7633672 7654483

UNIVERSITY OF MANCHESTER

BMAN 30022 STRATEGY COURSEWORK ASSIGNMENT CONCEPT APPLICATION MEMO STUDENT ID: 7633672 7654483 1

7633672 7654483 CONCEPT APPLICATION MEMO Lit Motors have created a vehicle that will be the future of personal transportation. The C-1 is a vehicle powered by electricity with designs that share the safety and comfort of a car and functions of a motorcycle such as enabling the vehicle to reach up to 100 mile-per-hour and permitting 45 degree banked turns. This memo will use concepts such as strategy positioning, strategy design and disruptive technology to analyse the company’s approach towards the product. The design of this product is the essence of their strategy in order to obtain competitive advantage. CEO of Lit Motors, Daniel Kim, have built their design inhouse. By doing this, they can control all R&D processes and eliminates unnecessary errors from outsourcing. The company’s main design focuses on manufacturing their own gyroscope that enables the vehicle to self-balance and maintain an upright position continuously. Another design that Kim has focused on, is the amenities and securities of a car. Therefore the C-1 contains a steering wheel, acceleration and brake pedals just like a car. Nevertheless, the vehicle will manoeuvre side to side like a motorcycle but will do it automatically, depending on how you steer the wheel. In addition, strategically creating this design concept allows this innovation to reduce the complexity of manufacturing an automotive product according to the respective region. For example, having the steering wheel placed in the centre of the vehicle, will create opportunities for the product to be used internationally, thus, generating more competitive advantage over other competitors such as Tesla Motors. Kim has employed Yves Béhar to be Chief Creative Officer for the design and Béhar confirms that this product will be a “non-incremental jump into another form of transportation”. Due to high-technology designs, the cost of production will amount to US$20-40 million, however, with billionaire Pincus involved, Kim is not concerned, as he has strategically designed his product to have competitive advantage. Disruptive technology is a new innovation that helps to create a new market and value. The C-1 model can be seen as a successful disruptive innovation as it, not only, affects the car industry but also the motorcycle industry. Being an electric powered vehicle, it will have numerous environmental benefits such as reducing CO2 emission, decrease traffic congestion and cutback fuel use. The gyroscope technology

2

7633672 7654483 created by Lit Motors is the first stabilized gyroscope in the world and therefore other automotive manufacturer has approached Kim for licensing. The combination of urban planning, manufacturing, design, and business strategy creates a disruptive innovation. Also, with their funds and production line commencing, Lit Motors will have a product that will disrupt the market. The C-1 vehicle is seen as a conservative industry due to its design being half car half motorcycle; therefore positioning the product will be difficult. The objective of competitive strategy for a company is to position its product in the market where the company can strive through an industry with high levels of rivalry. Successfully finding investors to fund nearly US$2 million, Lit Motors hopes to have a more functioning C-1 vehicle by the end of March 2014. Furthermore, with the financial aid from venture capitalists, it has enabled Kim to construct an engineering team capable of providing a new driving experience. An investor, Kelly Slater, previously wanted to invest in Aptera’s “three-wheeled electric vehicle” concept. However, the agreement failed due to lack of confidence of Apetra’s design to secure funds from Kelly. Therefore, Kelly investing in Lit Motors highlights the potential success of the C-1 vehicle. Securing funds will help Lit Motors strategize their position in the automotive market. In conclusion, Kim has planned his designs of the vehicle to be unique and individualized. With high technology innovation for manufactured parts such the stabilized gyroscope, it can be seen as a grand conception. With all R&D in-house developments, the CEO, Daniel Kim, can be seen as the strategist with a “command and control” mentality. A few recommendations to improve on is the short battery life which only goes 200 miles with one charge, and to plan how the vehicle can recharge the battery outside the consumer’s domestic charging point. In addition, further research is needed to increase the availability of charging points in public, which is equivalent to a petrol station for fuel consuming vehicles.

