The Chevy Volt
Recently production was halted on the Chevy Volt due to low demand. If you are not familiar with the Volt, it is a hybrid car that uses a battery powered electric motor, and has an additional gasoline motor that kicks in when the battery is exhausted.
The concept sounds good. Everyone wants to be green and drive an electric car, but no one wants to run out of juice and be stranded from their home battery charger. This anxiety has limited the purchase of pure battery powered vehicles where the typical driving range is 70 miles per charge.
Nissan Leaf
Chevy decided to address the problem by adding the option of switching to gas power if the batteries are drained, and you will never be stranded like you would be in a pure battery car, such as the Nissan Leaf.
When the Volt came out I questioned the level of feasibility work that was done, and how the business case was justified. I saw the value of the Volt and I was amazed at the technology, but I also perceived many negatives that could limit the buying audience for the vehicle.
I believe that if the correct feasibility processes were performed Chevy may not have gone forward with the Volt. For the purposes of this article, let’s do a feasibility simulation and see what could have happened at Chevy.
Starting Feasibility with an Elevator Statement
I train teams to start the feasibility process by creating an elevator statement for the project or product. If you are not familiar with elevator statements, they concisely describe the justification for doing a project, or why this project makes sense to do. Elevator statements do not discuss who, what, when, or where, but only focus on the business reasons for doing a project.
Elevator statements are brief and can be shared with a fellow elevator passenger in the short amount of time it takes to ride an elevator from one floor to another. The thought is most people have a short attention span, and if you cannot summarize the value of a project in a concise paragraph, the project may not make sense to pursue.
The format of an elevator statement looks like this:
For (target customer)
Who (statement of the need or opportunity)
The (product or project name) is a (category)
That (statement of key benefit – that is, compelling reason to proceed)
Unlike (primary competitive alternative)
Our Product (statement of primary differentiation)
To demonstrate with an example, I imagine many years ago the Apple iPod may have had an elevator statement that looked like this:
For: Music lovers
Who: desire a simple way to listen to and manage their songs
The: iPod
Is a: portable digital music player
That: provides intuitive, easy to use controls.
Unlike: other MP3 players
Our: product provides seamless integration with a world class music store (iTunes)
So going back to the Volt, what could the elevator statement have looked like for this project? Let’s assume that the Volt product owner, whom we will call “Jay”, created the following statement:
For: Automobile drivers
Who: desire a clean, efficient method of transportation
The: Chevy Volt
Is a: hybrid motor vehicle
That: is propelled by an electric motor and can go 35 miles on battery power
Unlike: the Nissan Leaf which is limited to 70 miles of range per charge
Our: product has an onboard gas engine that can act as a generator for the electric motor and extend driving range by 340 miles
And
Unlike: The Tesla Roadster which costs $109,000
Our: product only costs $32,000 after government rebates
Tesla Roadster
If a product owner creates an elevator statement on their own, I will have them vet the statement with a small subset of the project team. This small team is often composed of a development lead, a test lead, a UX lead, and an architect. The small team will try to identify holes in the elevator statement and issues that the product owner overlooked.
Simulating an Elevator Statement Team Evaluation
Let’s pretend the following happened at Chevy when Jay reviewed the elevator statement with the small team:
Keith the architect points out missing infrastructure. The Volt owner will need to install a charger in their home, at a cost of approximately $2000. To get a charger the owner will need to go through an assessment of their garage, obtain a permit for charger installation, do the installation, then have the installation inspected and approved. Not quite as easy as buying a gasoline car.
Laura the QA lead thinks that die-hard green technology enthusiasts will buy the Volt even if they have to install a charger. However, Laura has concerns of her own. Laura notices that the Volt may have a high Total Cost of Ownership (TCO). Here is Laura’s hypothesis:
If a person buys a Chevy Volt they will spend $32,000 for the initial purchase plus $2000 for a charger. Each charging of the Volt will cost approximately $1.50 on the electricity bill. The $1.50 of electricity is good for 35 miles of range. Continuing with this cost of ownership hypothesis, Laura says the average person drives 15,000 per year, and they keep a car for 5 years before selling and trading it.
Summing all of the items above, Laura determines that the total cost of owning a Volt for 5 years would be:
$32,000(car) + $2,000 (charger) + ($642 (electricity cost per year) x 5 years) = $37,210
To give this perspective, Laura asks Jay to compare the Volt to a gasoline car that Chevy sells, the Chevy Cruze eco. The Chevy Cruze has a price of $16,800. If the average person drives 15,000 miles per year, and gas costs as much as $5 per gallon, the total cost of owning a Cruze for 5 years will be:
$16,800 (car) + ($1785 (gas cost per year) x 5 years) = $25,728
Laura concludes her point by saying a person could get a nice car plus a nice motorcycle (a new Suzuki GS 1000) for the cost of a Volt.
Chevy Cruze
Scott the developer does not want to pile on to the negatives, but he has his own point for Jay. How long are the batteries good for? Jay says the batteries are warrantied for 8 years, and right now he guesses a replacement battery pack will cost $3,500 in the year 2020.
Summarizing the Value of Elevator Statements
Let’s leave the simulation and reflect on the main goals of an elevator statement. Here are 5 reasons I use elevator statements with my project teams:
- If you cannot concisely describe why you are doing a project, you have an immediate red flag.
- An elevator statement is a great tool to be reviewed by a small group for feasibility.
- An elevator statement review with a project team is a great way to get project buy-in. Most teams are just told to build something. Teams are not usually asked if they would approve of a project. Involving the team in feasibility helps build passion and support for a project.
- An elevator statement review is cheap and can help you decide to cancel a project before going into an expensive and detailed ROI analysis.
- Elevator statements help the team design the product. By knowing why we are doing a project, we can tailor the design and tradeoffs for the main business goal.
In summary, I am a huge fan of the elevator statement and use them with all of my clients and projects.