Executive Summary

Parents always worry about their child’s safety, especially

parents who work long days. Latchkey kids, a term coined during

the second world war, are kids who return home from school to

their house before their parents do. This means that they had to

carry a key around with them in order to unlock the door when

they return home from school. The Sphinx Smart Lock is a smart

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lock design to give latchkey kids a simple, reliable, and keyless

way to enter their homes as well as to provide parents with a

peace of mind, knowing their child has returned home safely. The

lock is designed for families with children the ages of 5 to 13, who

return home from school to an empty house. The Sphinx Smart

Lock provides security and peace of mind at a value price.

The Sphinx Smart Lock is an all stainless steel lock

attachment that simply fits over an existing deadbolt. The lock

works with RFID, radio frequency identification, technology. With

an RFID tag inserted into the child’s backpack, the lock contains a

RFID reader in the housing unit and when the child is within range

the door will automatically unlock as well as send a text or email

notification to the parents alerting them of their child’s safe

return. The encrypted 14443A RFID tag provides adds extra

security as the chip is unreplicable. Foxconn, the largest

electronic manufacturer in the world, will provide manufacturing

and packaging. The installation process is easy as it requires only

8 screws, and there are several installation videos on our

company website.

The distribution of our product will be through three major

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retailers as well as online sales through our website and Amazon.

The three major retailers are Home Depot, Lowe’s, and Ace

Hardware. Promotion of Sphinx Smart Lock will be through social

media, such as Facebook and Pinterest, as well as through Google

Adwords and Working Mother Magazine. The product will also be

on display at trade shows across the US. Sales will start in the

later half of the first quarter, with the initial market testing of 250

units. Sphinx Smart Lock expects to see steady growth, and will

achieve nearly 75,000 units in sales after its first full year on the

market. Overall, Sphinx Smart Lock is expected to gain nearly 2%

market share after its first year of sales. Sphinx Smart Lock is

seeking an initial investment of $60,000 for the first quarter

development, and will seek future investments there after. Sphinx

Smart Lock is safe, simple, and secure because your child is worth

it.

Table of Contents

Topic Page NumberExecutive Summary...............................................................................2Table of Contents ………………………………............................................4Table of Figures…………………….............................................................5

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Table of Tables.......................................................................................6Introduction............................................................................................7

Project Team Description & Individual Pictures............................7Company & Industry Background.................................................9Mission Statement......................................................................10Business Goals and Objectives...................................................10Positioning Statement.................................................................10

Research and Specifications.................................................................11Literature and Patent Search......................................................11Competitors................................................................................11Customer Needs.........................................................................12Target Design Specifications and Constraints.............................13

Description of Design Concepts............................................................14Functional Diagram of the Overall System.................................14Ergonomic and Aesthetic Needs.................................................14Concept Generation....................................................................15Design Research.........................................................................16Concept Selection.......................................................................17Concept Testing..........................................................................18

Technical Feasibility.............................................................................19Design Solution and Descriptions...............................................19Preliminary Bill of Materials........................................................22Manufacturing Issues..................................................................23

Financial Feasibility..............................................................................25Market Strategy and Channels of Distribution............................25Target Cost and Price..................................................................27Financial Assumptions................................................................27Cost Breakdown Summary..........................................................29Potential Funding........................................................................30Base Case Financial Model..........................................................30

Conclusions and Recommendations.....................................................32Summary Description.................................................................32Future Work................................................................................33

Table of Figures

Figure Number Title Page Number1 US20060226948......................................................112 Conceptual Illustration 1..........................................153 Conceptual Illustration 2..........................................154 Reverse Engineering Disassembly...........................16

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5 Base Plate................................................................196 Fixture......................................................................197 Fixture with Labels...................................................198 Fully Assembled Sphinx Smart Lock........................199 RFID Reader.............................................................1910 Hard Clamshell RFID Security Tag...........................2011 Notification Setup....................................................2112 Website Design........................................................2613 Estimated Production...............................................2814 Revenue...................................................................2815 Cumulative Cash Flow..............................................31

Table of Tables

Table Number Title Page Number1 Table of Contents.......................................................42 Table of Figures.........................................................53 Table of Tables...........................................................64 Customer Needs Matrix............................................185 Bill of Materials........................................................22

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Company & Industry Background

Five undergraduate students enrolled in the Integrated Business and Engineering Program at Lehigh University designed the Sphinx SmartLock. The Sphinx SmartLock fills the gap in the market for a reliable way for latchkey kids to enter the home that is both durable and kid-friendly. Kids

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often lose their key, forget to lock the door behind, or neglect to call their parents when they get home. The Sphinx SmartLock uses RFID technology to automatically unlock the door, and simultaneously sends a notification to a parent that the child has arrived home safely. Competitors use smart phone applications and Bluetooth technology to do the same thing. However, young children are unlikely to have smartphones and if they do often do not know how to deal with the apps. There have also been issues regarding the manufacturing of competing companies, so the team wanted to focus on making the Sphinx SmartLock both durable and kid-friendly.

