Description
This assignment is part of the Audio Partners case. Review the following resources to prepare for the assignment:Audio Partners Master Document (See the attached file)Also attached is the Week 5 Interactive Lectures for more details on PESTLE & Porter’s Five Forces.InstructionsApply a PESTLE to the industries related to the Audio Partners case. Remember that a PESTLE includes relevant facts or factors from the remote environment. At this point in the strategic planning process, analysis is not completed but rather this step is a collection of facts found through your research. Please include two factors for each of the six categories in the PESTLE. The second part of this assignment is to complete an industry analysis using Porter’s Five Forces.Your paper should be 3-5 pages long and conform to Business Writing Format APA guidelines. Include at least two credible references.
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Introduction to the Audio Partners Portfolio Project
You will do a final Portfolio Project based on this company. By way of introduction to the Audio
Partners Portfolio Project, the final assignment and grading rubric are based on the SPOT
framework (Situation, Problem, Opportunity, and Tactics).
You will be presented with a business situation. Your task is to spot the problems, recommend
solutions, and rationalize your recommendations.
The situation is presented to you as a story. It describes a group of people who have a business
idea. It is not a business plan but a concept, but the story provides sufficient information to
serve as the point of departure for creation of detailed business plan for them—by you.
The story implies a number of problems (or opportunities) that echo issues encountered during
each of the six core courses in the CSUG curriculum. It also hints at issues related to the seven
Integrated Themes threaded through the MBA curriculum.
As you read the story, it will become clear that the founders need competent business advice to
transform their concept from an idea into a viable business plan—one with a high likelihood of
operational viability, attractiveness to investors, and sustainable competitive success.
You are to be that advisor.
YOUR ASSIGNMENT PART 1 — SPOT (Situation, Problem, Opportunity, and Tactics)
Viewing the story through the lens of your current MBA Core Class, the first part of your
assignment is to recognize and resolve each of the issues raised by the story—spot the issue,
recommend a course of action, and provide a supporting rationale.
The SPOT framework suggests a grading rubric:
1. Spot issues—3 points per issue
2. Recommend a course of action (opportunity)—2 points each
3. Support with a cogent Rationale—1 point each
See Appendix A for suggestions regarding how to approach this project using the SPRR
framework.
YOUR ASSIGNMENT PART 2 — Present a Plan
In addition to your critique and advice, Audio Partners needs a business plan to present to
prospective stakeholders—investors, suppliers, regulators, customers.
Viewing what’s needed through the lens of your current MBA Core Class, the second part of
your assignment is to use the information you have gained from the class AND the SPOT
exercise and present a plan.
Table of Contents
Introduction to the Audio Partners Portfolio Project ……………………………………………………… 1
YOUR ASSIGNMENT PART 1 — SPOT (Situation, Problem, Opportunity, and Tactics) ……………………1
YOUR ASSIGNMENT PART 2 — Present a Plan ………………………………………………………………………1
The Audio Partners Story …………………………………………………………………………………………. 4
Audio Partners Background ………………………………………………………………………………………………4
Dr. Darya Amiri, MD …………………………………………………………………………………………………………………………… 4
Mr. Kermit Duncan …………………………………………………………………………………………………………………………….. 4
Dr. Jeffrey Lee, PhD ……………………………………………………………………………………………………………………………. 5
Ms. Rebecca Mallory ………………………………………………………………………………………………………………………….. 5
Mr. Trevor Meredith …………………………………………………………………………………………………………………………… 6
Dr. Larry Novotni, PhD ………………………………………………………………………………………………………………………… 6
The Founding of Audio Partners ………………………………………………………………………………………..7
Audio Partners Business Description…………………………………………………………………………………..7
Current Status………………………………………………………………………………………………………………..8
Trevor’s Conversation with Jeffrey ……………………………………………………………………………………………………….. 9
Session Notes, Audio Executive Meeting, San Francisco Presidio ……………………………………. 11
Opening Remarks, Introduction to the Technology……………………………………………………………… 11
Topic 510: Marketing, Mr. Kermit Duncan…………………………………………………………………………. 11
Situation and Problem: Hearing loss, Stigma, Convenience, CAGR …………………………………………………………. 11
Topic 520: Accounting and Management Reporting, Dr. Darya Amiri and Dr. Larry Novotni ……….. 29
