Hydrofoils for Motorboats

TCA Project Part B

Matt Baryluk, Zane Dennler, and Ben Leonardi

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Hydrofoils for Motorboats

Origins

The concept behind motorboat hydrofoils is well-proven, having first been put into

practice over 100 years ago. Hydrofoils utilize the simply physics principle of lift to

increase the speed and efficiency of water travel. Realizing that this principle could be

applied to boats in the same way that it was to aeroplanes, Enrico Forlanini built the first

efficient manned hydrofoil craft in Italy around 1900. Despite a proven concept,

hydrofoils would not see widespread use until the 1950s, when they were adapted for

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for military and commercial use. By the 1970s hydrofoil craft saw widespread adoption,

with certain boats achieving speeds of 80 miles per hour.

This image demonstrates how the interaction of water flow with the foil creates lift.

These developments, however, applied only to fixed, open water craft, such as

patrol boats, racing boats, and catamarans. In March of 2018, Jacob Woeste conceived

of a modular hydrofoil attachment for aluminum fishing boats, one which could confer

the same benefits of speed and stability while allowing for flexibility and applicability to

the niche of recreational and competitive fishing and boating. Aluminum motor boat

owners receive multiple benefits. The first, which caters primarily to competitive boaters

and fishers, is the additional speed that is gained as the hull is lifted from the water and

drag is greatly reduced. The second, more tailored to recreational boaters, is the

increased comfort of a lifted hull, which will no longer buck and skip upon contact with

waves. While the product has been developed through work on an Engineering Senior

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Design Project, it has been evolving for five months and presents a high propensity for

commercialization.

Industry Dynamics

As this attachable recreational hydrofoil would be the first of its kind to market,

there is currently no industry surrounding attachable hydrofoils. It follows that the

industry dynamics which concern us are aluminum fishing boats, whose owners are

likely to purchase the hydrofoils in order to improve the performance of their craft. Within

the $30 billion overall boating industry, roughly $1.5 billion is comprised by aluminum

fishing boats. The quantity sold in 2016, roughly 60,000, has grown consistently

year-over-year since 2013. Sales grew 6.4% in 2014, another 4.0% in 2015, and a

further 6.1% in 2016. What’s more, 84% of industry experts forecast that sales will

increase again in 2018, and 42% believe this growth will top 10%.

The above numbers merely concern new boat sales. Another lucrative market

exists in currently owned boats, whose numbers are estimated at 600,000 units.

Founding and Implementation of Technology Strategy

There are multiple variables influencing the approach to implementation. The

intent is to target the purchasers and owners of aluminum fishing boats, the largest

demographic whose boats are compatible with our product. The rationale is provide an

upgrade to performance at a cheaper price than other upgrades or a new boat. Buyers

will be persuaded to purchase the hydrofoils rather than opting for a more expensive

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model with the same performance. Owners will recognize hydrofoils as a performance

upgrade with a far cheaper price point than an entirely new boat or engine. A challenge

still exists in providing the product at a price point that will render it competitive with

other performance upgrades while providing a profit. Market research is being carried

out in the form of interviews in order to understand where this point of equilibrium lies.

The current projected price point is $3,000. This would enable a predicted 20% profit

margin. The extent of market penetration determines total profit, but at 4% of new boat

sales and 2% of current owners profit would equate to roughly $10 million.

As far as intellectual property is concerned, a patent is being pursued in order to

prolong the available time for development and increase market share. As it stands, the

patent environment for hydrofoils is finicky. A number of hydrofoil-related patents have

already been filed and expired, leaving many aspects of the concept in public domain.

There are, however, a number of features of our product that render it unique, due to the

fact that the concept must be worked to make it removable from boats. In addition, for

safety reasons, the hydrofoils must be designed to break away safely in the case of an

underwater collision so that passengers are not injured by sudden stopping. The intent

is to pursue the patent on the grounds of these innovations.

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Establishing an Objective

Pertinent Stakeholders

Below are listed a number of various stakeholders with differing degrees of actual

stake in either the actual company or the market environment in which the firm is

competing.

Consumers

While the adage that ‘customer is king’ might not always be a truism, there is

absolutely a reason that that is the first group listed under stakeholders. A market is

needed for a firm to exist, and the firm needs to make sure that they are supplying to a

market hungry for the product. Thankfully, hunger seems abundantly apparent. From the

over $3.6 billion in recreational boats sold annually (2016), to the massive market for

add-ons to those boats (including faster motors, depth detectors, etc…), this is a market

full of opportunity.

