David McGaw Portfolio Planning | Fall 2006 | IIT Institute of Design

Aiptek Portfolio Plan

Moving Beyond Graphic Tablets to Grow Sales of Digital Lifestyle Accessories for the Mass Market

Aiptek Overview

As it approaches its tenth anniversary, Aiptek is considering how to develop its product portfolio in the midst of an ever-changing consumer electronics market. Its fundamental business strategy as a market follower is sound and profitable, but could be built upon to strengthen and broaden its position as a low-cost, mass-market provider of a digital lifestyle accessories. Company Background
Aiptek is an agile follower in the fast-paced consumer electronics market.
Established in 1997, Aiptek grew rapidly from manufacturing graphic digitizing tablets to selling a wide range of digital imaging hardware and peripherals. Aiptek International is based in Taiwans Hsinchu Industrial Park, the Silicon Valley of Taiwan); this analysis will be based on the products sold through the U.S. subsidiary, with its headquarters in Irvine, Calif. Additional subsidiaries are in Germany and China. Although the company was launched with the HyperPen Tablet series, it quickly moved into other areas of low-end consumer electronics, with a widely sold PenCam in 2000 (sold broadly on the Home Shopping Network TV channel), and a series of digital video cameras launched in 2002. Digital video cameras now make up 85% of production, and approximately 80% of U.S. sales. Aiptek also manufactures products as an original equipment manufacturer (oem) for some of the worlds best-known electronics firms. Company Focus Aiptek has chosen to concentrate on products based on handwriting, digital video, wireless communication and opto-electronic technologies. In practice, this has meant a range of digital lifestyle accessories that work with a personal computer and/or a home entertainment system. Taking their inspiration from successful products already in the marketplace, Aipteks offerings are positioned at an affordable price ($100 to $200) and are sold through mass retailers, making them typically an impulse splurge purchase for an average consumer. Strategic Position
Moving fast leaves Aiptek lacking in quality. Design capabilities may be insufficient to keep following as consumer electronics products become more elaborate.
Aiptek International Website, at http://www.aiptek.com.tw/ Aiptek USA Website, at http://www.aiptek.com/ Burns, S. (2006) Cheap Shots. Taiwan Review, February 1, 2006, online at http://taiwanreview.nat.gov.tw/ct.asp?xItem=11 79&CtNode=128
Strengths. Aiptek manufactures its own products, and can keep tight controls over costs, resulting in competitive pricing within product categories. It can also move quickly to release new products as pricing and production permit feature upgrades. Weaknesses. Quality control. Online user forums are rife with complaints about Aiptek products initial quality, and difficulty of repair and technical service. Aiptek products, though priced competitively, do not offer the same set of features as the segment leaders. Brand recognition is low. Opportunities. Constant development of new products at the upper end of the consumer electronics (ce) spectrum builds overwhelming desire in the mass market for similar products at a lower price point; Aiptek can deliver in quantityand at great profit, since it has both second-mover advantage and a more agile production process. Threats. Without skillful in-house design, user interface, or marketing capabilities, Aiptek is vulnerable to the other low-end producers who can also imitate high-end products. As new ce devices become more sophisticated, Aiptek risks falling behind.

David McGaw

Product Portfolio
Aiptek USA Product Lines are shown below. Note that rapid change in some product lines leaves numerous discontinued products still available through various outletsincluding Aiptek.coms own websites; Aiptek also sells oem products it doesnt make itself. Its overseas subsidiaries may have different product mixes.

1997 Tablets

Few innovations in Aipteks tablet lineup in recent years
Smaller physical size, fewer input modes 6000U Tablet 8000U Tablet 8000U Pro Tablet 12000U Tablet Larger physical size, more input modes

2000 Digital Still

SD1.3 PenCam

PCM13 PenCam

XT 114 PocketCam
Aipteks digital still cameras sold massively in 20002002, but have languished in recent years.