Forecasted 5-Year Financial Projection of Income and Expense …………………………………………………………….. 29
Recommended Form of Ownership to Supersede Partnership ………………………………………………………………. 29
Company Valuation ………………………………………………………………………………………………………………………….. 30
Assets & Liabilities ……………………………………………………………………………………………………………………………. 30
Costing & Financial Benchmarks ………………………………………………………………………………………………………… 31
KPI s & BSC ………………………………………………………………………………………………………………………………………. 31
Topic 530: Finance, Mr. Trevor Meredith…………………………………………………………………………… 32
Status Today, Completed Seed Goals, Fund Creation of MVP ………………………………………………………………… 32
Seed Stage is Complete …………………………………………………………………………………………………………………….. 33
Equity Investment & Funding Request Scenarios …………………………………………………………………………………. 33
Mission – Nanoscale Devices……………………………………………………………………………………………………………… 34
Osborning & Premature WOM …………………………………………………………………………………………………………… 35
Valuation, Partnership, Trevor’s Investment, Investors’ 25% Stake ………………………………………………………… 36
Valuation of Company Assets & Future Earnings ………………………………………………………………………………….. 36
S-Corporation, Start Date, Stock Issue, Call for a Financial Plan ……………………………………………………………… 37
Protection of IP/Trade Secret …………………………………………………………………………………………………………….. 40
Topic 540: Joint Session – Operations and Operations Strategy, Ms. Rebecca Mallory, Dr. Jeffrey
Lee, Dr. Darya Amiri ……………………………………………………………………………………………………… 40
Outsource Supplier Selection, Sensor Cost, and Yield Impact ………………………………………………………………… 41
Single Threaded, Supply Chain Risk Factors …………………………………………………………………………………………. 44
Volume Forecast, Fabrication, & Team Capacity Planning …………………………………………………………………….. 44
Warehouse Team & Customer Loyalty ………………………………………………………………………………………………… 46
Artisan Team……………………………………………………………………………………………………………………………………. 46
Capital Equipment and Labor Expense Benchmarking ………………………………………………………….47
Jewelry Operations Responsibilities ……………………………………………………………………………………………………. 48
Plating Variations & Mass Customization ……………………………………………………………………………………………. 48
Quality Management ………………………………………………………………………………………………………………………… 48
Plant Lease, Location, Build, or Outsource …………………………………………………………………………………………… 49
Jewelry Fabrication Facility, DFSS, Quality, Delivery to Promise …………………………………………………………….. 50
Price/Volume Fallacy ………………………………………………………………………………………………………………………… 51
Kimberly Certification ……………………………………………………………………………………………………………………….. 51
Business Operations, AWS, Business-Wide Integration …………………………………………………………………………. 52
Project Management ………………………………………………………………………………………………………………………… 52
Topic 550: Joint Session – Digital & Data Analytics and AI Strategy, Dr. Darya Amiri and Dr. Jeffrey
Lee ……………………………………………………………………………………………………………………………. 53
Topic 560: Strategy Wrap-up, Dr. Jeffrey Lee ……………………………………………………………………… 55
Sideline Conversations and Key Takeaways ………………………………………………………………………. 55
Conversation A: Jeffrey’s Note on IoT, BMI, and Audio’s Technology Competitors …………………………………… 55
Appendices ………………………………………………………………………………………………………….. 56
Appendix A: Suggested Approach to the Portfolio Project ……………………………………………………. 56
Situation………………………………………………………………………………………………………………………………………….. 56
Problem ………………………………………………………………………………………………………………………………………….. 57
Recommendation …………………………………………………………………………………………………………………………….. 57
Rationale …………………………………………………………………………………………………………………………………………. 57
Ambiguity………………………………………………………………………………………………………………………………………… 57
Take Risks………………………………………………………………………………………………………………………………………… 58
Customer Development Manifesto …………………………………………………………………………………………………….. 58
Appendix B: Online Research Resources …………………………………………………………………………… 58
Wearables / Hearables Business Landscape ………………………………………………………………………………………… 59
Wearables & BMI Technology Landscape ……………………………………………………………………………………………. 59
Business Plan Touch Points ……………………………………………………………………………………………………………….. 59
Regulatory Touch Points ……………………………………………………………………………………………………………………. 59
Financials & Features Benchmarks ……………………………………………………………………………………………………… 60
Jewelry Making Touch Points …………………………………………………………………………………………………………….. 60
The Audio Partners Story
Audio Partners Background
Audio Partners is a start-up owned in equal shares by six founders:
Dr. Darya Amiri, MD
Dr. Amiri received her BS in Biology from the University of Chicago, MS in Biomedical
Engineering from the University of Minnesota, and MD from Stanford University, After
completing her residency at Mayo Clinic, Dr. Amiri turned to research, and currently leads
the Critical Implant Technologies Group within Boston Scientific’s Institute for Advancing
Science, in Maple Grove, MN.
