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NIST GCR
02-834 B.1.1 Company DescriptionAesthetic Solutions is a small company located in Laguna Niguel, California. Although the main technological ideas developed by Gary Falacara, principal investigator at Aesthetic Solutions, existed before receiving the ATP grant, the company did not. After receiving funding from ATP, Aesthetic Solutions was able to conduct the R&D needed to accomplish the technical goals it put forth in its ATP proposal. Company Demographics
B.1.2 Technology DescriptionGoals of the ATP ProjectAesthetic Solutions hoped to build a component-based technology for virtual reality that would allow non-technical users to incorporate 3D virtual reality images within their downstream applications. Aesthetic Solutions believed that current virtual reality programs were too expensive and only oriented to programmers, not users. Aesthetic Solutions hoped to lower the barriers to virtual reality use and, in the long term, turn virtual reality technology into a mass-market product. At the start of the ATP project, Aesthetic expected that it would be able to achieve all of the technical goals that were needed for users to implement virtual reality into downstream applications. The potential applications of this technology would be numerous, including medical, training, and industrial applications. Ideally, end users could use the technology developed by Aesthetic and incorporate it into their applications. By incorporating this technology into their applications, end-users' productivity was expected to increase. For example, by including a 3D interface within a medical training application, doctors would understand more clearly how the human body works and the implications of various medical procedures. Technical AccomplishmentsAesthetic Solutions accomplished all of the technical goals set forth in their proposal to ATP. Their goals were achieved within the time frame they expected and reached the level of quality required. Aesthetic Solutions developed demonstrations of their technology, codes, and technology libraries that end users could immediately use within the applications they are developing. However, technical success has not led to commercial and economic success. Aesthetic Solutions gives four reasons why they have been unable to achieve commercial success to date. Aesthetic Solutions thought that all of these barriers could be overcome if they could have developed an effective sales force. However, they lacked the financial resources to develop such a sales force. First, the company was not able to convince businesses to adopt their technology. For several reasons, some of which were beyond their control, Aesthetic Solutions used a programming language called Virtual Reality Markup Language (VRML) within their technology. Consequently, potential end users would have had to change how they produced their own software to incorporate Aesthetic's new technology. Most end users were afraid to take this risk. Second, the market for 3D technologies unexpectedly collapsed during this time period, which drastically reduced the number of potential customers. Third, because of changes to the market and the programming language used, venture capitalists were unwilling to invest additional funds in developing custom applications of the technology developed by Aesthetic. Fourth, the technology is ahead of its market. Although Aesthetic Solutions was able to develop the technology, end users lacked applications that could incorporate it; thus, sales of the product have been limited. Products
Customer Use of the ProductAesthetic Solutions developed three separate products, World Visions, Component Visions, and User Visions. World Visions is an assembly tool that consists of a point-and-click library of reusable 3D components. Although the product is currently being sold, Aesthetic Solutions does not expect that it will stay on the market much longer. Component Visions was a prototype development tool for developers to build their own components that never reached the market. The company had hoped this product would display the technology that it had developed. User Visions was expected to be the product that customers could use to apply the 3D libraries developed by Aesthetic Solutions. However, this product has not reached the market and will not be fully developed. Future ProductsAesthetic Solutions' future products using the ATP-funded technology are not clear. They continue to pursue 3D technology applications that end users can incorporate into their applications, but they have not achieved great commercial success with the ATP-funded technology. Ideas and information that Aesthetic Solutions developed based on the R&D funded by ATP may not be included in future products. B.1.3 Project PerformanceIn this section, we estimate the economic performance of the ATP-funded Aesthetic Solutions project. RTI conducted a structured interview with the principal investigator, Gary Falacara, and gathered information on product life spans, actual and projected sales, and total project costs. From this information, we derived demand curves for all products sold during their expected lives, and used these to estimate consumer and producer surplus and R&D expenditures. Based on these estimates, we calculated the net present value, benefit-cost ratio, and internal rate of return for the component software project. Product Life Spans
R&D Expenditures for the TechnologyAesthetic Solutions first started working on their technology in 1994. Since then, they have spent $500,000 of non-ATP resources on developing the technology. ATP's actual payments to Aesthetic Solutions totaled $1,715,456 over the 1995 to 1998 time period. The combined ATP and company expenditures were set against the estimated consumer and producer surpluses in calculating net benefits. Estimation of Performance MeasuresTo estimate the consumer and producer surplus benefits generated by Aesthetic Solutions' product World Visions, we assumed that the marginal costs of reproducing the software are so close to zero that they are negligible, and the only costs that are important are the investments in R&D. This assumption is consistent with comments made by Aesthetic Solutions staff. We first generated a per-year consumer and producer surplus benefit from the technology. Because the product is not expected to continue sales into the future, we maintained our conservative bias and did not include any benefits that might emerge after 2001. R&D expenditures and benefits were adjusted to 2000 dollars to remove effects of inflation. We estimated the benefit-cost ratio, net present value, and internal rate of return and present them in the table below. Measures of Performance
B.1.4 Qualitative Benefits Attributable to ATPGeneral Impacts of ATP Funding on the CompanyATP funding had several qualitative impacts. Aesthetics Solutions takes advantage of the fact that ATP funded their project in communicating to potential customers and partners. For example, companies like Apple, Microsoft, and Motorola became interested in Aesthetic Solutions after learning about the ATP project. This halo effect built the credibility of Aesthetic Solutions as an effective company. Secondly, the ATP grant created important business connections that Aesthetic Solutions used to improve its business operations. Finally, Aesthetic Solutions believes that it would have taken 10 years for them to reach market without support from ATP. General Impacts of ATP Funding on the MarketAesthetic Solutions believes the entire market for virtual reality programs has been accelerated and that with improved virtual reality programming, everyone will be able to incorporate virtual reality into programs. Return to Table of Contents or go to next section in Appendix B. Date created: December
3, 2002 |
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