2002 Digital Video

Pocket DV

DV3100 3MP

DV4100

DV 5100

DV4500 4M

DV5300 5MP

IS-DV2

MPVR MP6

Zoom DV-6
Lower resolution, less memory & fewer features

2004 Wireless

DV 8800 Higher resolution, more memory & features
Wireless products are the most recent line Aiptek has developed.
SecuCam AV100 IR Headphones Fidelity Bluetooth Headphones
Aiptek has found a sweet spot: products that seem like they should cost more, available through mass retailers at prices that are hard to pass up.
Aiptek is juggling a lot of different models of Digital Video cameras, chiefly because feature and performance upgrades take place so fast. This complexity is less apparent on the shelves of a particular retailersmost consumers see only four or five models. Neither the cameras nor other lines have garnered rave reviews or critical awards, but most purchasers are not domain experts and have only minor complaintsthough few express much admiration. Sales Channels In-Store
Various Discounters (Big Lots)
Aiptek USA Website, at http://www.aiptek.com/ Conversation with Douglas, customer service representative at Aiptek USA, November 16, 2006.

Online

Customer Segments

Budding Artist

Demographic

Media Amateur

2050, mostly M Varies high school college $20,000 $70,000 upper lowers upper middles Curious #38, Middle America: Midscale Families in Midsize Towns
Office Gadgeteer Regular Folks
3050, mostly M Business high school college $30,000 $70,000 middle class Curious Business buyer: Price-oriented novice 2545, M/F Blue collar; service industry high school community college $20,000 $50,000 upper lowers middle class Content #25, Mobility Blues: Young Blue-Collar/Service Familie

Comfortable Dabbler

4070, M/F Business; retired high school college professional degree $70,000 $100,000 working class lower uppers Impulsive #13, Gray Power: Affluent Retirees in Sunbelt Cities

Age/Gender Occupation Education Income

Ps y c h o g r a p h i c

1525, mostly M Student in high school or college $0 to $5,000 working class middle class Gregarious Children of #28, Big City Blend: MiddleIncome Immigrant Families
Social Class Personality Sample prizm segment

B e h av i o r a l

Occasion & Location of Intentional purchase, Purchase online Benefits Sought Learn design/media
Intentional or impulse purchase, online at Target or Best Buy Enter or develop in hobby Novice, regular user Light to Medium user Slight Positive
Impulse or intentional purchase, Buy.com or Office Depot Make work easier by trying out new technology on old process Novice, regular user Light user None Indifferent, negative
Impulse or intentional purchase, Walgreens, Target, Wal-Mart Capture family memories, enjoy a small luxury, give as gift Novice, regular user, non-user Light to Medium user Moderate Enthusiastic
Impulse purchase, Target Low-cost entry into a new kind of product; experimentation Novice Light user None Indifferent
Usage Status Usage Rate Loyalty to Brand Attitude to Product Tablet Still Camera Digital Video Wireless
Novice Light to Medium user Slight Positive
P r o d u c t M a p p i n g (with market size and growth trend)

Emerging Trends

Aiptek wins in affordable digital video for Regular Folks.
Customer segmentation based on which magazines review Aiptek products, and the customer reviews posted on Amazon.com et al.
Digital photography hobbyists are moving into video; still imaging technology is becoming ubiquitous. Wireless products are poised for explosion; wireless iPod listening is the Holy Grail of consumer electronics. But the underlying driver is Aipteks most direct pathway to continued profits: consumer electronics products that were considered luxuries just a year or two ago becoming the $150 impulse buy for the mass market Wal-Mart shopper.