Persona
Darya is 35 years old. Married for three years, she resumed using her own name following
her divorce. Both of Darya’s parents emigrated from Iran, and she is very proud of her
Persian heritage, tracing her family back as far as 1720. She is an informal student of ancient
Persian culture, and she can be a little sharp with people who assume she is Arab. Like
Jeffrey Lee, Darya is a highly analytical strategic thinker. She stopped seeing patients to join
Boston Scientific when she discovered that she finds medical innovation more interesting
than medical practice. She continues to serve on the Advisory Board for the Future Grant
Program at the Mayo Clinic.
Mr. Kermit Duncan
Mr. Duncan received his BFA with a concentration in Media and Communication from Pratt
Institute, where he was an Apple Design Scholarship winner, and his MFA from the Rhode
Island School of Design. He rose in two years to Senior Creative Director at Ruckus
Marketing in New York City, established a new Emerging Brands practice at Landor & Fitch
in San Francisco, and now leads the AI Opportunities Group at Alphabet, in Sunnyvale, CA.
Persona
Kermit is 29 years old and lives with his husband Zachary, an account executive at Hubspot,
in a San Francisco Victorian house where they host dinner parties and cocktail gatherings
almost every weekend. One of his favorite things is to introduce new people to one
another; his friends call him “Yente” (the match maker) even at work. Traveling
internationally for Landor, he was often tapped to lead projects that presented crosscultural challenges: “Haha, that one we need to assign to Yente!” Kermit loves
improvisational comedy, and toyed with becoming a writer in Los Angeles or New York, but
decided he would rather woo an audience from on stage than work behind the scenes. His
exuberance, empathy, and genuine joy in the company of people, energize everyone
around him.
Dr. Jeffrey Lee, PhD
Dr. Lee received his BSEE, MS in Chemistry, and PhD in Physics from the University of
California at Berkeley. While an assistant professor working together with Larry Novotni,
then a Berkeley postdoc, Dr. Lee’s research explored techniques for the design and
optimization of nano-scale sensing and actuation devices that could achieve the technical
and economic (production cost and yield) performance suitable for high-volume
manufacturing and commercialization. In addition to delivering numerous articles and talks
in electrical engineering and device chemistry, Dr. Lee holds seven patents, including three
mask patents securing exclusive rights to the device architecture at the heart of Audio’s
product concept.
Persona
Jeffrey is 32 years old, married to wife Cynthia, with a three year old daughter, Xiang. Jeff
and Cynthia met at Berkeley, where is Cynthia is completing medical school preparing for
her residency. Both of Jeff and Cindy are highly analytical and share a love of ideas,
discussion, and debate. Jeff respects strategic thinking and believes people are responsible
for the future and, like Cindy, is less interested making his career a path to prosperity than
in devoting himself to making life better for people. Both are devoted to their daughter, and
Jeff even has a reputation for bringing her along when he teaches or speaks. Jeff and Cindy
also find time to be actively involved in the arts, as donors to the San Francisco Symphony
and the de Young Museum, and avid enthusiasts of the opera. They make it a point to
attend at least one cultural event each month, they always make an evening of it—formal
jacket and tie—and they always bring Xiang along.
