Business Case Innovation Business Series

1. Business CaseInnovation Business Series Your Partner for Ventures in Science and Technology The U.S. Civilian Research and Development Foundation (CRDF) Industry Partner Development Program (PDP) (c) 2005, US Civilian R&D Foundation

2. Business Communication Mistakes • Talking first (in meeting) • Too much information • Addressing the wrong issues • Political statements • Irrelevant commentary • Personal passionate issues (c) 2005, US Civilian R&D Foundation

3. Primary Purpose? • Inform? • Explain? • Reference? • Demonstrate? • Convince? • Encourage Action (c) 2005, US Civilian R&D Foundation

4. What Action & Who? What action? • Schedule a meeting • Convince superior • Review a demo • Explore a business relationship Who should take action? • Decision-maker • Trusted advisor • Financial officer Why? • They need (not want) (c) 2005, US Civilian R&D Foundation

5. Determine what they NEED? • Listen, don’t talk • Ask questions: • Primary business goal? • Current situation? • Next steps? • Top Challenges? • Where technology might help? (c) 2005, US Civilian R&D Foundation

6. Business Goals versus Desires • Test business goals: • Ask them to define their success? What measures? • Test their answers: • Successful? if ‘a’, but not ‘b’? • Determine most important and realistic goals • Customize your pitch (c) 2005, US Civilian R&D Foundation

7. Determine Decision Makers • Who makes business decisions? • Who takes actions? • Who makes financial decisions? • Who makes technical recommendations? • What is the relationship between the individuals? • What is the last decision and how was that made? (c) 2005, US Civilian R&D Foundation

8. Ready to Start? (Checklist) • What they need • How you can help • Who is the decision-maker (action taker/target) • What action you desire • What you must convince • Your argument (c) 2005, US Civilian R&D Foundation

9. Business Argument • Credibility • Who are you • What are you there to do • Why they should care • The issue (confirm?) • Solution (summary) • Key benefits • Competitive position • Achievable results • What you need (c) 2005, US Civilian R&D Foundation

10. Forms of Argument Needed • Statement (Pitch) • 5 to 30 seconds • Presentation • 5 to 10 slides • Proposal • 1 to 2 pages • Appendix in RARE cases (c) 2005, US Civilian R&D Foundation

11. Target’s Language and Mindset • Terms • Business advantages • Business costs • Goals • Lower costs • Higher profit margin • More sales • Better market position • Lower product returns • Lower customer service costs • Etc. (c) 2005, US Civilian R&D Foundation

12. Presentation (1 slide each) Title slide Business issue Technical issue Technical solution Summary: key aspects Business benefits Market & competitors ROI (time and money) Next step Proposal Fact box Contact info, project name, proposition, funding, schedule, return Proposition statement Diagrams, charts, tables Sections: Proposition Issue and solution Market & competition Sales & distribution Management plan Projections ROI (time and money) Presentation vs. Proposal (c) 2005, US Civilian R&D Foundation

13. Length & Style • Short and direct as possible • Focus on 1 key aspect • One good argument is stronger than several good arguments • Each section should NOT be equal length • Fewer words make a bigger impact • Stay away from details and supporting information • Use quotes and convincing statistics • Use common language (c) 2005, US Civilian R&D Foundation

14. Examples - Proposition • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • ROI • Next step With all competitors meeting standards, the product has become a commodity. Using a new standards-conforming algorithm, already implemented on a common microprocessor, twice as much can be processed on the same hardware. As a result, manufacturers can produce the same product at a net 37% increase in margin or double the performance at the same price. (c) 2005, US Civilian R&D Foundation

15. Examples - Market • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • ROI • Next step Structure, players, market drivers, dynamic, opportunities, threats: The market for the hardware is dominated by manufacturers and integrators . Manufacturers produce their own cards and Integrators purchase cards from any of the top 9 card suppliers. The market driver is price... (c) 2005, US Civilian R&D Foundation

16. Examples - Competition • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • ROI • Next step DX Group, SignalCorp, and Motorola are also developing new algorithms. DX Group’s solution requires a more expensive microprocessor. The SignalCorp algorithm has not yet been implemented in real-time. The Motorola solution saves only 39%, short of the 50% required to reduce hardware costs. • Common Mistake: • No competitors • “Only solution” (c) 2005, US Civilian R&D Foundation

17. Examples – Return on Investment • Business issue • Technical issue • Technical solution • Business benefits • Market & Competitors • ROI • Next step The total cost of labor and material is $1,500. At the current levels of production, the profit margin increases by $100 per unit for a net increase of $7,500 per year. That’s a 500% return on investment in the first year only. (c) 2005, US Civilian R&D Foundation

18. Examples – Next Step • Business issue • Technical issue • Technical solution • Business benefits • Market & Competitors • ROI • Next step Meetings: (Presentation) • Engineering Manager – Demonstration • Finance Manager – Economic case • Business Manager – Project definition Actions: (Proposal) (c) 2005, US Civilian R&D Foundation

19. Examples – Sales & Distribution(Business Plan Only) • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • Sales & distribution • Projections • Management Plan • ROI • Next step • * Business Plan only Direct Sales, Partners We plan to sell directly to manufacturers. There are only 15 sizeable manufacturers and our technology is needed enough to gain the attention of their R&D managers. Integrators do not purchase technology and card vendors are not structured to work with scientists. Our chip partners will help us get meetings with the R&D managers at each Manufacturer. (c) 2005, US Civilian R&D Foundation

20. Examples – Projections(Business Plan Only) • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • Sales & distribution • Projections • Management Plan • ROI • Next step • * Business Plan only Bottom-up Estimates: We plan to close Aldec, Marzed, and Pixel, or similar manufacturers in the first 9 months. Each quarter thereafter, we expect to close deals with one more manufacturer using two sales people… (c) 2005, US Civilian R&D Foundation

21. Examples – Projections (Mistakes)(Business Plan Only) • Business issue • Technical issue • Technical solution • Business benefits • Market & competitors • Sales & distribution • Projections • Management Plan • ROI • Next step • * Business Plan only Top Down: (Mistake) The market for the software is $10M and we will sell 5% of the market or $500,000. (c) 2005, US Civilian R&D Foundation

22. Business Statement (Pitch) • My organization has developed a better solution for manufacturers. • Partnered with Brand Corporation, my team has produced components that reduce the cost by 50%. • We plan to direct sell the solution to manufacturers. • I am a scientist with the Institute of Semiconductor Physics in Baku, Azerbaijan. • We have interested customers and are looking for funding to produce the first 10 units. • We can provide a 5 times return in 18 months. (c) 2005, US Civilian R&D Foundation

23. Q&A: Business Case (c) 2005, US Civilian R&D Foundation

24. CRDF Contact Information U.S. Civilian Research & Development Foundation (CRDF) 1530 Wilson Boulevard, Suite 300 Arlington, VA 22209 USA Emails info@crdf.org General CRDF enquiries pdp@crdf.org Partner Development Program (business questions) tgp@crdf.org Travel Grant Program fstm@crdf.org First Steps to Market Grants (new partnerships) nstm@crdf.org Next Steps to Market Grants (commercial partnerships) Website: www.crdf.org Tel: +1 (703) 526-9720 (c) 2005, US Civilian R&D Foundation