations that use newme robots for internal business purposes Businesses that sell products/experiences using newme robots Customers seeking experiences through avatarin platform Enabling humanity to overcome barriers of time, distance & physical limitations Establish an ecosystem that democratises human skills to solve societal problems Mobility platform that enables humans to interact seamlessly in a remote environment through robotic avatars Create additional revenue streams for businesses by opening access to geographically dispersed customer groups From Business owners – Platform fee, monthly fee & service fee From customers – Fees to access remote experience Connect with businesses/organisations through newme robots Engage with customers though avatarin platform Customer Relationships Periodic servicing of newme robots Customer support that enables navigation of platform Key Activities Fostering innovation through a collaborative, trust-based model Production of newme robots Establish and maintain supply chain & distribution network Key Resources Leadership that facilitates open innovation Huge war chest from ANA Employees Strong relationship with industry players Key Partners JAXA XPRIZE Oita Prefecture Consortium Partners Japanese Govt. Robot manufacturers Raw material suppliers Robot manufacturing Research & Development Personnel Costs Platform service & maintenance costs Team No. 94
  14. 14. Lower Entry Cost ✓ Better affordability encourages quicker adoption by customers ✓ Expenditure shift from capex to opex enables better acceptance by businesses ✓ Efficient management of variable demand & seasonality ✓ Avoidance of sunk costs Scalability Optimum Resource Utilization ✓ Reduction of idle time associated with ownership ✓ Optimum resource deployment in alignment with Society 5.0 and SDG goals Ease of Maintenance ✓ Frees the customer from the hassles of maintenance ✓ Customers can avail the benefits without burdens like insurance ✓ With rapid pace of tech innovation, service model eliminates possibility of owners getting locked up with outdated version of robots Avoidance of Tech Obsolescence Advantages of Service based Model currently Team No. 94
  15. 15. ✓ Future iterations of robots will have superior technological capabilities, resulting in rise of monthly lease rentals from the current value of ¥ 69800* ✓ As people become well versed with using avatar robots, they become ubiquitous, resulting in more efficient utilisation (i.e., Reduction in Idle Time) ✓ Taking the aforementioned factors into account, in addition to service model, ownership model should also be introduced from 2026 ✓ Ownership model will enable addressing the fixed demand of businesses ✓ 2026 emerges as a pivotal year owing to the following factors ▪ Sufficient time for development of fully functional product ▪ Ramping-up manufacturing capabilities to achieve economies of scale ▪ High adoption rate by customers Parameter Value Monthly Lease 2026 (¥) 1,20,000 Annual Lease 2026 (¥) 14,40,000 Usage period (Years) 4 Discount Rate** 5.72% Present Value Annuity Factor 3.49 Ownership Threshold (¥) 50,21,911 Analysis of Ownership Threshold in 2026 ✓ Lease value in 2026 arrived at by factoring product development, economies of scale, inflation & adoption rates of avatar robots ✓ If selling price is greater than Ownership Threshold, customers are better-off paying the lease and embracing the already existing service model ✓ If selling price is lesser than Ownership Threshold, opting for ownership will be beneficial to customers ✓ From a customer’s perspective, initially they can go for service model to test the waters. Once they realise the benefits, they can explore ownership as a long term option *Avatarin Website ** https://people.stern.nyu.edu/adamodar/New_Home_Page/datafile/wacc.htm Proposed Changes in Business Model Changes in Business Landscape in Future Team No. 94