Competitors

Aiptek competitors in three product lines are plotted in the following diagram; digital still cameras are not currently competitive. Critical competitors in red.
G r a p h i c Tab l et S vs. Aiptek 12000u 912 ($120) D IGI TAL V ID EO CAMERA S vs. Aiptek DV6 Zoom ($200)

iPod Nano 2gb ($150) Framed Ansel Adams Prints, Two ($150)
Zenith ZHC-313 Home Theatre System w/DVD ($175)
Canon CanoScan LiDE 25 Scanner ($50)
Canon SD600 6MP Digital Still Camera, 3x Optical ($250)
Sony DCRSR100 3MP Hard Drive, 10x Optical ($800) DGX 506V 5.1MP ($120)
Sony Playstation 2 ($130)
Crumpler Hee-Goer: HP Officejet 5610 Messenger Bag for Printer, Copier, Scanner, Laptop ($125) Fax ($130)
Wacom Graphire ($145) Adesso CyberTablet 12000 ($150) *Made by Aiptek
Flat Panel TV, HD-Ready, 24 in. ($600) Pioneer DVR-64H-S DVD Recorder+DVR ($350) Final Cut Express Video Editing Software ($200) HasbroZoomba DVD+Projector ($250)
24, Seasons 14, boxed set DVDs ($130)
Community CollegeClass in Photoshop ($150)
Canon PowerShot SD600 6MP Digital Elph Camera ($220) Adesso CyberPad (made by Aiptek) ($140) Captures handwriting Pegasus America PC NoteTaker ($70) Captures handwriting from pen motions.

Wacom Intuos($290)

RCA EZ101 Small Wonder Camcorder ($150)
Adesso CyberTablet MTablet& Monitor ($1,300) Wacom DTF-Tablet& Monitor ($1,500)
Pure Digital PSV-352 ($170) Mustek DV 12M 5.0MP ($160)

Wacom Intuos($420)

Sanyo Xacti HD1a 5.1 MP Hi-Def, 10x Optical ($700) Canon DC40 4.3MP DVD Camcorder, 10x Optical ($650)
Portable DVD Video Player ($200)
Panasonic SC-PM71SD CD/ SD/MP3 Compact Home Stereo ($200)
Logitech FreePulse ($100)
Sony Noisecancelling earbuds ($100)
Brookstone BT ($200) SoundShield 250, noise cancel ($150)
Motorola/GI 89014J ($85) Bose Tri-Port ($150) Shure E3C SoundIsolating ($180)
Shure E500PTH Sound-Isolating ($500)
Bose Wireless Extension Speakers ($5001000) Portable Satellite Radio Receiver ($200)
Apple iPod Hi-Fi Speakers ($350)
Leather MP3 carrying case ($50) U2 Concert Ticket ($125)
Capital Records 19422002 Greatest Hits Boxed Set ($125)
WIRELE SS HEA D PHONE S vs. Aiptek Fidelity BT Headphone ($150)
Form Similar products from other manufacturers; same features Category Other products that perform the same function, with different features Generic Other products that serve the similar goals (computer imaging accessories, audio accessories, etc.) Budget What else might be in a typical store at the same price Competitors to Watch Aiptek competes mostly on price, and not on brand reputation. It should be concerned, however, about companies like Mustek, also based in Taiwan, and skilled at low-end production. In the realm of wireless headphones, Logitech has some well-designed offerings, sold under a trusted brand name; Aiptek can compete if it pushes prices lower.

Aiptek should exit the graphic tablet category.
Informal survey of current and potential graphic tablet purchasers, conducted November 10 to December 1, 2006 (N = 15). Survey by BCN Research Institute in 2005, referenced on About Wacom via http://www. wacom.com/. CalComp Technology, INc. Quarterly Report (10-Q) Exhibit 10.35 at http://sec.edgar-online. com/1999/05/14/07/0001017062-99-000873/ Section8.asp)
Wacom and the Graphic Tablet Category Wacom is the undisputed leader in the graphic tablet market. An informal survey revealed both amateurs and professionals vastly prefer Wacomand Wacoms own market research indicates it owns a staggering 95.8% of the tablet market. Wacom technology is used by all major TabletPC manufacturers. Their current line of tablets includes incremental innovations added over the last 17 years; Wacom owns most of the patents on digitizing tablets (the vast majority of its 335 U.S. patents overall), and has used them to drive other manufacturers out of business. Aiptek has just 14 patents on tablets. The U.S. market for Aipteks tablets is small and dwindling fast.

