Professional Documents
Culture Documents
Steve Babitch | Enric Gili Fort | Andy Kim | Pam Nyberg | Albert Wang Strategic Design Planning Workshop
Institute of Design, Illinois Institute of Technology Spring 2006
Contents
User Research
Research Insights & Principles
Concept Development
Concept Generation Concept Evaluation
Industry Analysis
Introduction State of the Industry Mattel Competitiveness Competitor Overview Financial Performance Mattel and Direct Competitors Mattel and Gaming Software Competitors Industry Evolution Kid Lifestyle Trends Technology and Play Category Trends Opportunity exploration
System
Subsystems New Value Web Roadmap Risks & Uncertainties
Conclusion Appendix
Mattel Analysis
Introduction Financial Performance Core Competencies Innovation History Innovation Analysis Current Value Web Most Recent Digital Products Most Recent Experiential Efforts
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Executive Summary
Executive Summary
Children are being exposed to technology at ever-younger ages, and as a result, they are becoming increasingly more interested in technologybased entertainment, including electronic, video, and online games. Currently, Mattel has a very limited presence in electronic entertainment. This shift in childrens entertainment preferences is accompanied by a trend toward childhood compression, meaning that childrens tastes are maturing more quickly than in the past. As such, Mattels target market is shrinking. Particularly worrisome to Mattel is the slow sales decline of Barbie products over the past several years. Barbie is Mattels largest, most profitable brand. Even though things seem especially dire for Mattel, there is hope. By leveraging their existing competencies while acquiring new capabilities through internal development and partnerships, Mattel should be able to develop relevant products and services that positively reposition them in kids worlds. From an offering perspective, they should pursue a development strategy which includes the following six subsystems, listed in order from easiest to most difficult to implement: Traditional Toy/Game Enhancement High-Tech Toy Development Imaginative Exploration Content Creation and Community Mobile Networked Entertainment Physical Activity Immersion
To successfully execute elements within these strategic sub-systems, Mattel must make some operational and strategic adjustments. Specifically, they must build their competency in content creation, while partnering with niche knowledge communities, to create a more balanced relationship between their content creation efforts and those of external content providers, like movie studios. Given their limited experience in technology and software development, they must partner with firms who are experts in these areas to more quickly develop technology-infused products and services which provide richer play experiences. Simultaneously, they must strive to learn from these companies since the knowledge is critical to their future success. Mattel must also establish a web-based dialogue channel with buyers and users which promotes interaction between them via networks, provides hardware and software upgrades, provides creation tools, and sells new products and services.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Project Overview
Opportunity Statement
The shift in childrens play from traditional toys and games to more compelling, technology-enhanced play experiences offers Mattel the opportunity to regain relevance in the United States through the development of innovative, tech-infused products and services.
New Market
Existing Capability
New Capability
Existing Market
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Project Description
Children are being exposed to technology at ever-younger ages, and as a result, they are increasingly more interested in technology-based entertainment, including electronic, video, and online games. According to American Demographics, electronic games now account for two-thirds of the total toy market.1 Currently, Mattel has a very limited presence in electronic entertainment. This shift in childrens entertainment preferences is accompanied by a trend toward childhood compression, meaning that childrens tastes are maturing more quickly than in the past. Whereas manufacturers of traditional toys and games used to target kids under 14, their attention is now focused on children under 10.2 As a result, Mattels target market is shrinking. Particularly worrisome to Mattel and another potential indicator of girls maturing tastes is the slow sales decline of Barbie products over the past several years. Barbie is Mattels largest, most profitable brand. Given Mattels daunting challenges in this highly competitive environment, this plan was crafted to intend to identify possible strategic opportunities for the company, related to the development or acquisition of new technology-infused entertainment capabilities. These expanded capabilities will complement childrens interaction with related Mattel products, leverage existing play patterns, and encourage childrens personal development. Using Institute of Design Innovation Planning methods, Mattel will be analyzed Mattel to identify their core competencies and innovation capabilities. Analysis of the childrens traditional toy and game industry, the electronic entertainment industry and childrens lifestyles will also be conducted, using primary and secondary research techniques. Insights will be extracted from the research, based on the use of comparative analytic tools. New concepts and opportunities will be generated which address the insights. Those concepts and opportunities will then be systematized to provide a rich array of innovative solutions which will help Mattel expand its offerings and retain its relevancy with children of all ages.
1 Raymond, J. 000. Kids Just Wanna Have Fun. In American Demographics : 5 1. Ibid.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Industry Analysis
Introduction
Competing for childrens attention has become more challenging than ever before due to shifting market conditions, the changing lifestyle of children, and the influence of increasingly more powerful big box retailers. According to a recent Kaiser Family Foundation survey, Kids and Media @ the New Millennium (Nov 1999), half of all 4 to 6-year-olds have played video games, a quarter of them regularly. Game makers are aggressively marketing to children as young as 3, while researchers report what parents already know: that children as young as 8 and 9 are asking for adult toys, like cell phones and iPods, rather than stuffed animals or toy trucks.1 This adoption of technology at younger ages is adversely impacting both traditional toy manufacturers and retailers. Further complicating matters, children now spend 75% of their weekday in scheduled activities, as compared to 40% in 1981.2 This decrease in available playtime has driven kids to adopt sophisticated multi-tasking behaviors. Because they have less free time to play, children look for fun in any activity they pursue. This expectation has forced toy manufacturers to compete against all other forms of entertainment, including friends, TV, the Internet, and organized sports. As a result, the industry is shifting away from toys as they were traditionally defined toward leisure products.3 Retailers are also a powerful contributor to the success of a given toy. They determine the products theyll stock, the cost theyll pay, and the amount of shelf space each toy will receive. Times are changing for the toy industry. In response to these monumental shifts, Mattel must quickly adapt or suffer shrinking sales and profitability at the hands of more technologically sophisticated play experiences.
Sources: 1 Raymond, Joan; Kids just wanna have fun, American Demographics; Feb 000; Vol, ; p. 5-1. Carey, Benedict; Babes in a Grown-up Toyland, The New York Times (Late Edition (East Coast)); New York, NY.: Nov 8, 00; pg. .1. 3 Stanley, T.L. and Becky Ebenkamp; In search of the magic formula, Brandweek; Feb 1, 000; Vol 1, ; p. 8-3.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Sales of traditional toys and games have been flat since 1 (see graph below) while video game sales have been growing. In 005, toy and game sales dropped % to $1.3 billion while video game sales increased % to $10.5 billion. One significant reason for this market shift is childhood age compression. Kids today are growing up more quickly than in the past and are outgrowing toys as a faster rate. This phenomenon is illustrated in the graph below which highlights the decline in per capita spending for traditional toys among -13 year olds, the Tween market. Since Tween purchasing power has increased over the years, its obvious that theyre choosing to spend their money in other categories.