3

7633672 7654483 References: Mac, R. (2014). Two-Wheeled Electric Vehicle Builder Lit Motors Finds Funding From Mark Pincus And Kelly Slater. Available: http://www.forbes.com/sites/ryanmac/2014/03/05/two-wheeled-vehicle-builder-litmotors-finds-funding-from-mark-pincus-kelly-slater/2/. Last accessed 28th March 2014. Concepts: • • • Disruptive technology Strategy as Positioning Strategy as Design

Article used: Two-Wheeled Electric Vehicle Builder Lit Motors Finds Funding From Mark Pincus And Kelly Slater

From left to right: Kelly Slater, Lit Motors CEO Danny Kim, Chief Marketing Officer Ryan James, Yves Béhar, Damon Way and Steve Rocco. (Photo: Josh Kim/ Lit Motors) Lit Motors’ much-hyped C-1 prototype lies in pieces in the back of the startup’s South of Market offices in San Francisco. With green and red wires protruding and the doors taken off the frame, the enclosed, electric two-wheeled vehicle is a shell of what it was a year ago. Back then, it was awing spectators on a gyroscopebalanced test drive down a musty city alley across the street.

4

7633672 7654483 Despite gutting his science project-cum-business, Lit Motors CEO Danny Kim is optimistic. The company is closer than ever to having a fully-functioning vehicle, he says, and now they have a little money to get them there. In an exclusive with Forbes, the much hyped vehicle builder announced that it had closed a $1 million seed round with an eclectic set of investors who range from billionaires Mark Pincus and Kim Jung-Ju to angel investor Scott Belsky and world surf champ Kelly Slater. Total funding in the company now totals just over $2 million, a small, but workable amount of capital that will enable the company to piece together a more functional C-1 model by the end of March, according to its founder and CEO. “[The funding] is basically enabling us to hire a full engineering team and build a brand new driving prototype–a high-speed driving prototype that will be able to fully execute the full driving experience,” says Kim. To that end, Kim has found investors, though not the ones in khakis and button-up shirts, whose venture capital firms line Menlo Park, Calif.’s famed Sand Hill road. Instead, he’s assembled icons of what he’s termed “California culture,” heroes from his youth like action sport entrepreneurs Damon Way and Steve Rocco, both of whom skateboarded to the office for an informal meeting of investors late last month. Also present was Slater, and Yves Béhar, chief creative officer at Jawbone who’s signed on to be a design advisor as well as a backer. “If this works, it is a non-incremental jump into another form of transportation, “says Béhar. “When I came [to the offices] what impressed me about what Danny and his team were doing was how much they were doing with so little.” That’s come to define a company whose final product has to be so much more than an app on a smartphone. With only $1 million from friends and family to start, Kim and his team built the first C-1, an electric, self-balancing motorcycle that can carry two passengers in an egg-shaped cockpit. That initial build-out could only do straight-lines at a generous 10 miles-per-hour.

5

7633672 7654483 A year on, the Lit Motors CEO say the new tranche of funding will get them to an 100 mile-per-hour model that will be able to do 45-degree banked turns–he just needs to put it together first. Currently the vehicles components, from in-house built gyroscopes to steel wheel frames, are spread out across the office’s floor, ready to be pieced together. Assembly though, seems like an after-thought, as Kim seems convinced that he’s done the necessary calculations to get everything to work once the new C-1 is intact. That’s probably what Lit’s early believers are hoping to hear. The company has about 850 people place pre-production orders, with some already agitating for the finished product. “Most people don’t understand product development, especially not vehicle development,” says Chief Marketing Officer Ryan James. “We get emails like, ‘Why haven’t your released the vehicle already?’ As if we’re sitting on something that we wouldn’t release.” Now at 20 full-time employees, Kim says his company is working around the clock to get something that is ready for production within eight months. They’ve put a scooter side project, which has a failed Kickstarter experiment, “on the horizon” as Kim put it gently and are now completely focused on the C-1. That’s a smart move in a space where the lessons of failures like Aptera and Fisker leave little room for distraction. “It seems like a logical step for me in terms of transportation,” says Slater, who admits he put a payment down for one of Aptera’s promised three-wheeled electric vehicles. That dream never came to fruition and the company went bankrupt. “When they said they were going to have a car in 2009, that didn’t happen,” he remembers. “And they were like 2010 for sure, and that didn’t happen. Then they lost me and I stopped paying attention.” Attention is something that Lit Motors can’t afford to lose. And now with billionaire backing from Zynga cofounder Mark Pincus– 6

7633672 7654483 a friend of Béhar’s–as well as the inclusion of Korean rich lister Kim Jung-Ju, Kim does not seem too worried about the future. “We’re going to be raising in the next round or two, $20 million to $40 million pretty easily just to get to production,” he says. “There’s no way around it… but if you have a billionaire helping out in the seed round, with the [Series] A round that’s just a drop in the bucket.”

7