Strategic Situation

Introduction growth maturity decline
Aiptek has found a very profitable position in mature and later markets, but is moving upstream slightly as it introduces new market categories: Tablet (basic) Aiptek sales to: market laggards.
A typical market lifecycle curve.

Digital Camera (low-end)

Aiptek sales to: market laggards

Digital Video

Aiptek sales to: early & late majority

Wireless (headphones)

Aiptek sales to: early adopters & early majority

Strategic Position

As a market follower, Aipteks profits depend on cheaply imitating the products invented by category leaders.
Aiptek has been a market follower, with great success. Their manufacturing capabilities and efficiencies have helped them be among the lowest-cost producers in their product areas. By keeping top product prices in the $75 to $200 range, they become an impulse splurge item for the mainstream consumer. A person walking through Walgreens can see a $100 digital video camera and make an on-the-spot purchase decision. Aiptek has not developed design, user interface, platform creation, or software capabilities that would enable it successfully to create and sell innovative products, but it earns a healthy profit in its follower position. This position, however, is vulnerable to undercutting by other companies that could potentially produce the same goods even cheaper. Aipteks quality and level of customer delight is lowcustomers buy largely on price. Strategic Goal

Aiptek should maintain its follower strategy, and position itself to continuing entering markets earlier in the lifecycle.
Under the current strategy, Aipteks most important task is to maintain low-price leadership, even as it adds features and performance to stay competitive with an evolving market. Focusing development on its digital video and wireless lines will be essential; phasing out tablets and cameras will help. At the same time, Aiptek should explore pursue partnerships, acquisitions, and human resources moves as ways to build design capabilities, so that more advanced products can be developed in coming years. This will distinguish Aiptek from other low-end manufacturers, and provide customers with more complete value than lowprices alone.
Aiptek Portfolio Plan | David McGaw
Potential portfolio directions have been developed in each of the four quadrants shown at right. It is important to note that we assume Aiptek will continue to explore product imitation opportunities as leaders like Samsung, Canon, and others launch innovations in consumer electronics. A successful low-cost imitation will still be quite profitable.

New Markets

Portfolio Options

Gain New Customers

Add new customers with limited changes to portfolio

Push Beyond

Expand into new realms, adding to core competencies to engage market at a higher level with more innovative products.

Build on Strengths

Existing Markets Incremental growth in product features and product lines, plus continued efforts at bringing prices down.

Add Product Lines

Continue Aipteks pattern of taking on new consumer electronics products as technology stabilizes and mass market interest peaks. New Products

Existing Products

Better Optics. Aiptek DV cameras use digital zoom only, and have only adequate video
quality. Upper-tier camcorders have 10 digital zoom. By adding better lenses, Aiptek could vault out of its so-so quality reputation.
Noise-cancelling Wireless Headphones are becoming a must-have audio accessory. Aiptek could vault ahead by providing noise-cancelling features in their wireless offerings, at a lower price point.
Lite Wireless Headphones. Whether a particular iPod/mp3 player is already Bluetooth-capabable or not, eliminating wires is a highly desired feature.
Kid Tablets. An unexploited niche is graphic tablets for kids, sold in a package with

drawing software.

Low-end GPS. Commodity GPS location devices (and/or adding GPS awareness to

other devices as an oem component) could mainstream a currently high-end product. The new line would not feature mapping features at first.
Hi-Def DV Camcorders. With Hi-Def video poised for mass-market breakthrough in
the next three years (and already dominating the upper-mid- to high-end), increasing the resolution of Aipteks DV product line would broaden appeal.
Video Editing Platform. With the spread of video cameras comes more consumer
video content. Build a $200 platform for editing video streamswithout needing a computer.
WiMax Octavo Pad. A stretch product: build a cheap personal communication device,
the size of a slender hardback novel, using open source web browser and text messaging and chat software, based on a thin client os driven by forthcoming free city-wide Wi-Max access.