  16. 16. ✓ A typical zoo in Japan will have two seasonality where there will be surge in footfalls ➢ Summer vacation (Jul – mid Sep) ➢ Year end holiday season (Dec – Jan) ✓ Companies should adopt ownership model to address fixed demand & use service model to cater to seasonal peaks in demand ✓ This hybrid model will enable businesses to scale up without significant capital outlay, addressing scalability issues 0 2 4 6 8 10 12 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec No. of visitors (in thousands) Monthly Footfall Pattern of a Zoo in Japan Fixed Demand Seasonal Peaks n Service Model & Ownership Model - Coexistence Stable yearly demand for Newme (nos.) 4 Variable demand for Newme (nos.) for 4 months 6 Total 10 Useful life (years) 4 Lease rental in 2026 (¥) 1,20,000 Proposed Selling Price of Avatar (¥) 44,00,000 Particulars Service Model Ownership Model Hybrid model Total Annual lease (¥) 86,40,000 0 28,80,000 PV annuity factor @ interest rate of 5.72% 3.49 - 3.49 Total lease outflow (¥) 3,01,31,469 1,00,43,823 Total Purchase value (¥) 4,40,00,000 1,76,00,000 Cash outflow (¥) 3,01,31,469 4,40,00,000 2,76,43,823 Excess outflow vis-à-vis Hybrid model (¥) 24,87,646 1,63,56,177 ✓ For businesses with seasonality, Hybrid model is most optimum in terms of cash flow management Team No. 94
  17. 17. - 5 Year Business Plan 2022 2027 2025 2026 2023 2024 ❖ Talent Acquisition ❖ Expand category of experiences ❖ Series A Funding ❖ Ramp-up Manufacturing Capabilities ❖ Business Development ❖ Establish Distribution Network ❖ Expansion at global level ❖ Introduce Ownership Model ❖ Ecosystem creation Technology & Product Development [R&D] PHASE I - GENESIS PHASE II - PROPULSION PHASE III - TRANSCENDENCE Team No. 94
  18. 18. ❖ Perpetual process to keep up pace with the market’s demands ❖ Invest heavily in R&D to become a technology leader & parallelly reduce costs through Economies of Scale ❖ Collaborate with industry players to gain expertise & improve capabilities ❖ Build a team of technically qualified personnel across domains to support the steep technology curve ❖ Defined Organogram by creation of functional blueprint, reporting structure & clarity of roles Talent Acquisition ❖ Raise capital to build infrastructure & capabilities ❖ Approach VCs for Series-A funding Raise Funding ❖ Identify new use cases by taking feedback from the market and through brainstorming ❖ Validate the use case and build service offerings around them Expand Category of Experiences PHASE I - GENESIS Technology & Product Development [R&D] Team No. 94
  19. 19. ❖ Identify suitable international markets to introduce the offering and improve global footprint ❖ Target developed countries initially where infrastructure is robust and tech adoption rate is high ❖As avatars become technically advanced and EOS is achieved , introduce ownership model to co-exist with service model ❖This opens up new revenue streams PHASE III – TRANSCENDENCE Global Expansion Introduce Ownership Model Ecosystem Creation ❖ Promote an all-inclusive society through Avatars with focus on collective benefits to communities ❖ Partner with Govt. bodies to develop Avatar powered smart cities ❖ Align Avatar’s vision with Society 5.0 and ESG goals through resolution of social problems PHASE II - PROPULSION ❖ As customer base increases, establish distribution network to have wider reach ❖ Improve service levels & reduce lead time through efficient distribution Distribution Network ❖ Identify and enlist new clients & businesses to provide a plethora of options for customers to choose from ❖ Enlisting new vendors creates positive network effects to draw more customers Biz Development ❖ Develop technology in-house and forge partnership with third-party assemblers ❖ Ramp-up manufacturing capacity to match demand & achieve economies of scale Ramp-up Manufacturing Capabilities Team No. 94
  20. 20. ✓ Monthly lease fee increases every year due to better iteration of robots made available with superior capabilities ✓ The no. of robots deployed at each location witness a steady growth owing to increased demand ✓ Platform fee assumed to be 10% of monthly lease rental Particulars Key 2022 2023 2024 2025 2026 2027 Listed Experiences (nos.) A 100 280 650 2500 3300 4500 Business Establishments (nos.) B 250 500 1250 2300 3800 5800 Avg. Fee Per Experience (¥) C 3100 3400 3700 4000 4400 4800 Avg. Time/experience/robot (in mins) D 35 40 45 60 65 70 Utilisation Factor E 45% 50% 65% 65% 70% 75% Monthly Lease Fee (¥) F 69800 73988 78500 84700 120587 125410 Approx. Unit Sale Price (¥) G 0 0 0 0 5000000 5000000 Avg. Shopping Bill (¥) H 5000 5500 6050 6600 7300 7500 Robots at Each Location (nos.) I 3 5 8 10 15 18 Monthly Transactions/Location/robot (nos.) J 50 80 120 150 180 200 Avatars sold (%) K - - - - 10% 20% Avatarin – Revenue Projections (contd..) Premises & Assumptions ✓ Listed experience nos. surge in 2025 due to international expansion ✓ With more experiences being added, the avg. time per experience steadily increases due to higher levels of engagement ✓ With new use cases being identified, the utilisation factor of robots increases every year ✓ Monthly lease fee for 2022 Source - Avatarin website Team No. 94
