Developing the Business Plan

Preparing Phase III: Developing the Business Plan

With agreement that the technical questions had been answered, the OS team was now ready

to move into the Phase III Development process that led to the Phase IV Introduction stage. Before

they could do so, however, they were required to attach hard cost estimates and sales forecasts to the

broad product concepts and design parameters they had developed. The new frame had been

designed not only with market differentiation in mind, it also aimed at reducing supporting inventory

levels and minimizing the tooling investment. Nonetheless, the final calculations arrived at an

investment authorization request for $750,000 primarily for new moulds and assembly equipment.

The business plan also required the team to develop sales forecasts and risk assessments (see

Exhibit 7). Rob Noirjean, who prepared much of the data used in the plan acknowledged that his

forecast of $1 million of sales in the first six months faced a good deal of skepticism. And his estimate

of worldwide sales of $10 million in 1993 was dismissed by some as being nothing more than a way of

showing a one-year payback on the investment. Said Noirjean:

The forecasts seemed high to many of them, especially compared to our sales

of the first two generations of the product. But we tried to point out that they were a

drop in the bucket compared to the total PC market size. . . . There are always a lot of

soft facts in these presentations, and because 90% of new products fail, we knew

management's role was to challenge the logic and expose the risks. Paul had

certainly done that in the Phase I and II reviews, and we expected even tougher

questioning in this style. . . . There certainly was a lot of doubt in the division. People

were openly saying that we were just planning to throw money down a black hole

again with this project. But we really believed our numbers.