Sales ($B)
10 5 0
'96
'97
'98
'99
'00
'01
'02
'03
'04
'05
Source: NPD
Year
2003 2000
Age (years)
Source: NPD
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Market Share
<1
10
11
12
13
Age ( Years )
Source: NPD
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Competitor Overview
According to financial industry reports, Mattels direct competitors are considered to be Hasbro, Leapfrog, Jakks Pacific, and Radica Games. Hasbro most closely resembles Mattel in that its primarily a traditional toy manufacturer whos trying to expand beyond those offerings into electronic and gaming entertainment. As part of this strategy, they recently announced a partnership with G4, the gaming network on cable. In addition, theyve been releasing lifestyle toys like ChatNow Communicators which resemble Nextel press-and-talk phones and VCamNow, a digital video camera for kids. Unlike Mattels competitive products, Hasbros devices provide functionality that more closely resembles the features provided in adult products, which kids appreciate. Hasbro also produces edgier content like Magic and BRATZ dolls which have taken considerable market share from Mattels Barbie. Mattel responded with MyScene, but this offering was perceived as a less expensive Bratz knock off by some Tween girls. At the other end of the spectrum, Leapfrog is primarily focused on educational toys. They currently struggle to create play entertainment that doesnt feel like doing homework. Jakks and Radica, on the other hand, are much more involved in play entertainment, specializing in electronics and gaming. Jakks develops video games for various gaming platforms and TV while Radica produces hand-held electronic games and gaming accessories.
Hasbro HAS Toys and Games Playskool, Tonka, Super Soaker, Milton Bradley, Parker Brothers (all popular board games), Tiger, Wizards of the Coast Star Wars, Disney (master toy licensee and official toy and game company for theme parks), Nickelodeon, Sesame Street
Brands
Key Licenses
World Wrestling Entertainment, Dragon Ball, Hello Kitty, Nick-Tivities, SpongeBob Squarepants, Dora the Explorer, Blues Clues World Wrestling Entertainment video games for all gaming platforms (with THQ), popular tv video games, action figures
Key Products
BRATZ, GI Joe, LAZR Tag, Magic, ChatNow Communicators, Mr. Potato Head, Pokemon, Play-Doh, VCamNow (like Mattels Vidster), Easy Bake Oven, Tinkertoys Entered video game market in 15 with the creation of Hasbro Interactive. Was very successful but sold the division to Infogames Entertainment SA in 000 and continue in video games through licensing with Infogames.
XBOX controllers, Game Boy Advance accessories, 0Q, Bass Fishin, Play TV Baseball, Play TV Legends Genesis, Skannerz Commander
Facts
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Financial Performance
As the financial chart below illustrates, traditional toy manufacturers including Mattel, Hasbro, and Leapfrog have experienced very little growth in their stock price over the past ten years. In stark contrast, Jakks Pacific and Radica Games have performed significantly better because of their level of participation in the electronic and video game market.
+1000%
Stock Price Increase (%)
1
1
Mattel
18
1
000
Leapfrog
001
00
003
00
005
00
Hasbro
Radica Games
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Offering Comparison
Mattel has a very limited presence in specialties that are becoming more popular with kids. Even Hasbro is beginning to expand into other more relevant arenas as mentioned above with their announcement of a partnership with G.
Mattel Traditional Toys Video / Online Gaming Music Movies/TV Telecom Health / Fitness Hardware Co-Creation Education Limited Limited
Hasbro
Electronic Arts
Vivendi International
(Mattel Partner)
Sony
Konami
Microsoft
soon
Limited
Games
Games
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Financial Performance
Although Mattel might not consider companies who produce gaming software to be direct competitors, these firms are developing compelling entertainment experiences that draw kids away from traditional toys. The 10-year financial performance of THQ (a Mattel partner), Electronic Arts, Activision, and Take Two Interactive Software clearly shows that each has experienced considerable growth in stock price, compared to Mattel whos demonstrated little to no growth. Privately held Vivendi International, another Mattel partner, is the world leader in MMOGs, multimedia online games (e.g. World of Warcraft) as well as being a leader in the PC console and handheld market.
1/02/2006
+3,000%
+2,000%
+1,000%
0%
1 1 18 1 000 001 00 003 00 005 00
Mattel
THQ
Electronic Arts
Activition
Take Two
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Industry Evolution
Before toy trends and opportunities can be fully appreciated, the evolution of toy development must be understood. Five significant eras have been identified including Post War Optimism, Transformation, Licensing, Electronics, and Online Gaming. The matrix reveals that the childrens toy/game industry has evolved from one with simple, physical toys that emulate adult life to one based on hardware and software technology platforms and rich, interactive content which support fantasy. The number of dual income families has increased significantly while family size has decreased, allowing parents to direct more money toward each child. Children have fewer playmates in the household and therefore rely on the TV (and other more interactive media) for entertainment. With the advent of individualism and the Internet, kids have the ability to create content and share it with people theyve never met. Given their high level of media consumption, kids are actively targeted by advertisers and are influenced by the messages. With regard to retailers, small family-owned toy stores have been replaced by big box and online retailers because of selection, convenience, and price.
Key Toys/games
Leaders
Retailers
Toys Rus
Wal-Mart, on-line
Family Identity
Super Moms
Soccer moms
Guilty parents
Play environment
Home
Screen
Anywhere
Society Values
Family values
Mass consumerism
Co-creative experience
Communication
Internet and blogs, social networks Mobile phones, networks and Internet Immersive experience
Technology
Plastics
Computer chip
Context
Interactive environment
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Industry Evolution
Physical toy appearance clearly reflects the societal and aesthetic values of the age. During Post War Optimism, for example, the importance of traditional family and home is evident, whereas technology is clearly valued in the Online Gaming era.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Kids are getting older younger, (e.g. age compression), so traditional toys become outdated more quickly.
Source: Toy Industry Information
Children are exposed to technology at younger ages - 20% of the active online population is ages 2-17. They also learn to express themselves with technology earlier.
Source: Nielsen Net Ratings
20% of U.S. children are overweight, an epidemic according to the U.S. Surgeon General.
Source: National Institute of Health
30% of fourth graders are proficient in reading, and 32% are proficient in math at traditional public schools. Boys fare worse than girls, making education an increasingly important priority.
Source: National Center for Education Statistics, as compiled by the American Federation of Teachers, 00.
Kids only have 25% of their day available for free play so they maximize their time through multi-tasking.
Source: University of Michigan, The Panel Study on Income Dynamics, Child Development Supplement in American Demographics, May 1.
Children have fewer siblings than they did 30 years ago, decreasing the number of kids conveniently located playmates.
Source: U.S. Census Bureau
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Trend Cocreation Fandom and consumer involvement in game development and adaptation positively influence a games success.
Precursors
Lego Mindstorms
The Sims
New interface devices The development of non-traditional game controllers is expanding the types of interactions players can have with games.
Revolution Controller
Nintendo DS stylus
PS EyeToy
Lifestyle Lifestyle toys and action figures are becoming more popular.
Designer Toys
Movies
Music
Mixed Reality Games played in the physical world can be extended via electronic technology into the virtual world.