Ms. Rebecca Mallory
Ms. Rebecca Mallory received her BA in Anthropology from San Francisco State University,
and an MFA from the Oregon College of Art and Craft (OCAC) where she continued as Artist
in Residence for jewelry design in metal and gemstone, and she holds a DFM Certificate
(Design for Manufacturability) from the University of Washington. She has been exhibited in
San Francisco, New York, Paris, Bangkok, and Arezzo (in Tuscany), and even before leaving
OCAC, her work had been recognized by houses including Cartier, Dior, Bucherer, and
Damiani, with whom she has since collaborated. Her designs are known for their complex
delicacy, softness, a graceful flow and transformation of light, and for exquisite
craftsmanship.
Persona
Rebecca is 28 years old, and lives on 12 wooded acres north of San Francisco, near the
California wine country, with two friends (also fine artists) with whom she shares studio
space, and jointly operates a community vegetable growers co-op. She enjoys long walks for
conversation with friends, always including her two Bernese Mountain Dogs, Bilbo Baggins
and Gandalf the Grey. She prefers soft color patterns and natural fabrics in her clothing, and
believes clothing becomes more beautiful as it ages with use. An informal follower of
Eastern philosophies, she feels a deep sense of connection with people, almost
experiencing their emotions along with them, and she strives to make herself, her
environment, and her art a source of positive, lighthearted harmony for the people around
her. Her signature greeting is to laugh and say, “Go placidly amid the noise and
haste, Kiddo. And hurry it up!”
Mr. Trevor Meredith
Mr. Trevor Meredith is a graduate of Olin College with a BS in Chemistry, and received his
MBA from Santa Clara University. He served as a senior executive vice president and general
manager at Philips Medical, and has held executive positions at Siemens Medical (where he
oversaw intellectual property matters and FDA approval / compliance matters), as well as
several Silicon Valley semiconductor companies, rising through marketing and sales
management.
Persona
Trevor is 73 years old and retired, although he prefers to say, “semi-retired” because he is
still active as a private equity investor and currently serves on the boards of three earlystage healthcare start-up companies. He provided much of the seed funding for Audio as an
angel investor, but he has refrained from active oversight of how the funds are used,
preferring instead to protect his status as a silent partner. Early in his career, he was
personally acquainted with Eugene Kleiner at Fairchild Semiconductor, and Tom Perkins at
Hewlett-Packard, and he is still well known at both Kleiner Perkins and Intel Capital.
Trevor is a highly analytical, systemic thinker, wants to understand the detail as well as the
big picture, and believes that, second only to making good hiring decisions, an executive’s
most important role is to ask lots of questions—most often “How do you know…” and
“What’s your plan if… ” Trevor respects hard work, diligence, intelligence, competence and,
especially, collaboration. He is frankly miffed when younger executives overlook his
expertise, insights, and suggestions. Although Trevor has very high standards, he also has a
sentimental and generous nature; he has forged many lasting friendships, some dating back
to college and even high school, and he takes his relationships with people seriously simply
because he considers that the right way to be. Although Trevor has a very substantial net
worth, he drives a modest car, lives in a lovely but unpretentious home, and follows a
modest lifestyle. Trevor and his wife, known by her friends as Jonny, maintain a vacation
home near Lake Tahoe, California, where he enjoys golf and hiking. They look forward to
resuming annual trips abroad when Covid passes. Trevor and Jonny especially take great
pride in their two children, and savor their career successes.
Dr. Larry Novotni, PhD
Dr. Novotni received the B.S. (Hons.) in Electrical Engineering and Computer Science (EECS)
from UCLA, and a PhD in Quantum Mathematics from Stanford University. He was recipient
of a Graduate Fellowship Award from IEEE, and the first recipient of the Directors Best
Thesis Research and Innovation Award from Cornell University, Solid-State Circuit Society
(SSCS). Dr. Novotni currently teaches part time at Stanford and leads research on resonance
physics in nanoscale semiconductor devices, on a fellowship at the University of California,
Berkeley.
Persona
Larry is 32 years old and lives in San Francisco. In his spare time, he is a champion triathlon
competitor, rock climbing instructor, and extreme ski enthusiast. He pushes himself and
enjoys achieving, in both his athletic and professional careers. Although he is disciplined and
deliberative in his thought process, he prefers experimentation to theory, and he is decisive
and action-oriented. “Short of life or death gambling, a go-for-it pitch summits faster than a
conventional one.” A well-liked leader, he is at his best under pressure, and has been
recognized “Most Trusted Expedition Leader” by board members of the American Alpine
Club for three consecutive years.