  21. 21. Lease model Annual Lease fee (A+B)*F*I*(100-K)*12 879 3,462 14,305 48,788 1,38,699 2,23,210 Ownership model Sale realisation value (A+B)*G*I*K 0 0 0 0 53,250 1,85,400 Platform Fee (Assumption) Increase in (A+B)*F*10% 2 3 8 24 28 40 Service Fee* A*C*60/D*10*E*I*20% 1 7 33 130 281 500 Transaction Fee (Shopping)* B*H*I*J*12*15% 338 1,980 13,068 40,986 1,34,816 2,81,880 End User Service Fee* A*C*E*I*365*(60/D*10)*10% 262 1,303 6,086 23,725 51,367 91,229 TOTAL (X) 1,483 6,756 33,502 1,13,643 3,78,442 7,82,259 Business Owners Revenue (in million ¥) No. of Institutions L 50 200 500 1200 2300 3500 No. of Robots M 2 3 4 6 8 10 Monthly Lease N 69,800 65,612 61,675 57,974 1,20,587 1,20,587 Annual Lease fee L*M*N*12*(100-K) 83.76 532.7 1,882.3 7,318.2 23,964 42,138 Sale realisation value L*M*G*K 0 0 0 0 9200 35000 Platform fee Increase in L*F*10% 0.4 1.1 2.4 5.9 13.3 15 TOTAL (Y) 84.1 533.8 1,884.6 7,324.1 33,176.3 77,153 Institutions Revenue (in million ¥) TOTAL (Z) 0.00 2.63 4.41 9.84 17.62 29.99 Year 2022 2023 2024 2025 2026 2027 Individuals** Revenue (in million ¥) Total Revenue for the Year (X+Y+Z) 1,567 7,292 35,391 1,20,988 4,11,636 8,59,443 *https://biz.avatarin.com/plan/ **Based on average number of bookings, usage time and lease rentals charged to individuals Segment wise Projection Team No. 94
  22. 22. Hardware Components Sensors Gears Motors Embedded & Comm. chips Processors Exoskeleton Software Components Cloud Storage Platform Operating Systems Machine Learning Algorithms Other Specialised Software Services Logistics Servicing & Maintenance Software Updates Manufacturing Value Chain Stamping Assembly Welding Team No. 94
  23. 23. Risks Supply Side Priorities & Issues I) Component Sourcing & Manufacturing ✓ Ensure sufficient availability of hardware components & ramp-up software capabilities ✓ Enter into long term purchase contracts with Chinese companies to source raw materials & components ✓ China produces 5.6 MMT of Silicon, accounting for 68% of global production (Source – Statista) ✓ Source components from Shenzhen province to Tokyo ✓ Global semiconductor shortage exacerbated by Covid lockdowns Mitigation Strategy ✓ Most companies rely on short-term forecast driven and Just-In-Time delivery models for sourcing chips ✓ Avatarin should do away with such inefficient models and enter into long terms purchase agreements to hedge against such risks Sea Route from Shenzhen to Tokyo Team No. 94 ✓ Establish back-end IT infrastructure (Servers, CRM & operating system) & cloud storage to support the burgeoning demand ✓ Employ cybersecurity firms to develop state-of-the-art network security since large volume of sensitive data is exchanged
  24. 24. Supply Side Priorities & Issues III) Product Innovation II) Establish Distribution network ✓ As adoption increases, it becomes difficult for Avatarin to manage the huge customer base ✓ Appoint distributors to take care of servicing aspect of value chain & efficient management of credit IV) Creation of ecosystem ✓ Efficient utilization of Avatar robots is of prime importance to cater to the huge customer base ✓ Deploy Predictive Algorithms to gain insights about usage time & pattern of avatar robots ✓ This enables optimum resource utilisation, thus creating a shared Avatar ecosystem ✓ Better utilisation also leads to energy conservation, thus aligning business operations with UN’s SDG goals ✓ Develop all-purpose Avatar bots to serve multiple use cases ✓ With rapid pace of innovation, product obsolescence is an area of concern ✓ Can be thwarted by taking a proactive approach and keeping a tab on the pulse of the market Gantt Chart showing utilisation of Avatar robots Team No. 94
  25. 25. Team No. 94 Team No. 94 ありがとうございます Thank You

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