Human Pacman
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Opportunity Exploration
Position maps (or 2x2 maps) were generated to investigate different aspects of kids play experiences and play-oriented technology. The goal was to identify opportunity gaps that could suggest areas for future product and service development. Map axes were selected based on child lifestyle trends and technology trends. Position maps include the following dimensions: Mental/Physical Engagement vs. Level of Technology Level of Technology vs. Level of Self-Authoring Provided Number of Players vs. Level of Activity Educational/Entertainment Play Goal vs. Level of Activity Level of Mobility vs. Level of Activity
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Opportunity Map
Mental/Physical Engagement vs. Level of Technology
Toys, games, and activities have been plotted on the map below, the speculation being that few activities combine physical activity with high technology. This map confirms our hypothesis. Games such as Dance Dance Revolution, laser tag, and paintball are examples of such toys, games, and experiences.
Opportunities for high tech products that provide kids with physical activity.
High Tech
MMOGs / Sims Video game / Consoles Nintendo DS Robosapiens Lego Mindstorms Dance Dance Revolution
Leapfrog
iPod listening
Mental
LEGO
TV
Physical
Action Figures
Nerf Toys
Hot Wheels Arts & Crafts Building Blocks Card Games Dolls Dressing up Puzzles Books Tag
Board Games
Low Tech
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Opportunity Map
Level of Technology vs. Level of Self Authoring
Toys, games, and activities have been plotted on this map to investigate the level of self authoring provided. The conclusion here is that the majority of toys dont promote self-authoring, but children seem to be drawn to selfauthoring experiences such as Lego Mindstorms, simulation games, and photo websites such as Flickr.
High self-authoring
Arts & Crafts Mindstorm LEGO Blogs Sims Movies
MMOGs / Sims
Low Tech
Magic Talk Back Dolls & animals
High Tech
iPod listening
Action Figures Dolls Sports equipment Tag Board Games Card Games Puzzles
Hot Wheels TV
Books
Low self-authoring
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Opportunity Map
Number of Players vs. Level of Activity
Toys, games, and activities were plotted on a map of level of physical activity versus level of individual or group activity. The number of toys in the upper right quadrant of the map is less populated; however, there are a variety of organized sports, which, if individually named, would increase the number of data points in that quadrant. Toys tend either to be physical in nature or sedentary, but not usually both. Dance Dance Revolution does combine physical with screen-based activity. The opportunity gap appears to include the combination of physical and sedentary activity - perhaps combining physical activity with electronic or screen-based activites would result in a more rich, immersive game experience.
Physical
Exercising
Ride bike Hiden seek Dance Dance Revolution Organized Sports
Tag
Moving
Shopping Yoyo
Opportunities for providing experiences that bring screenbased sedentary activities together with physical ones
Laser Tags
Individual
Mindstorms
Making Movies
Action Figures
Group
Hot Wheels
Seating
Electronic Instruments Speak and Respond Talk Back Dolls & animals Sims Handheld video games
LEGO
Dungeons and Dragons Dolls Video game / Consoles MMOGs / Sims Magic TV Card Games Board Games Photos (flickr)
Hands interacting
Eyes action
Blogs
Sedentary
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Opportunity Map
Play Goal vs. Level of Activity
Toys, games, and activities were plotted based on level of physical activity and play goal achieved, ranging from educational to entertainment. An opportunity gap was noted in the physical activity/educational space, perhaps speaking to the trend in childhood obesity.
Physical
Shopping Laser Tags Organized Sports
Exercising
Nerf Toys
Ride bike
Paintball
Dance Dance Revolution
Moving
Making Movies
Dressing up
Hot Wheels Action Figures
Robosapiens
LEGO
Educational
Seating
Electronic instruments
Lego Technic
Dungeons and Dragons Magic
Building Blocks
Entertainment
Card Games Talk Back Dolls & animals Speak and Respond Video game / Consoles
Leapfrog
Hands interacting
Nintendo DS
Phone Games
MMOGs / Sims
Eyes action
Books
TV
iPod listening
Sesame Street
Movies
Sedentary
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Opportunity Map
Place of Play vs. Level of Activity
Toys, games, and activities were mapped to investigate level of activity vs. level of mobility provided. Given that children spend time in many more locations (e.g. divorced parents homes, organized activities, friends homes, etc.) than they once did, the opportunity to combine physical activity with mobile, electronic experiences could be compelling.
Physical
Pacman
Laser Tags
Exercising
Moving
Opportunities to deliver electronic games that combine physical activities in a mobile environment
Mobile
Seating
Leapfrog Lego Technic
TV
MMOGs / Sims
Robosapiens
iPod listening Video game / Consoles
Anchored
Nintendo DS
Sesame Street
Movies
Hands interacting
Phone Games
Blogs
Eyes action
Sedentary
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Mattel Analysis
Introduction
Headquartered in El Segundo, California, Mattel Inc. has been designing, manufacturing, and marketing toy products for more than sixty years. Now employing more than 5,000 people in countries, its products include fashion dolls and accessories, vehicles and play sets, and games and puzzles. The company also publishes childrens books and magazines.
We continued to experience extensive cost pressures and sales declines in the Barbie brand, which offset much of the growth we experienced throughout the portfolio. Robert A. Eckert, chairman and CEO of Mattel
Mattel sells its products to retailers in more than 150 nations, including discount and free-standing toy stores, chain stores, department stores, wholesalers, and retail outlets. Key global retailers include Toys R Us, Wal-Mart, Target, Carrefour, Argos, and Auchan. Mattel also sells its products directly, through agents and distributors, and through their web site. Mattels reportable segments are separately managed business units and are divided on a geographic basis between domestic and international. The Domestic segment is further divided into Mattel Brands US, Fisher-Price Brands US and American Girl Brands. Historically, Mattel has been a leader in the childrens traditional toy and game industry worldwide. However, in recent years, the industry has witnessed a shift in childrens lifestyles and interests that is adversely affecting the companys financial performance and expectations for future growth. While American Girl and Fisher-Price have experienced annual sales growth, their success has been partially offset by Mattel Brands and the slow sales decline of Barbie, which dropped by 13% worldwide in 005.
3000
1000
0 02 03 Year 04
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Mattel Brands US sales declined from $1. billion in 00 to $1.5 billion in 00 with the domestic market representing 58% of worldwide sales. This is especially critical to address since the U.S. is considered a lead market and since % of kids globally live outside the U.S. and Europe.