The target market of the Sphinx SmartLock is busy, working parents of latchkey kids. The market size is about 4 million, meaning that there are 4 million households with latchkey kids between 5 and 13 years old. However, this number is growing. More children are going directly home after school primarily due to a decrease in government funding of afterschool programs as well as a 70 percent jump in childcare costs over the last 20 years. A US census projects that there will be 20 million households with latchkey kids within the next 10 years.

Mission Statement

“Our mission is to provide children with a safe and reliable way to enter their homes when they return home alone from school.”

Business Goals and Objectives

➔ to give latchkey kids an easy and dependable way to enter the home

➔ to comfort parents who are worried about their children

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Positioning Statement “Using top of the line security technology, our lock provides kids with an easy and simple way to enter their home, and ensures the peace of mind of their parents.The door will automatically unlock when the kid is in range, simultaneously notifying the parents that their child has arrived safely. Safe, Simple, and Secure…because your child’s worth it.”

Research and Specifications

Literature and Patent Research

Patent #20060226948Door lock with RFID key

This lock uses both RFID technology and a traditional key to operate it. When you put the key into the lock, a transponder in the lock registers the key and checks to see if it has the appropriate RFID and once both check out it unlocks the door. this two tiered system provides greater security but takes longer and is more expensive which is probably why we don’t see it on the market today. With just an encrypted RFID tag you can get comparable security with greater ease of use.

Patent #20130099893 A1Lock Control System Using RFID

This lock uses a multi antenna RFID reader to detect the approach of an RFID tag to a door and and actuate the lock if the reader recognizes the RFID. It uses a microcontroller tied to an actuator to unlock the door. While the underlying idea seems to work, it would be relatively expensive with it’s multiple antenna design. Also, Q Developments LLC is a relatively small company without the capital to adequately fund the creation of the project.

Competitors

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The status quo serves as the main competitor to our product. When we surveyed the market, 43.75% of people said they gave their child a key so that the kid could enter the home. That equalled the proportion who had a parent at home when the child got home. Both of these current solutions compete with our product and when it comes to parents and their children, they can be very averse to change. Parents can be willing to change if they see another solution that solves their problem better and keeps their children safer. Currently, children can lose their keys easily and parents don’t receive a notification when their children arrive.

There are also a number of competing products who claim to solve the issues surrounding home entry. Apigy’s Lockitron, Kwikset’s Kevo, and Schlage’s Camelot are the three main competitors our product has to deal with. Apigy is a relatively new company that was founded after their Kickstarter campaign received over $2,000,000 in funding and over 14,000 orders online. Since then, they have been trying to produce the Lockitron in great enough numbers to fill their orders and ship it to people. The Lockitron works with an app for iPhone and Android devices that allows users to lock and unlock the door remotely, give keys to people, and get notifications when people open the door. It fits over the existing deadbolt on the inside of the door and has an electric motor actuate the deadbolt. However, it has a 10% mechanical failure rate due to shoddy manufacturing and it’s recent firmware update causes the lock to get stuck open or closed. These issues combined with the large number of orders has put Apigy over a year behind in shipping the Lockitron to consumers. Kwikset is a large lock manufacturing company that started in 1946 and is now owned by Black and Decker and they seller thousands of locks every year. The Kevo works similarly to Lockitron in that the door can remotely be locked and unlocked through an app and owners can give keys to people with their phone. Unlike the Lockitron, the app works only for iOS devices and the lock itself replaces your existing deadbolt instead of fitting over it. A person who wants to use the Lockitron or the Kevo needs to have a smartphone thus these products don’t satisfy the needs of latchkey kids who are unlikely to have even a plain cell phone let alone an expensive smartphone. Schlage is a company founded in 1920 that produces both commercial grade deadbolts and high security locks. It was bought by Ingersoll Rand but recently spun off as part of Allegion. The Camelot also replaces your existing deadbolt but unlike the first two, it uses a keypad and has no connected app. The child who uses the Camelot needs to remember the code to get inside and also has to be

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trusted to not give out the combination to friends at school. It also doesn’t notify parents when someone unlocks the door. All three competitors fail to solve the basic issues for latchkey kids.