The firm is, however, focusing on the slightly more specialized sector of not only

the recreational boat market, but the fishing boat. Specifically, the $1.5 billion aluminum

fishing boat market and the $0.4 billion fiberglass fishing boat market, as the product is

primarily aimed at those who fish for leisure. In addition to currently being a market

drowning in opportunity, the market has also seen a growth of around 5 to 6 percent

every single year since 2013.

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Employees/Advisers

Currently, the firm consists of three individuals: Jacob Woeste, the CEO and

co-founder, Derek Schulte, the CTO and other co-founder, and Chris Moell, who is

technical support. All three of these individuals have exceptionally strong technical

backgrounds, with combined experiences encompassing published research papers,

patent drawings, CAD designing and 3D modelling, as well as professional experiences

in manufacturing engineering. What should be apparent is that a problem for the team is

not their technical knowhow, but their business acumen.

When looking forward to actual product offering, these individuals will need

strong knowhow in supply chain management, as well as probably some sort of

financial expert. However, a common theme exists that makes these individuals all have

legitimate stake in their business, and will probably impact the hiring process. All of

them simply enjoy fishing for leisure, relate to some of the problems faced by fishermen,

and wish to improve the lives of those who share their passion.

However, while not officially members of the team, there are a number of

consultants and advisers who have been instrumental along the way. From engineering

professors, to department heads, to individuals actually members of the market in which

they would like to involve themselves, their help cannot be underestimated.

Competitors

Competition, as far as attachable boat hydrofoils are concerned, is essentially

nonexistent. There are a few firms that have patents on hydrofoils that attach to

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surfboards and other personal , non-motorized boating equipment, but none designed

specifically for fishing boats. This leaves the firm with a large market and an as of yet

unsolved problem: fishermen’s desire to get to destinations faster and with less

discomfort along the way.

Currently, most products on the market focus on only one side of this problem

and do so in a manner that is not cost-effective for consumers. New, external motors

that boost speed by a number of factors can actually complicate and make the comfort

problem substantially worse. There are very few products that have the ostensible

purpose of smoothing a ride: it is something boaters just assume will not change.

Boat Salesmen

Lastly, the individuals by whom this product is intended to be sold will be

wholesale boat distributors (e.g., Bass Pro Shops, Cabela’s, etc…) as well as

convenience stores and retail giants Amazon and Walmart. The firm intends to have an

incentive structure such as to motivate individual employees of these distributors and

retail stores to sell and grant a kickback to those who sell particularly well.

Interest Evaluation and Stakeholder Position

The deep dive analysis of the firm will be performed from a sales representative

in the boating and outdoors market, like one of the individuals we talked to for advice:

Mark Blackfield. Mark has been a sales representative in the sports boating and

assorted accoutrements industry for twenty years. One of the main concerns given by

all, but specifically those looking to market their products is the propensity of these

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external devices to withstand significant damage. While this is ostensibly a technical

problem, the solution of it will be instrumental in marketing these products as not only

fast, fuel-efficient, and comfortable, but also and necessarily safe.

BHAG for the Organization

The final design for the prototype has a safe mechanism for breaking away from

boats so that the product can be marketed as fast, fuel-efficient, comfortable, and safe.

Tentative Sequence of Actions

Action Sequence

1. Continue meeting with technical and business advisers

2. Conduct market research via interviews

a. Focus on relationship between speed tradeoffs, optimum balance of

speed, fuel efficiency, comfort

3. Manufacture first prototype for senior project

4. Explore intellectual property claims

a. Most patents to hydrofoils have expired, leaving public domain

5. Speak to patent lawyer in fall ‘18

Assumptions

● Boats’ longevity will not be harmed by the addition of external stressors

● Boaters are most concerned with the speed of their boats

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○ Competitive fishermen are more concerned with speed

○ Recreational fishermen are more concerned with comfort

● Aluminum boats have a cost-effective method of installing hydrofoils

Risks

There are a myriad of risks that could upset the firm’s trajectory, both

endogenous and exogenous. The status of the product as a compliment good to a

luxury one marks it as particularly more vulnerable to any broader economic slowdowns

than consumer staple, or even normal, goods.

Internal

Any concern over the members of the team should be assuaged by the fact that

many have already given countless hours to this project, so qualms directed to the

sticktoitiveness of members of the team or even the advisers are misguided at this

point. However, the actual physical products machining and the entirety of the supply

chain is a question that remains, as of yet, unanswered. From installation on boats, to

sourcing of materials, to dealings with variations in boat structures: some of these

problems can cause genuine concern. However, they are not questions with which the

team is unfamiliar and a good deal of thought has gone into clever solutions to these.