Mattel Revenue and World Gross Barbie Sales year to year end sales
Revenue
1Q
Q
3Q
Q
1Q
Q
3Q
Q
2004
2005
In the first nine months of 005, cost pressures were also problematic and included: Product costs, such as oil-based resin Recent strengthening of the Chinese yuan against the US dollar Transportation costs, due to petroleum prices Employee-related costs In response, management has established six key company strategies: Improve execution of the existing toy business Globalize the brands such as Barbie Extend the brands into new areas Catch new trends, create new brands and enter new categories Develop people Improve productivity, simplify processes and maintain customer service levels Additionally, Mattel management has crafted four strategies to drive sales growth: Focus on core brands and core markets Align more effectively with growing retail customers by building closer partnerships with customers worldwide Invest in developing markets, expanding our presence in categories where Mattel doesnt currently have an extensive presence and grow alternative sales channels Pursue additional licensing agreements and strategic partnerships to extend the brand portfolio
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Financial Performance
Kid lifestyle changes including age compression, increasing popularity of video games, and overall increase of activity choices are having a profound effect on the top and bottom line performance of Mattel. When compared to its industry (Recreational Products), sector (Consumer Cyclicals), and the S&P 500, Mattel has underperformed financially. Mattel has a lower P/E ratio for the trailing twelve months compared to the Industry, Sector, and S&P 500. For the most recent quarter and trailing twelve months, Mattels sales have been lower than that of the Industry, Sector, and S&P 500. For the trailing twelve months, the Net Profit Margin of Mattel is below that of the Industry, Sector, and S&P 500 in sales.
Valuation Ratio P/E Ratio (TTM) P/E High - Last 5 Yrs. P/E Low - Last 5 Yrs. Growth Rates (%) Sales (MRQ) vs. Qtr 1 Yr. Ago Sales (TTM) vs. TTM 1 Yr. Ago Sales - 5 Yr. Growth Rate Profitability (%) Gross Margin (TTM) Gross Margin - 5 Yr. Avg EBITD Margin (TTM) EBITD - 5 Yr. Avg Operating Margin (TTM) Operating Margin - 5 yr. Avg. Net Profit Margin (TTM) Net Profit Margin - 5 Yr. Avg.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Core Competencies
After examining Mattels corporate, product, and brand evolution over the past sixty years, including both successes and failures, five core competencies surfaced which can be leveraged in future product and service development: American Girl Experience Creation Infant/Toddler Product Development Strategic Partnerships Brand Management Market Intelligence
Core Competencies
Strategic Partnerships
Brand Management
Market Intelligence
Company
Company
Brand Portfolio
Brand
Product Portfolios
Barbie Hot Wheels Magic 8 Ball Rockem Sockem Robots UNO Scene It? Tyco R/C Vidster ello My Scene Polly Pocket Disney Princesses Max Steel
Baby Playzone Kick & Whirl Carnival Peek a Blocks See n Say Little People Learn through Music Plus InteracTV DVD Based Learning System Dress-up Adventure Dora Brilliant Basics Snap-Lock Beads Link-a-doos Take-Along Playquilt ESPN Shot Block Basketball Rescue Heroes Pixter View-Master
Historical Characters Jess: Girl of the Year Just Like You Dolls Bitty Baby Bitty Twins Home Party Kits Bath and Body Care Products Character Books
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Core Competencies
According to both analysts and insiders, Mattel has the necessary in-house skills and research technology to identify trends and new opportunities. The real issue, according to corporate insiders, is execution. In the past, when important information was provided, it wasnt given the necessary priority, it was rejected as not being important, it was lost during personnel shifts, or it wasnt applied correctly during execution. Fortunately, Mattel has been especially successful in developing infant/ toddler products under their Fisher Price brand, and theyve done a fantastic job crafting a rich compelling experience for girls through American Girl. By leveraging the knowledge that exists in these two brands, their ability to manage power brands like Barbie would be further strengthened. Not having focused on generating original content in years, Mattel has relied heavily on establishing strategic partnerships. Granted, licensing is especially crucial, given the appeal of multi-channel entertainment to kids, but Mattel might consider seeking more of a balance between licensing and original content creation.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
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Innovation History
Company / Competitors Comparison
Throughout its history, Mattel has had fewer, larger superhits, compared to its competitors. Rather than striking a balance between ongoing new product development and brand extension, they choose to focus heavily on extending their primary brands, leaving them without other established product lines to depend upon. As illustrated in the chart below, Mattels stock price rose through the early to mid 1990s, due to the sale of non-toy related ventures, licensing, and toy-related acquisitions. By the late 1990s, Mattels stock price declined significantly because of the growing popularity of video and online gaming, a trend that continues to impact their profitability today. Also important to note is that all of their non-toy related acquisitions and internal development ventures have failed, a definite challenge as they look for ways to make themselves more relevant to todays Tween market.
1950 Stock
1960
1970
1980
1990
2000
GameBoy
Competitors Superhits Mr. Potato Head Superhits -outside traditional toy Competitors industry -inside traditional toy industry
Nintendo
Sony PSP
Lineage
Pictionary Trivial Pursuit
Xbox
Pokemon
Furby
Sony PS2
Xbox360
Superhits
Key Innovations
Sa ic M ke y M s ou e C b lu rb Ba ie ll Do En isi qu ac g un Yo e t th ke of ar ld l lm or ee na W wh tio ot uca d re te H En te re le ct ni ro c ga m es m ar H eM an e lin n io Q sh TH fa . s nd re n tu che P a tio ou n isi C au VU qu P) ie d l ith rb an ac M Ba br nt w o. (G ) e C les e e n Th en em io ng p sit ni ci Sc re y ag ar rin qui M Le P ac nt. se e g et rin en o. me pl ctu Lic t C ee om fa an gr l c nu as A te a le g at M (P sin M bal irl n ily G Lice lo G am an n lls s f ic o er ode lmo Do ttel Am kel e E tch Ma a ic N M P ns kle ge joi Tic bba ice s a r rie C er-P ia id sh Fi ey DI ubs sn s Di ANed ith th B lat i e sw w r ve e oy vi tur --t Re ven non t ll in a Jo of le
ke
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
tio n str at eg y
3
Innovation Analysis
Doblin Ten Types of Innovation
Doblins 10 Types of Innovation identify ten distinct areas where companies can focus to develop innovative new offerings. Market leaders typically have strongholds in 3-4 innovation types, with new Business and Networking models offering the most bang for the buck and Product Performance offering the least value. Higher innovation rates from 1955 to 1982 led Mattel to market leadership, with most of their offerings being developed in-house during that period. Once their development efforts slowed, they chose to acquire or partner with others to generate new ideas. This approach has resulted Mattel Innovation Analysis loss of market share over the past four decades. in slow growth and
Ten Types of Innovation How has Mattel innovated throughout its history?
Pa tch ion. Elm 199 199 3 elo 5 o de 19 G on lo 95 ba 19 Am l Mf 96 g er ica . Pra Le cti n ar ni Girl ces ng A 19 Vi Co cqu 97 ve is m nd i a pan ition M y n y 1 A Sc d T HQ cqu 998 en Ba e isi tio rb 20 20 ie n 01 Co 02 19 utu 99 re Fa sh io n 20 03 kle N ick me 19 68 86 19 re ntu Ve nt oi ey isn t-D al he Fis lia ric Ca Al r-P 19 77 nc e bb e Ac 82 iJ n Da W 88 Tic e ag
19
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Ac
68
68
Sa
he
of
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tW
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ld
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or
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Ho
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Higher hit rates in multiple types of innovation lead to market leadership. Decreased innovation rates over past 40 years results in slow growth and loss of marketshare.