Customer Needs

When we surveyed customers, we found that the overwhelming majority said that safety was their first priority in buying a lock. That was followed up by ease of access, locking the door behind the child, a notification system, and durability. Any solution to the issue of latchkey kids needs to be very safe, durable, kid friendly and have a notification system. It also should be easy to use and easy to install and should lock the door behind the child. Quantifying some of these needs is relatively easy. For the notification system and locking the door behind the child, we just have to test if the design would notify parents and lock the door behind the kid. Durability is also somewhat easy to quantify in that the product has to not break during repeated use. Ease of access and installation, safety, and kid friendliness are all harder to quantify. For easiness, the product should be simple to install and should be simple to use and should unlock the door when the RFID is 1m away. If possible, it should require no input from the child other than opening the door. The lock should also have a battery life of 1 year or longer. Safety is also hard to quantify but the “key” to open the door should be extremely hard to duplicate; it also should be discreet to make the child not stand out as a target and it should lock the door behind the child. Kid friendliness is also hard to quantify but any kid friendly product should be easy for the child to use, hard for the child to lose, and discrete so the child doesn’t become a target.

Target Design Specifications and Constraints

To solve all the customer needs, we need a product that is safe, durable, kid friendly, and it has to have a notification system. For safety, the Sphinx Smart Lock meets the target specifications by making the RFID “key” hard to duplicate with RFID 14443A encryption technology. The RFID is also hidden in a clothing store security tag inside the child’s backpack. This makes it discreet and also makes it nearly impossible to lose or take out. To make the lock durable, we chose to construct our lock out of stainless steel. The steel gives it strength and the added chromium in the 18/0 stainless steel prevents the lock from corroding and gives it a modern aesthetic. To make the product kid friendly, Sphinx Smart Lock requires no input from the

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child when they come to the door. Once their backpack is within one meter of the lock, the lock reads the RFID they have hidden inside and unlocks the door. All they have to do is turn the handle and enter. The door even locks behind them to keep them safe once the child is inside the house. The RFID reader also uses very little power and the rest of the system consists only of a servo motor and arduino which also use very little. Thus we chose to us a 9 volt battery so the battery life would be over 1 year. The system will also notify the parents when it needs a battery change. That’s just one aspect of the notification system. It works through text and an app we might develop in the future to tell the parents that their child has arrived home safely and the door has been locked behind them. This provides parents the peace of mind they need to finish their workday with a smile.

Description of Design Concepts

Functional Diagram of the Overall System

Currently, there are young students returning home from school everyday to an empty home. These children had to work with their parents to devise the safest plan for them to unlock the door and enter their home. Oftentimes, the child must worry about carrying a key throughout the school day and not losing it. Inevitably, there will be times when the child loses or forgets their key. As a result, they will have no way to enter their home. The majority of these children will also not have a cellphone to contact their parents to let them know that they are locked out. This will lead to the child either sitting outside and waiting for their parent to come home, or it will lead them to seek refuge with a neighbor. Parents will then worry towards the end of their workday about whether their child got home safely or not. The team’s proposed solution is driven towards ensuring that the child will be able to safely enter their home after school every day while also notifying their parent of their arrival so that they can go through the rest of their workday with peace of mind.

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Ergonomic and Aesthetic Needs

Ergonomics and aesthetics are important aspects in any product on the market today. A product to solve the Latchkey Kid problem would need to be almost universal, if not completely universal. This means that the product would have to be compatible with the majority of homes in the market. A solution would also need to be aesthetically pleasing. This is due to the fact that the product will be located on or near the front door. Everytime the customer enters their home, they will see the team’s product.

Concept Generation

When the team began to think about potential solutions to the Latchkey Kid problem, we first looked at the flaws of the products currently on the market. In particular, the team focused on the Schlage Keypad Deadbolt. This deadbolt required either a key, or a passcode to enter the home. As stated in the Research and Specifications section, this is not a kid-friendly method of home entry due to the fact that they must not lose their key, forget their passcode, or give their passcode to anyone. Other current solutions required the use of a Smartphone, which many children ages 5 to 13 do not have. The team looked in several different areas in an attempt to allow the child to unlock their door without needing to have a key, passcode, or Smartphone. Following some research about commercial building entry systems, the team came to the idea of using RFID (Radio Frequency Identification) technology. Using an RFID system would include having an RFID reader near the lock. This reader would communicate with an RFID tag that would be with the child as he or she approaches the door. As soon as the tag enters the specified read radius, the reader could signal the lock to unlock, allowing the child to enter safely.

The team then came up with two main ideas in order to automate the lock. The first concept that the team developed was a full deadbolt replacement, similar to the Schlage Keypad Deadbolt. The team envisioned creating an entire deadbolt assembly with the associated electronics to allow the RFID system to function. As seen in the diagram to the left, the product would look like the

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average deadbolt from the outside of the home, however it would have a larger housing on the inside of the home. This housing would hold the electronics to automate the lock, as well as the RFID reader. To install this concept, the customer would need to remove their current deadbolt and replace it with this product.

