Back Bay Battery Strategy
1. What was your strategy going into the simulation?
Market data analysis stressed two main facts: i) the promising potential of ultracapacitors and ii) surfacing mature market conditions for conventional NiMH batteries. The first piece of information implied that it would be critical to beat the competition and be the first company to offer customers the features and benefits they demanded in the new product. That would have allowed Back Bay to gain a competitive advantage and keep existing customers (that could easily switch from the company’s conventional batteries to the company’s ultracapacitors) as well as attract new ones. The second piece of information implied that demand for my core business products would soon start to decline and that a price war would be inevitable. It became clear to me that to sustain growth for Back Bay I had to focus my R&D efforts on innovative products as demand for NiMH batteries would slowly drift away towards the adoption of new technologies. From a financial standpoint, it was important to do it while my NiMH business was highly profitable so that I could use the cash it generated to fund innovation in the ultracapacitors line. For these reasons, my strategy was to invest heavily in:
• Process improvement in the core business of NiMH batteries. Being conventional batteries a commodity, pricing them as low as possible while still being profitable was my objective. I wanted to find the most efficient way to produce them so I could lower prices and increase market share through volume increases—compensating these two effects would allow me to maintain cash flow generation at previous levels. Also, most criteria demanded from these batteries were already met and customers were happy with the current performance so I felt there was no need to invest heavily in improving them.
• Ultracapacitors’ Energy Density. The level of energy density seemed to be the most important feature demanded by customers that ultracapacitor
Market data analysis stressed two main facts: i) the promising potential of ultracapacitors and ii) surfacing mature market conditions for conventional NiMH batteries. The first piece of information implied that it would be critical to beat the competition and be the first company to offer customers the features and benefits they demanded in the new product. That would have allowed Back Bay to gain a competitive advantage and keep existing customers (that could easily switch from the company’s conventional batteries to the company’s ultracapacitors) as well as attract new ones. The second piece of information implied that demand for my core business products would soon start to decline and that a price war would be inevitable. It became clear to me that to sustain growth for Back Bay I had to focus my R&D efforts on innovative products as demand for NiMH batteries would slowly drift away towards the adoption of new technologies. From a financial standpoint, it was important to do it while my NiMH business was highly profitable so that I could use the cash it generated to fund innovation in the ultracapacitors line. For these reasons, my strategy was to invest heavily in:
• Process improvement in the core business of NiMH batteries. Being conventional batteries a commodity, pricing them as low as possible while still being profitable was my objective. I wanted to find the most efficient way to produce them so I could lower prices and increase market share through volume increases—compensating these two effects would allow me to maintain cash flow generation at previous levels. Also, most criteria demanded from these batteries were already met and customers were happy with the current performance so I felt there was no need to invest heavily in improving them.
• Ultracapacitors’ Energy Density. The level of energy density seemed to be the most important feature demanded by customers that ultracapacitor