Finance
Process
Offering
Delivery
Ba
Se
-M
ctr
on
an
es
19
19
59
se
un
19
els
ic
19
Yo
ou
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19
Organic Innovation
55
tio
Higher Innovation Rates 1955 to 1982 lead to market leadership Product Innovation first 30 years organic
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Mattels existing value web illustrates that they have vertically integrated operations, but this is only true for their Barbie and Hot Wheels brands. (Manufacturing for other branded products is outsourced.) This level of integration may actually be problematic since trying radically different approaches is challenging when plants arent designed with flexible manufacturing in mind. Also important to note is the significant amount of money paid to content providers for licensed content. At this time, Mattel produces a very limited amount of original content, a potential opportunity area for them which could have significant financial benefits. Although Mattel spent $646 million on advertising in 2005, they dont seem to have enough direct contact with kids to build relationships with them. How can they become as relevant as Nickelodeon? With regard to retailers, Mattel relies heavily on Wal-Mart, Toys R Us, and Target for widespread distribution. These big box retailers have tremendous purchasing power and can leverage significant control over the types of products sold through their channel and the cost of those products.
$
Raw Materials
Content Owners
Licensed Content $204M
Parts
Mattel
Toys
Mattel Manufacturing
Toys
Distributors $ $$
Toys Advertising $646M
$
Attention & Loyalty
$$$
Toys
Customers Kids
Parents
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Mattel continues its move into digital products with AcceleRacers, Pixel Chix, and Vidster. AcceleRacers is an excellent example of a rich user experience. It provides engaging physical and digital products that encourage collecting and competition, while ensuring the content stays fresh. Pixel Chix, a less rich user experience, combines physical and digital technology by placing an LCD friend in a physical environment. Digital friends can interact with each other, creating a sense of connection and community for girls. The Vidster Digital Video Camera is a simplified video camera with editing software. Its most appropriate for young children who want to make movies but arent able to operate mini-DV video cameras yet. (Older kids probably wont be satisfied with the resolution level, limited zoom, and limited storage capacity based on feedback.1
Source: http://blogs.pcworld.com/archives/0008.html
AcceleRacers introduced in 005 through vehicles, sets, and collector cards, complemented by new Cartoon Network cartoon, micro-episodes, and activities.
Vidster Digital Video Camera comes with 3-step photo and video editing software. It holds -8 minutes of video and has 30x0 resolution.
Pixel Chix are 3D environments for LCD virtual friends. When the environments are hooked together, the LCD characters interact with each other. Introduced in 005.
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Mattel has been actively strengthening the reach of its power brands, Barbie, American Girl, and Hot Wheels, by creating more extensive experiences for kids and their parents. Theyve extended the brands into made-for-tv movies, DVD movies, live stage shows, and real world exhibits. The Barbie and American Girl movies have proven to be highly successful while both brands stage shows continue their runs. The success of the Hot Wheels museum exhibit is more difficult to gauge, given its location with other museum exhibits.
Barbie Live in Fairytopia, the brands first live touring stage show
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User Research
User Research
Tweens
Primary research in the form of internet surveys and observational research was conducted with kids, age 7-12, in an effort to understand the Tween market. Both the surveys and the observational research confirmed the trends found through secondary research. Due to age compression, growing familiarity with technology, and the desire to create content, toys are seen as things that little kids play with. To illustrate this situation, two survey questions and their respective answers are included below: Q: What was the last cool thing that you were bought or given? A: Playstation video games, a Coach case and lanyard for an I-Pod Shuffle, Nintendo DS, snowboard, skateboard, and a cool pair of earrings. Q: Whats the next cool thing youd like to buy or receive, without thinking about cost? A: Sony PSP, NintendoSP with Nintendogs, In-home movie theatre, Playstation video game, I-Pod, Mini video camera, Xbox 360, and a good book. New findings that surfaced during observational research include: Kids discovering new character content in obscure places on the web, in addition to finding content through mainstream media Kids learning how to use new technology from each other, as well as from older kids and adults Mastery being a form of currency, and kids striving to be perceived as experts Kids interacting with technology wherever they go, using mobile gaming systems, portable DVD players, mp3 players, etc. Importance of collecting and displaying physical objects or artistic creations
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Observational Research
Mike
Sketch book
Observational Research
Jessee, Bob and Mark
7,8 and 10 years old Chicago, IL, USA
Observational Research
Lisa
Based on extensive primary and secondary research, four categories of insights were identified: Industry, User, Technology, and Mattel. Leveraging these insights, design principles and recommendations were crafted to provide focus for the Concept Development phase.
Industry
Insights 1. Video game sales are rising while traditional toy sales are flat. Principles Identify a viable strategy(s) for Mattel that allows them to participate in the video/ online game market while leveraging their core competencies. Generate and develop play concepts/ systems/experiences which combine physical activity with: - advanced technology - group play - sedentary gaming - educational opportunities - mobility (no set environment)
. Opportunities exist for toys which combine physical activity and at least one of the following: - advanced technology - group play - sedentary gaming - educational opportunities - mobility (no set environment)
User
Insights 1. Technology has empowered children, giving them the ability to communicate, create, and share content with others remotely. . Kids are getting older younger so traditional toys are becoming outdated at a faster rate. To combat this trend, some traditional toy manufacturers are developing edgier products to appeal to the older market. 3. Kids are exposed to technology at younger ages, which means that it becomes more integral to all facets of their lives.
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Principles Explore new technologies, and generate play concepts/systems which provide kids with unique content creation and sharing experiences. Consider establishing an edgy subbrand, distanced from Mattel, which develops more mature content for kids who have outgrown Mattels traditional products. Look for opportunities to introduce additional play value through the incorporation of technology into existing products.
. Kids have very limited free time for play so they multi-task and look for fun when using any device they have. 5. The rate of childhood obesity continues to rise, increasing the importance of promoting fun physical activities. . Childrens performance in school is dropping, but kids are highly motivated to master fun things that other kids value. . Kids have fewer siblings, decreasing the number of physically available playmates, which is further reinforced by kids participation in instant messaging, emailing, blogging, etc.
Introduce games that can be played in varying lengths of time, to accommodate their hectic schedule. (See Industry Principles)
Generate and develop play concepts/ systems/experiences which disguise learning and emphasize fun. Investigate and develop new approaches to remote group interaction and play.
Technology
Insights 1. Involving users in game development and adaptation inflluences the games success. . New types of controllers are expanding user interaction options with video games. 3. Games are being played in the physical world, using electronic technology to extend their functionality. Principles Provide opportunities for kids to participate in the development or evolution of online games or other media content. Explore technologies that allow kids to become more immersed in play environments. Investigate and incorporate technologies and concepts that allow physical toys to interact with virtual content.