External

A change in consumer preferences (or simply a change in the population to

whom this product appeals) could throw a wrench in this market - though given that how

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such a demand shock would happen is a mystery, the importance of proactively dealing

with such a problem is dwarfed by others, such as problems complicating the firm’s

exploitation of intellectual property schemes. From the expiration of many related

hydrofoil patents to the general nature of such technology and the relatively basic

application of the technology in an unbeforeseen way, this may present some problems.

However, the exploration of the ability to patent the method of joining the foil to the boat

is definitely occurring.

Recommendations

Objective Summary

The 3 year goal of our company is to sell the attachable hydrofoil to 5% of the

used boat market in the Ohio Valley region. Kentucky, Ohio, West Virginia, and

Tennessee are included in the Ohio River Valley. We would also like to sell the

attachable hydrofoil to 1% of the used boat market in the United States within the first 3

years. After the Ohio River Valley, we will be targeting the Great Lakes Region. There

are 12.5 million registered recreational boats in the United States. Since the largest

portion of these boats are aluminum fishing boats, we estimate that there around 3.5-4

million aluminum fishing boats in the United States.

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Recommended Actions and Justifications

The first thing that we will do to launch our company would be to get patents on

different aspects of our product. The attaching mechanism, support to the haul, and the

ability to move the propellor lower as the boat rises could all be patented.

We will target the used boat market to sell the hydrofoil. To maximize sales, we

will begin displaying the new item at boat shows in the region. At the different boat

shows, we would create different relationships with boat dealerships to put the product

in their stores. In addition, we would like to create an agreement with them to have them

be able to install our product for customers.

We will also work to get our product on Overton’s. Overton’s is a website that

boat owners can buy parts and accessories for their boats. The website is extremely

popular, and the ability to be on that website would be crucial.

Last, we will make appearances at local fishing tournaments. The appearances

will get us in front of potential clients, and it will help us gain recognition. If we are seen

by more people, then we would have a higher likelihood of someone buying our product.

Assume the Role of a Competitors

Strong and Likely Competitor

A strong or likely competitor would be one of the many companies that exist in

the industry currently. Both companies that manufacture boats and companies that

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create boat parts/accessories would be able to compete in this space. The patent for

hydrofoils is not valid anymore, so it would be easy for a competitor to enter the space.

Competition’s Mitigation Recommendations

The competition would be able to mitigate our product by using their financial

resources and established network. Their financial prowess would allow the competition

to do more research, which would allow them to create their own ways to install the

hydrofoil. Creating a hydrofoil is not the difficult part of the equation, but attaching the

hydrofoil to the boat adds many different risks. The competition would need to engineer

a way to attach the hydrofoil to the boat, add support to the hull of the boat, and account

for the height of the propellor as the boat rises and lowers in the water. These could all

be accomplished if patents did not exist to protect our company.

The competition would also be able to utilize its network to mitigate the risk to

their business that our company poses. Since they are already established in the

industry, getting the product into dealerships and in front of customers would be much

easier for them. Also, if an individual boat manufacturer added this as an option to a

new boat, then it would be in the spotlight even faster.

Recommendation Adjustments

To mitigate the risk, we would suggest that our company gets patents for the

areas that are patentable as soon as possible. There is no way to patent the hydrofoils

on the boat because it has been done already. The patent, however, is not valid

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anymore. The ability for the hydrofoils to attach to the boat, the strengthening of the

boat hull, and the propellor height being able to adjust as the boat rises out of the water

are all things that are important to design and could be patented. The patents create the

added safety and time that our company needs to get started in the boating industry.

The patents would protect our competitive advantage, and the patents would allow us to

recoup the money that we put into our research and design preparation.

Sources

http://web.mit.edu/2.972/www/reports/hydrofoil/hydrofoil.html

https://books.google.com/books?id=8NsDAAAAMBAJ&pg=PA70&dq=1954+Popular+M

echanics+January&hl=en&sa=X&ei=S8Q4T9XAH8aygwe0k-nnBQ&ved=0CD8Q6AEwB

DgK#v=onepage&q&f=true

http://www.foils.org/

https://books.google.com/books?id=u-EDAAAAMBAJ&pg=PA136&dq=&hl=en&sa=X&ei

=uoxET6-bFcPVgQf2s_i2BA&ved=0CEcQ6AEwBjgK#v=onepage&q&f=true

https://www.growboating.org/toolkit/facts-and-figures.aspx

http://www.oceanofnews.com/wings-water-history-hydrofoils-boats/