Development: Case Study

Client Situation

As part of its overall strategy to drive future growth through innovation, a leading beverage manufacturer is actively managing its innovation pipeline and aggressively pursuing attractive new technologies. One such technology developed by a small start-up company is a new water filtration system that has the potential to transform the water purification market.

Unfortunately, the beverage manufacturer lacks the appropriate resources to adequately evaluate the new technology and provide an assessment of its potential. In addition, assuming the technology is attractive, the beverage manufacturer is unsure how to best structure a deal with the start-up in order to lock up the technology rights.

The beverage manufacturer asked Alliance to determine the new technology’s market potential, identify potential new product opportunities, assess potential ROI, evaluate key risks and provide a recommendation as how best to proceed with the start-up.

Alliance Approach

Using data collected from interviews with client senior management and industry experts as well as an exhaustive literature search, Alliance evaluated the strategic and financial attractiveness of the technology to the client, quantified the market potential and recommended a course of action.

Assessment of the technology and its attractiveness to our client revealed the following:

Consumer Need Identified – Interviews with industry experts in combination with secondary research revealed that tap water is the most consumed beverage, yet approximately 30% of the world’s population lacked access to safe drinking water. In addition, studies showed that up to 3% of all deaths may be attributable to unsafe drinking water. There is a clear need for water filtration technology.

Product Solutions Identified and Markets Sized – From interviews with industry experts and internal brainstorming sessions, commercial and consumer uses of the water filtration technology were identified and the most attractive product ideas prioritized. Four attractive product categories were identified (refillable bottles, pitchers, faucet mount units, countertop units) and the existing and latent market sizes were determined for each.

Competitive Solutions Lacking – Interviews with industry experts and in-depth literature reviews revealed that the new water filtration technology was superior in performance, ease of use and value compared to current leading competitive solutions.

Attractive Financial Return – Based on potential market sizes and expected shares of market, financial projections were calculated and the expected net present value was found to be attractive.

Manageable Risks – Both internal and external risks were identified and assessed, and a mitigation plan was developed. In general, risks were determined to be inconsequential or manageable.

Deal Structure Recommended – Potential deal structures to acquire the IP rights were identified and investigated. Most attractive deal structure for all parties involved was selected.

The findings revealed that the technology was attractive not only in the client’s core business, but could potentially be even more lucrative in non-core markets. However, expansion into more lucrative non-core markets came at a higher risk. As a result, Alliance recommended a staged investment approach by which the client would initially acquire the exclusive rights to use the technology in its core markets and would have the right of first refusal to acquire rights in markets outside of its core.

Results and Impact

As a result of the team’s recommendations, client management decided to invest in the technology and is aggressively negotiating for the IP rights to solidify and secure the opportunity. In addition, given the success of the water filtration technology evaluation and business case development, the client has made Alliance’s methodology an integral part of their innovation management process and has replicated the approach on other innovation projects with equal success.