Mattel
Insights 1. Mattel has a very limited presence in specialties that are becoming more popular with kids. . Mattel is the leading toy manufacturer for kids <1 to 8 but quickly loses market share with kids who are older. Principles (See Industry Principles)
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3. Sales for American Girl and FisherPrice are increasing while sales are declining for Mattel, with one primary reason being sales declines in Barbie. . Mattel has the necessary skills and technology to identify trends and opportunities. Ability to execute is the problem. 5. All non-toy related acquisitions and internal development ventures have failed. . Mattel focuses heavily on extending their primary brands, as opposed to expanding new product development efforts, leaving them without other established product lines to rely upon. . All of Mattels early innovations were developed internally, but theyve relied heavily on acquisitions and licensing over the past 0 years. 8. Mattels offerings span a very limited number of innovation types.
Conduct an extensive audit to determine why Mattel has such difficulty capitalizing on trends and executing in non-toy industries.
Evaluate Mattels balance between management of existing brands and new product development. Recommend focus readjustment, as necessary. Require that a certain percentage of content be developed internally so Mattel can drive more of its innovation efforts. Look for opportunities to expand the number of innovation types addressed through Mattels efforts.
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Concept Development
Concept Generation
Workshop
From Design Principles to Themes to Concepts
ANYWHERE
PLAY+
The design principles which evolved from the research insights were clustered, and themes emerged. Six sets of axes were developed (see below) to address each theme, with every axis having an opposite pair of descriptors assigned. Candidate axes for a 2 by 2 matrix
HI-TECH
individual low authoring sedentary low tech single channel experience fixed location
Rather than leveraging 2x2 matrices for concept generation, the team provided each brainstorming group with 3-4 attribute combinations, to help them generate a richer range of concepts. Determining theme combinations was done intuitively, with the goal being to pair themes that could have interesting or important relationships.
Group 1
Hi-tech Anywhere Physical Activity
Group 2
Physical/Virtual Exploring Identity Multimodal fun
Group 3
Play+ Physical/virtual Co-creation Group Play
Group 4
Physical activity Traditional Networked
Group brainstorms concepts which involve the hi-tech, anywhere and physical activity themes.
Strategic Planning Workshop | Mattel Strategic Plan | Babitch, Gili Fort, Kim, Nyberg & Wang
Process The workshop session was divided into three parts. The first activity required teams to generate concepts, based on their set of assigned themes. The second activity encouraged teams to consider how their three most promising concepts could be delivered, from a brand and customer experience perspective. To convey how their offering might function, teams role played some aspect of their concept as the third activity.
OFFERINGS
Product Performance
How you design your core offerings
DELIVERY
Channel Brand
How you communicate your offerings
Group dealing with these themes: play+, physical/ virtual, cocreation and group play.
Product System
How you link and/or provide a platform for multiple products.
Service
How you provide value to customers and consumers beyond and around your products
Customer Experience
How your customers feel when they interact with your company and its offerings
Concept Development (30 minutes) During concept generation, participants were encouraged to combine the themes provided and to talk aloud. For inspiration, themed imagery was made available. This imagery suggested potential product and service-based offerings that could be used as springboards to more unique offerings. As concepts were sketched, they were numbered and posted on nearby walls. At the end of concept development, participants voted for their top three concepts, and those were used in the second exercise. Concept Delivery Development (30 minutes) For each of their top three concepts, the brainstorming teams generated concept delivery ideas related to channel, brand, and customer experience. These categories were inspired by Doblins 10 Types of Innovation. After generating delivery ideas for each concept, the team voted for the concept system they wanted to share with the class. Role Play (20 minutes) Each team crafted and delivered a play which demonstrated their concept and how elements of the system interacted.
workshop theme coming up with ideas related to physical, traditional and networked
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Concept Evaluation
Following the Concept Generation workshop, brainstorming ideas were sorted into categories and category titles were assigned. Concept category titles were then entered into Excel, and each category was evaluated against all others using Insight Matrix, a proprietary tool developed at the Institute of Design. The tool was used to determine which categories were most closely related to one another. (This knowledge is helpful when assembling strategy components.) On a separate spreadsheet (see below), the value of each concept category was evaluated using the Design Principles and Mattel business considerations as criteria. Each criterion was weighted based on its level of importance. Concept categories were then rated against the criteria, yielding weighted scores. Weighted averages were then calculated, highlighting the categories that were most important and most feasible for Mattel to explore.
Criteria Industry
Weights
Identify a viable strategy(s) for Mattel that allows them to participate in the video/online game market while leveraging their core competencies.
16
16
16
16
16
User
Generate and develop play concepts/ systems/experiences which combine physical activity with: - advanced technology - group play - sedentary gaming - educational opportunities Explore new technologies, and generate play concepts/systems which provide kids with unique content creation and sharing experiences.
20
10
10
10
20
20
20
20
10
20
20
10
20
10
10
20
10
20
10
20
20
10
Consider establishing an edgy subbrand, distanced from Mattel, which develops more mature content for kids who have outgrown Mattels traditional products. Look for opportunities to introduce additional play value through the incorporation of technology into existing products.
12
12
12
Introduce games that can be played in varying lengths of time, to accommodate their hectic schedule.
Generate and develop play concepts/ systems/experiences which disguise learning and emphasize fun.
Fun Learning
12
12
12
12
Investigate and develop new approaches to remote group interaction and play.
Networked games
16
16
16
16
16
16
16
Technology
Explore technologies that allow kids to become more immersed in play environments. Investigate and incorporate technologies and concepts that allow physical toys to interact with virtual content.
12
12
12
16
16
16
16
16
16
16
16
Subtotal
28
12
20
18
22
16
12
16
20
18
24
24
16
16
16
12
22
26
2.941 100
1.412 48
2.059 70
1.588 54
2.412 82
1.412 48
1.059 36
1.941 66
2.059 70
1.882 64
2.529 86
2.412 82
1.647 56
1.765 60
1.706 58
1.176 40
2.294 78
2.765 94
0 0 4
2 4 0
2 2 2
0 2 4
2 4 0
2 4 2
2 4 0
0 2 2
4 4 0
0 0 2
0 2 2
0 2 0
0 2 0
0 2 2
2 0 0
4 4 0
0 0 4
0 0 0 Combined Score Rank 4.275 3 3.412 10 4.059 5 3.588 8 4.412 2 4.078 4 3.059 12 3.275 11 4.725 1 2.549 16 3.863 6 3.078 14 2.314 18 3.098 13 2.373 17 3.843 7 3.627 9 2.765 15
1.33
2 2.67
2 1.33 2.67 0.67 1.33 0.67 0.67 1.33 0.67 2.67 1.33
Concepts scored based on how much they support each design principle
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physical activity/mastery
physical activity/mastery
Collection management
Collection management
Virtual agents/pets/toys
Virtual agents/pets/toys
Concept Categories
Connecting people
Connecting people
Hi-tech morphing
Hi-tech morphing
Science creation
Science creation
System Development
System Overview
Having determined each concept categorys roll-out priority, based on ease of implementation and fit with core competencies, the concept categories were then deconstructed and reassembled into strategic subsystems. The complete system, which addresses future product and service innovation areas for Mattel is illustrated in the diagram below. On the following pages, each system sub-element is described in more detail.