Option Evaluation

Portfolio direction options have been evaluated against each other on a series of key success factors, with the top two ranked in each factor accounted a top hit.
Commercial Success Scorecard Relative rankings from 1 to 8
concept strategic Fit customer Market Competitive Value potential Advantage ECV # Top Hits
Better Optics Noise-cancelling Headphones Lite Wireless Headphones Kid Tablets Low-end GPS Hi-Def DV Camcorders Video Editing Platform WiMax Octavo Pad

y q e u r w t i

i q w y t r u e

y w q i r e u t

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i r q y t w u e

Feasibility Scorecard Relative rankings from 1 to 8
concept existing Mfg. fit existing cost of technical new comability petencies New competencies needed; Plan to acquire them
Lens grinding could be outsourced, but prices will never beat experienced camera makers Minor technical information needed; 1 new hire sufficient Manufacturing optimization & price control; in-house knowledge sufficient. Product is fine; marketing, UI, and software expertise would be needed. Could be outsourced. Minor GPS electronics knowledge needed. Some UI experience will be requiredmore if navigation features desired. Some additional technical knowledge needed. UI & software issues a challenge; could be outsourced, but will be the bulk of value delivered in the product. Significant UI & software issues. Using networks other than free city-based Wi-Max may require partnerships.

i w e q y t r u

u w e q t r y i

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Risk vs. Reward Potential, with Option Value Size: relative cost

Aipteks quick hits include product line enhancements. In the long term, Aiptek should explore an innovation of its own.

Better Optics

tech & commercial success: high

Low-end GPS

Lite Wireless Headphones
Noise-cancelling wireless headphones Hi-Def DV Camcorders

Video Editing Platform

modest rewardexcellent reward
Kid Tablets WiMax Octavo Pad

option value

must execute now should execute 13 years could execute 3+ years Aiptek Portfolio Plan |
tech & commercial success: low

Recommendations

We propose two options, one or both of which Aiptek could pursue. Both grow market opportunities in the future, and build on Aipteks low-cost leadership strategy. Option One Increased Features / Continued Low-Price Leadership Add Wireless Portable Headphones, Noise-Cancelling Headphones, and Hi-Def Video Cameras; Launch GPS Line. Lower risk. Focusing developing on keeping existing lines competitive will help maintain Aipteks visibility through mass retail channels, as an increasingly attractive option for Regular Folks. Adding an affordable line of GPS devices will continue that trend; we also assume Aiptek will maintain its rapid imitation of other consumer electronics devices as they emerge in the market at a higher price point. Option Two Move Into Mass-Market, Network-Enabled Communication Design and launch a handheld communication device, suitable for Web-surfing, watching viral video, and exchanging email and text messages: a laptop-lite, or Blackberry-plus, for just $200, powered by free city-wide WiMax. Increased Risk. If Aiptek adds design and software capabilities, it could build a broadly appealing, yet low-cost device that could be sold widely in cities that offer free network access. Aipteks edge over competitors would be its ability to produce in volume at low cost. Capabilities to Add Product Design & User Interface Design. Aiptek needs to be able to create more sophisticated interactions that are easy for customers to use. Software Partnerships. Either in-house our outsourced, Aitpek will need to draw on expertise with open-source software to build out a cheap personal communication device. Branding & Marketing. Aiptek hasnt yet had to develop a widely-known and -trusted consumer brand in the U.S., but that will become more important for the Octavo product. Network Partnerships. Since the Octavo device depends entirely on its network connection, Aiptek should explore a more formal relationship with network service providers, to ensure proper functionality. Roadmap

Product Lines existing

Ta b l e ts D i g i ta l S t i l l C a m e r a s D i g i ta l V i d e o Hi-Def Models Hi-Def Models for $150 W i r e l e ss Noise-Cancel Models Portable Bluetooth Models
Portable Bluetooth + Noise Cancel Models

Option One

GP S Base Model GPS with Navigation Micro PS with Navigation O c tav o W i - M a x M e ss e n g e r

Option Two

Supporting Initiatives
Design & UI Teams Software Partnerships branding & marketing network partnerships

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