Steel Processing Service

Investment opportunity appraisal

Evaluating the benefit of buying the intellectual property rights in an innovation offering the possibility of reinvigorating demand for products.

An international group of manufacturing companies was considering buying a design for an accessory to its products for the construction industry. The design had the potential to help increase demand for the products. The directors wished to assess the likely benefit to them of buying the design. Sterling was commissioned to help.

It was necessary to understand the characteristics of the new design and then answer the questions:

• what is/are the market/s?
• what is the potential market size?
• who/what controls the market?
• what are the benefits of the innovation over established products?
• what are the barriers to market entry?

The client's employees helped us understand the established products, applications, and markets, and develop a sound basis for the research. We identified the sectors to research and the type of input to seek, and agreed critical topics and target respondents. These included potential users, buyers, advisers, and distributors of the products, and influential research and representative bodies.

Desk and field research covered market size, the product selection and sourcing process, influences on choice and change, and the time to introduce innovation. Quantitative and qualitative factors proved equally significant. Risk aversion was a greater issue than the product specification, performance, and cost. The challenge of introducing a new product was major, whatever the market size, and would take several years to achieve.

Whilst the new design created opportunities, our client would need collaborative partnerships to penetrate the market. If any of the milestones on the way to market penetration were missed the project would need to be terminated. Although several preconceptions had to be abandoned, the company decided that the innovation did not merit their investment.

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Sterling Management Consultants based in Worcester West Midlands