Imaginative Exploration
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Subsystem Components
Traditional Toy/Game Enhancement
Traditional Toy/Game Enhancement is comprised of two categories: Technology Extension and Collection Management Extension. Technology Extension refers to traditional toys and games that have technology incorporated into them to extend their functionality. Examples might include a Frisbee with an integrated video camera, baseball cards with bar codes, or a Monopoly board game that emits electronic sound effects when players land on particular squares. Collection Management Extension is a website that extends the play value of physical collections by giving kids the ability to manage their collections (e.g. Barbies, Hot Wheels cars, etc.) online. As an example, the website could help kids organize, swap, value, and potentially sell items in their collection. It could also highlight those toys that are limited editions, rare, sought by others, or new releases, as well as wish list items.
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Subsystem Components
High-Tech Toy Development
High-Tech Toy Development is comprised of three toy categories with different levels of presence in the real world: Primarily Physical, Primarily Virtual, and Physical/Virtual. Primarily Physical refers to stand-alone toys that are heavily dependent on electronics. Examples of this category would include a remotecontrolled monster, an electronic guitar with pre-stored songs, or musical motion sensor bracelets which allow kids to create music by moving their arms and legs. Primarily Virtual would include toys where the primary play value is on-screen, whether that be on a computer or hand-held device. Existing examples include Tamagotchis, Sony PSP games, and electronic diaries. Physical/Virtual refers to high-tech toys or games that have a balanced presence in both the real and on-screen worlds. Existing examples in this category include Dance Dance Revolution, wireless motion-activated gear that kids wear to control on-screen super heroes, and Pokemon cards with barcodes that can either be used to play a card game or scanned into the computer for online competitions.
Primarily Physical
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Subsystem Components
Imaginative Exploration
Imaginative Exploration is comprised of three categories: Scientific Exploration, Fantasy and Aspirational Exploration, and Competition Forums. Scientific Exploration refers to toys and games with science and learning as primary components. These toys or games could be high or low tech. Product examples might include engineering kits which allow kids to create various structures and then post them for web-based competitions. Kits with super-sized components could also be developed which allow kids to build and race vehicles, analogous to go-cart or radiocontrolled vehicle racing. Concepts could be paired with a web service that encourages Tweens to work together, emphasizing teamwork to solve engineering problems. Scientific Exploration Another concept example might include learning about animals by morphing two creatures together. Kids would learn about each animal and its characteristics while forming a new mutated species. Again, opportunities would exist for physical or virtual competitions. Fantasy and Aspirational Exploration involves toys and games which allow kids to become someone they admire including rock stars, movie stars, athletes, or parents. Fantasy could also involve role-playing adventures, analogous to Dungeons and Dragons. Games might leverage technology to create both physical and virtual experiences which enrich the exploration. Competition Forums could consist of in-person, organized contests as well as virtual competitions. As an example, they could take the form of actual races or rely on preference voting.
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Subsystem Components
Content Creation and Community
Content Creation and Community is comprised of three categories: content creation, social networking, and exchange of content. Content Creation refers to games or toys in which tweens develop original content. The desire to create their own content and share via blogs and other web-based outlets is becoming increasingly more popular. Types of content generated include movies, music, animated cartoons, art, fashion, etc. These types of activities empower kids to develop story lines themselves rather than having the story line provided by the toy or game. Social Networking involves developing networks where Tweens can interact with each other based on common interests, values, or activities. Networks could include websites, wireless technology, or other near-term networking technologies. Examples in todays world include Flickr and MySpace. Content Exchange, closely related to social networking, refers to exchanging concepts, creations, or representations of common interests. For example, kids might share original music on Mattels music club website. They could also beam information, like a sound byte from their favorite music video, to each other.
Content Creation
Exchange of Content
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Subsystem Components
Mobile Networked Entertainment
Two categories make up Mobile Networked Entertainment: Physically Active Networked Experiences and Enroute Networked Experiences. Physically Active Networked Experiences includes toys and services that leverage GPS or positioning technology to provide entertainment that blurs the division between the digital and physical worlds. Examples include Tiger Telematics Gizmondo, Mopius RealReplay, and Your World Games The Shroud. Enroute Networked Experiences includes wireless toys and services that allow kids to learn and play while on the move. A future device could combine a PDA like device with plant and animal imaging identification technology. After a real plant or animal is identified through an optical reader, in combination with imaging software, the device could then download related information from the web. Precursors include LeapFrogs iQuest and Verizons XAPwords. enroute
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Subsystem Components
Physical Activity Immersion
Three categories comprise Physical Activity Immersion: Immersive Play Experiences, Immersive Educational/Mastery Experiences, and Activity Incentives. Immersive Play Experiences refers to collective and individual experiences supported by technology enabled environments. The experience is multi-sensory and interactive. A precursor is Lazer Maze. Current examples are Amusitronix arcades games and 5W!TS TOMB adventure. Immersive Educational/Mastery Experiences refers to smart toys that assist kids in learning new skills. A smart drum set could show tweens how to provide the drum beat to their favorite songs. Examples of physical activity devices include golf analyzer gadgets and Konamis Dance Dance Revolution. Activity Incentives include services that encourage activity through the use of rewards or points. An activity incentive service could involve a tween exercising while also earning points that can be applied toward his or her online character. The more he or she exercises, the stronger his or her online character becomes.
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To re-establish themselves as leaders in the creation of childrens play experiences, Mattel must make some operational and strategic adjustments, as illustrated in this new value web. Specifically, Mattel must build their competency in content creation, while partnering with niche knowledge communities, to reduce their dependency on external content providers, like movie studios. Given their limited experience in technology and software development, they must partner with firms who are experts in these areas to more quickly develop technologyinfused products and services which provide richer play experiences. Simultaneously, they must strive to learn from these companies since the knowledge is critical to their future success. Mattel must also establish a webbased dialogue channel with buyers and users which promotes interaction between them via networks, provides hardware and software upgrades, provides creation tools, and sells new products and services. Finally, Mattel must become more active in providing entertainment experiences by partnering with companies like Disney and NASCAR, supporting activities with appealing products and services, and providing licensed and unlicensed content.
Content Owners
Technology Partners
Raw Materials
Manufacturing Partners
Licensed Content
$
Technology
Manufacturing expertise
Content
Mattel
$
Toys Digital toys and game extensions Advertising Budget $
Distributors
$
Toys
Mattel Retails
Mattel Services
Service Providers
$$
Entertaining Experiences
Offerings
$ $
Digital updates
Customers Kids
Parents
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Strategy Roadmap
Strategy
This implementation roadmap illustrates how Mattel should roll out three key strategy subsystem components over time. (The following pages delve into more detail on each program.) Traditional Toy Enhancement was chosen for development because of its relative ease to execute. Content Creation and Community was selected because of its importance to todays kids. And Physical Activity Immersion was chosen because of its potential for Roadmaps engaging play in the future.