The Founding of Audio Partners
The initial founders of Audio Partners were Jeffrey and Larry, who developed the core
technology on which Audio’s products are based. They brought in Darya as an advisor and
Rebecca as the fine arts voice, and then it was Rebecca who enlisted Kermit. In each case, the
founders had either worked together before or were friends from school. Trevor, semi-retired,
is an angel investor, and has been a business mentor to the other founders, most of whom lack
business experience.
To bring their product idea to market, the founders thought it would be sufficient to set up
manufacturing and a website, and then perhaps also look into advertising, maybe in those
magazines everybody finds in the seat back pocket on airlines.
They were happy just to begin selling product and generating revenue and income with a view
to eventually being acquired if an interested buyer can be cultivated, or possibly become a
public company. Before they can accomplish any of that however they must raise funds to
establish production and selling capability, and so they are deciding how to prepare them and
present Audio to prospective investors.
With that in mind Jeffrey had written the following business description.
Audio Partners Business Description
Audio will design, manufacture, and sell what we call intelligent fashion accessories or “IA.”
Our initial product offering will be a line of hearables—earrings—designed to appeal to
American women 45 years or older, who have hearing loss. Our IA technology corrects
hearing loss in a manner that is more convenient and less expensive than conventional
hearing aid technology, and entirely unobtrusive — eliminating any embarrassing physical
evidence of a prosthetic in favor of a stylish fashion accessory: the earring.
This first product offering will be followed immediately by designs tailored to the tastes of
additional segments of the fashion market, and additional age groups, eventually ranging to
products designed to serve children.
Audio’s IA is made possible by a patent-protected set of semiconductor sensor technologies
developed by founders Jeffrey Lee and Larry Novotni at the University of California in
Berkeley, which enhances and extends so-called “smart dust” technology, developed at
Berkeley about 10 years ago.
The heart of Audio’s technology combines sensing, processing, and actuating capabilities in
a single semiconductor device that is smaller than a grain of salt. Placed close enough to the
ear, 8 to 13 of these devices (sometimes called dust “motes”) sense sound and then,
harmonically reinforcing one another, physically vibrate to amplify it. Further, AI technology
carried in an application on an intelligent mobile device, such as an iPhone, enabled the
wearer to adjust the frequency response of this harmonic group to amplify sounds the tonal
range she has most trouble hearing. Further, still the very low power requirement at this
tiny scale makes it possible to rely on ultrasonic stimulation to actuate the harmonic group,
entirely eliminating need for a large battery or recharging. Ultrasonic vibration (sound at a
higher frequency than we can hear) turns out to be sufficiently present in the ambient
environment around us to achieve this (In very quiet areas, sufficient ultrasonic energy may
not be available. However we believe the desire for hearing augmentation, which exists
especially in a noisy restaurant or airport conversation, exists little if at all in those quieter
circumstances).
This combination of IA and AI makes it possible to enjoy the benefits of hearing
augmentation without need of a doctor visit or post-purchase adjustment.
Our strategy is to lead in four critical areas: quality, delivery, cost, and innovation.
Current Status
Trevor read the description and advised that it will need to be expanded. It needs compelling
detail about the market, organizational plans, the specific planned uses of funds, the
credentials of the executives themselves, risks and expected returns, why now, who agrees—in
short, all the elements of a compelling business case to win investors. Trevor has suggested he
and Jeffrey meet.
Read the notes from Trevor and Jeffrey’s conversation:
Trevor’s Conversation with Jeffrey
TREVOR: “Jeffrey, I understand the nature of your idea and a few of the primary factors that
you believe will make it a success, but it is not clear what all of the different elements of your
business model are or how they fit together.”
JEFFREY: “Larry and I have had some initial discussion about that. We will make key decisions
collaboratively, but at the same time each member of the founding team will oversee one
function, get it organized and staffed, and then hire management talent to take over running
it.”
“I will be the CSO, Chief Strategy Officer, responsible for our business model and operations
strategy, and overall organization and management of Audio.”
“I will also serve as Chief Product Officer (CPO) responsible for our competitive strategy.
Overlapping me in this role, Rebecca Mallory, with her expertise in jewelry production and
industry contacts like Damiani will serve as our Chief Operations Officer (COO).”
