One of the biggest challenges companies face is the ability to grow or expand into new business markets. Our clients need to identify whether their prospective markets can sustain additional entrants and whether their organization has the ability to enter new territories. These endeavors can be costly in terms of the required financial and labor resources, and often times the expertise or knowledge is not available internally. The Shpigler Group specializes in providing the necessary assistance, gainful knowledge, and proven results when evaluating new opportunities in new markets.
Our client, a developer of energy storage solutions, had developed a novel approach to energy storage that would offer solutions for grid storage, electric vehicle batteries, and commercial sites. A management team was put together to pursue the opportunity while the technology development team worked on the optimal system design. Early stage testing showed tremendous promise.
While the business potential was very strong, the market entry would entail taking on significant risks. The company would be entering into a very dynamic field with very stringent system requirements and a significant amount of entrenched competition. Meanwhile, incumbent solutions (peaking generators for grid storage, internal combustion engines for vehicles) offered comparatively low costs and proven technology. Furthermore, the financial requirements needed to fund the venture would be high and would require strategic external financing.
In order to better evaluate the market potential, an extensive market research campaign using primary and secondary sources identified the key system and company characteristics of over 30 potential competitors in the energy storage sector. Extensive benchmarking was undertaken in order to identify the critical gaps in cost and performance, thereby highlighting the targets the design team would need to achieve. In addition, we identified the potential areas of market capture – areas where customers were seeking a solution that offered our client the potential for early market successes.
Once the details of the market were gathered through an extensive market research and data collection effort, it was then time to turn our attention to the business case. The overall market potential was tremendous -- but so was the potential risk associated with adequately attacking the market. To justify the investment to the client’s executives, Board of Directors, and investors, analysis was required to quantify the revenue potential and then to determine if the market activity could justify the level of capital and operating expense needed. By combining a detailed go-to-market strategy with our market research, we were able to quantify the likely market potential over time.
While identifying market opportunities was a start, it was not enough to justify the business case; we needed to evaluate all of the elements of the operation of the business. This involved a detailed analysis of all of the elements of the business: revenue, operating expense, capital investment, financing issues, and others. A detailed business model allowed us to identify the optimal market approach -- one that offered the company’s investors an opportunity to generate activity projected to create $92 million in value within a three-year window.
Once the value was found in the market approach, the client made the decision to move forward with plans to aggressively enter into the energy storage sector. Over $5 million in venture capital was raised and the management team was completed with key executives focused on engineering, production, and marketing. Initial customers within the utility sector have been identified, with three coming to terms for initial deployment activity in 2013.
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