Collection Collector cards, toy Management transporter, American Girl, and newsletter Web development, social networking, and design/ technology strategy Product portfolio audit Web Consulting and IT Strategy partnerships Year 1 Software engineering, electrical engineering and UI design Manufacturing audit
New Capabilities
Year 2
Year 3
Year 4
Year 5
Organizational Changes
Leverage human talent or licensing technology from acquisitions and alliances across the organization
Partnerships
Continue to form media and video-gaming alliances. Develop alliance with tech toy leader. Develop alliances with other educational institutions. Year 2 Year 3 Year 4 Year 5
Year 1
Year 2
Year 3
Year 4
Year 5
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Roadmap
Traditional Toy/Game Enhancement
Stage (5+ years) (Dependent upon product portfolio audit) - Toy & Game Personalizer (allows kids to choose game piece sets, game board themes, etc.)
- Collector cards (e.g. Barbie fashions, Hot Wheels car components, etc.) with barcodes - Toy Transporter (reads barcodes and uploads items into collection) - American Girl collection management website (charge for valuation) - Online collector-oriented newsletters Web development, social networking, technology strategy Audit current product portfolio with design/technology/ strategy consulting firm to determine which toy/game functionality can be extended with technology or expanded services. Web development consulting firm(s), design/technology/ strategy consulting firm, collector clubs Software engineering, electrical engineering, UI design Audit manufacturing processes, facilities, and suppliers with manufacturing consultant to determine level of prowess and opportunity for flexible manufacturing.
- Barbie and Hot Wheels - Collection management collection management websites for other Mattel websites (charge for valuation) collectables - Mattel collector social network - Mattel-sponsored collector conventions
New Capabilities
Organizational Activities
Partners
Ebay for trading/selling, collector clubs, technical manufacturing consultant Collector clubs (newsletter), cell phone manufacturers (bar code reader), Hasbro
Collector clubs
Competitors
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Roadmap
Content Creation and Community
Stage (1 - 3 years)
Bring new organically developed concepts to market with a focus on co-creation, social networking, and sharing
New Capabilities
Organizational Activities
Leverage American Girl expertise throughout the organization. Learn from this success.
Leverage human talent or license technology from acquisitions or alliances. Establish an innovation center part of which is focused on weak signal media trends
Partners
Evaluate market and industry leaders to determine potential alliances and acquisitions to enter co-creation, sharing, and social networking spaces Acquire or form an alliance with one of these players to build this capability Form a relationship with MIT Media Lab or other similar cutting edge educational entity to learn from and develop expertise in-house
Continue to form alliances in areas such as media, video-gaming Form an alliance with a technology-oriented educational toy leader Develop talent recruiting relationships with world class educational institutions.
Competitors
Flickr (Yahoo!), MySpace, Google, Microsoft, Hasbro, Disney, Apple, Electronic Arts, Sony, Vivendi
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Roadmap
Physical Activity Immersion
Stage 1 (0-1 years) Concept: Individual Immersive Experiences Concept: Immersive Educational/ Mastery Experience Product development Leverage existing brands including Barbie and HotWheels Product development Leverage existing internal educational expertise at Fisher Price and American Girl
Stage ( - 3 years) Launch and begin to extend products Incorporate additional brands Launch and begin to extend products Develop music related products
Product development Conduct research into possible incentives, i.e. online games, music, clothing
Concept: Create preliminary Group Immersive Experiences business plan New Capabilities Basic immersive technologies sourcing Develop user research capabilities Organizational Activities Develop cross functional product development teams
Single concept site: prototyping and development Advanced immersive technologies sourcing
Leverage human talent and technology from acquisitions across the company Form cross functional virtual planning team
Partners
Develop partnerships with industry/video game leaders and music-focused partners i.e. Philips, Intel, Vivendi, NCSoft Develop academic partnerships, i.e. MIT Media Lab, Tisch, RCA
Competitors
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For Mattel, the risks involved with expanding their capabilities and pursuing this proposed strategic plan are sizeable and must be carefully evaluated before proceeding. However, the risk they incur by staying the course and continuing to focus on their existing core brands is much greater, given the changing lifestyles of kids and the loss of core brand market share. Specific risks and uncertainties associated with this strategic plan include the following: Video games are a lucrative market, but Mattel shouldnt plan to compete with powerful incumbents like EA, Sony, or Microsoft, given their dominance in the field. Instead, Mattel must look for opportunities that allow them to tie physical objects to virtual content, thereby leveraging one of their core competencies. Mattel does not have extensive talent or experience in fields like mobile technology, networking, web development, software programming, etc. In order to become a market leader in more tech-focused play entertainment, Mattel must either partner with skilled firms or acquire skilled firms as well as hiring talent to build these competencies. Mattel is currently perceived as being a toy brand for kids. As such, they may want to consider creating a sub-brand which allows them to develop more sophisticated or edgy entertainment without adversely affecting the Mattel name. (Kids might also consider the product more seriously if the Mattel name isnt prominent.) Mattel must look for innovation opportunities beyond product development (refer to Doblins 10 Types of Innovation) to build a more defensible position in the industry. Powerful incumbents exist in the video game space in the form of EA, Sony, and Microsoft. Therefore, they must distinguish their offerings from them rather than compete directly. (It should also be noted that compelling low tech experiences can be just as engaging as those incorporating advanced technology.) Mattel has had difficulty leveraging previous non-toy related acquisitions. They should investigate the cause for this and try to proactively prevent such issues in the future. It is unclear what the optimal balance of externally generated content vs. internally generated (organic) content should be. This is an area requiring further consideration. This strategic plan doesnt focus specifically on improving processes. However, operational aspects of the business (e.g. manufacturing, outsourcing, supplier relationships, etc.) should be explored for optimization. The price of oil continues to rise with industry experts claiming theres no end in sight. As such, contingency plans should be established to combat this uncertainty. In addition, potential substitute materials should be explored.
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Conclusion
Although Mattel is currently being challenged by a shift in childrens lifestyle trends and the growth of increasingly more sophisticated play technology, there is hope. By leveraging their existing competencies while acquiring new capabilities through internal development and partnerships, they should be able to successfully develop relevant products and services for the Tween market, as well as for children of other ages.
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Appendix
Within the traditional toy industry only the categories Action Figures & Accessories, Building Sets, and Learning & Exploration increased between 2004 and 2005. After Video Games, Infant/Preschool and Outdoor & Sports Toys, and Dolls represent the three largest categories.
CATEGORY Action Figures & Accessories Arts & Crafts Building Sets Dolls Games/Puzzles Infant/Preschool Learning & Exploration Outdoor & Sports Toys Plush Vehicles All Other Toys TOTAL TRADITIONAL TOY INDUSTRY Total Video Games
00 $1.3B $.5B $5.8M $.B $.B $3.B $31.M $.8B $1.5B $.0B $.B $.1B $.B
005 $1.3B $.B $5.M $.B $.B $3.1B $3.0M $.B $1.3B $1.8B $.5B $1.3B $10.5B
% Change
% Change - 1 - - -1 5 -3 -15 -8 - -
Source: NPD
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