“Kermit Duncan, who was brought in by Rebecca, will serve as our Chief Marketing Officer
(CMO). I should mention that Larry Novotni was not supportive of my decision to make Kermit
a full partner in equal shares with the rest of us who have been here longer. It was his view
that we do not need to fund a marketing function for a product as unique as ours. He has
already generated a lot of word-of-mouth interest in Audio through his social media contacts
with other innovators, and publication of some of our research work, as we were completing
development together at Berkeley.”
We thought you, Trevor, might be willing to serve as Chief Financial Officer (CFO) with the idea
that your main function will be to guide creation of a business plan and investment proposal
that will win the funding we need to turn our technology into a business.”
“With his technology expertise, Larry Novotni will overlap me in the role of CPO in the same
way Rebecca does with her fine arts expertise. Together, they represent Audio’s two most
important competencies. In addition, Larry will assume responsibility for setting up accounting
and management information functions for us. I thought we might designate him Audio’s Chief
Information Officer (CIO).”
“With her expertise in medical device design and regulation, Darya Amiri will also overlap with
me in my role as CPO. Darya will also take the lead on assuring Audio makes full use of digital
technology and analytics, across all functions from product design to operations to marketing.
We’re not sure what to call her role, but for now it will be Chief Business Science Officer
(CBSO).”
TREVOR: “OK, but I cannot serve officially as CFO. I am happy to advise, but it is important for
me to remain apart from any decision-making or operation of the company. Now, I assume
that each of the folks has, by now, thought through a plan for the function they are about to
organize, and identified the top 3 to 5 things that absolutely must go right for Audio to become
a success. So let’s do this. Get the whole team together for a weekend retreat. Have each of
them take the group through what they’ve got. We can all contribute. And I will bring an
outside expert in each of those functions, and invite them to give us their critique and
recommendations. You do the kick off and wrap-up, and we can take them in this order:
Jeffrey Introduction & Business Concept
Kermit Marketing
Larry Accounting, Reporting, and Organization
Trevor Finance
Rebecca Operations
Darya Digital & Analytics
Jeffrey Strategy
TREVOR: Your role as CSO will get you involved in most every one of those—certainly marketing
and operations. So will Darya’s role as CBSO.”
JEFFREY: Sounds good. We will do it at the Presidio in San Francisco.
Session Notes, Audio Executive Meeting, San Francisco Presidio
Opening Remarks, Introduction to the Technology
JEFFREY: Thanks for coming, everyone. For the guests Trevor has invited to join us from
Colorado State First, let me set the stage.
First, our sensor device is very small, which is to say unobtrusive in use. Unlike existing
technology, which can be packaged into a space perhaps a third of an inch cubed, our current
device is smaller than a grain of salt, and the future device we have in development now will fit
quite literally into a space no more and the diameter of a human hair. (This physical size has
already been proven feasible; remaining research needed now centers not on fabrication of the
device but on mathematical theory and the AI-enabled software to exploit its physics.)
Secondly, this requires no battery at all. And think about it. Your ear requires no battery but it
picks up and delivers sound to you, using energy developed biologically within your body.
Similarly, this device is activated by nothing more than ultrasonic energy which exists in the
ambient environment around us.
Third, this device is self tuning. That is to say it delivers good performance without the
requirement for a visit to an audiologist. Once again think of your ear. As long as it is
functioning and healthy, it to adapt to the sound around it.
We have built prototypes that work, 100 sets in a variety of design styles, which we have been
showing to jewelry houses.
REBECCA: Chartier and Damiani are both interested.
JEFFREY: Yes, Chartier and Damiani are both interested, and we think a dozen others might be
as soon as they see the product.
TREVOR: Investors are going to want to know same things that you want to know. How much
money is this going to take. How are you going to use it. How much money is available in the
marketplace to provide a return on the investment, how big is that return, and how hard will it
be to get it.
Topic 510: Marketing, Mr. Kermit Duncan
Session Notes
Situation and Problem: Hearing loss, Stigma, Convenience, CAGR
TREVOR: How much money is available in the marketplace to provide a return on the
investment, how big is that return, and how hard will it be to get it?
JEFFREY: The first thing to understand is that Audio will play at the intersection of two older
markets, a technology market and a fas