The team’s second concept featured the same general idea as the first concept, however this design would be an attachment to the customer’s existing deadbolt, not a full deadbolt replacement. As seen to the left, this design features a mounting plate that fits right over an existing deadbolt. This plate would be securely attached to the door with screws, and then a fixture that would cover the existing deadbolt would attach to the mounting plate. This fixture would house the electronics to automate the lock and

use the RFID reader.

Both of these concepts utilize RFID technology, which require the child to have an RFID tag. In order to make sure the child would have the tag with them everyday when they return home from school, two main concepts were generated. The team’s first concept was to put the RFID tag in a bracelet for the child to wear. In order to make the bracelet appealing to young students, it could be customized with different colors and different designs. It would also be possible to put their favorite cartoon characters on the bracelet, such as Spongebob. The second concept was to attach the tag to the child’s backpack using a security tag, velcro, or some sort of pin or button. Both of these concepts would be with the child every day at school. The bracelet could be worn as a bracelet, and would not have to be identified as a key. The tag in the child’s backpack would always be in the backpack so they would not have to worry about forgetting or losing it.

As soon as the door would unlock, allow the child to enter, and relock, a notification needs to be sent to parents so that they could continue through the rest of their workday with the peace of mind that their child is

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home safely. In order to notify parents of their child’s arrival, the team thought of developing an app or a text notification system.

Design Research

To begin design research, the team looked to learn more about what is involved in creating a deadbolt and how to automate it. To accomplish this, the team purchased a Schlage Keypad Deadbolt to reverse engineer. The reverse engineering process allowed the team to learn all of the components of the average deadbolt and how they worked together. The team also discovered the use of an electric motor to automate the lock.

The team met with two professors and a local leader in the RFID industry to ensure that the concept was feasible and to learn more about how to make it perfect. First, the team met with Jack Romaine, the CEO of Element ID. His company designs and manufactures RFID systems for industry, mainly to keep track of inventory. He confirmed that RFID is the technology to utilize in the lock system. He also introduced the team to the 14443A encrypted RFID tag. He advised the team to use this tag in a solution because it is significantly safer than the average RFID tag since it cannot be easily replicated. Second, the team met with Professor Lawrence Butler, who teaches students how to use the Arduino, a programmable microcontroller. The team chose to meet with Butler because they considered using the Arduino to control the lock. Professor Butler confirmed that the team could use the Arduino, along with a servo motor and rack and pinion gears powered by a 9 Volt battery to automate the system. He also introduced the team to several RFID readers that are compatible with the Arduino. The team then reached out to Professor Joshua Ehrig to learn about what is involved with creating an app or text notification system. He advised the team to develop a text notification system. This was due to the fact that a text based system would lead to the same end result, the parent being notified, however it is significantly less expensive.

Concept Selection

As a result of the reverse engineering, the team realized that they did not want to create an entire new deadbolt assembly. A deadbolt assembly is

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complicated and has many small intricate parts. This led the team to decide to pursue their second concept, a deadbolt attachment. The team chose to use RFID technology to unlock the door as the child approaches. A small security tag, similar to those found on clothing in stores to prevent stealing, was chosen to house the encrypted 14443A RFID tag. This tag would then be attached inside of the child’s backpack. This design was chosen as a result of the team’s market research. When introduced to the idea of using a wristband to house the RFID tag, several mothers were concerned with the idea that their child could be identified as entering an empty home. A security tag will be discrete. No one other than the child and his parents will know that it is in the child’s backpack. This tag is also permanent, so the child will not be able to lose or remove the tag. For the notification system, the team followed the advice of Professor Joshua Ehrig and decided to develop a text notification system.

This concept addresses all of the customer needs. It is safe because it uses the encrypted 14443A RFID tag in a discrete location, as well as locks the door after the child enters the home. It is durable because of the materials used to make the product, as well as the extensive testing, as explained in Concept Testing, to ensure it will function as it is intended to. It contains the text notification system that will alert parents of their child’s arrival. It is kid friendly because the child does not have to remember a key or a code, they simply just have to approach the door and it will automatically unlock the door.

Concept Testing

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In order to ensure that the final product will function as it is intended to, the first thirty days of our launch will serve as a product test. During this test, ten Sphinx SmartLock products will be given to a group of potential customers. The Bethlehem Mothers group has agreed to distribute ten locks amongst themselves to use for one month. This month will simulate the stresses that the lock will undergo throughout its lifetime. Throughout the test, the team will be in contact with the participants to learn about any potential failures and how to improve the product to better meet customer needs. Following the test, the team will meet with all of the people who were using the lock to discuss any problems that they may have run into, and any suggestions for improvements. The team will then collect all ten products to take back and evaluate for wear and tear. The next month will be spent attempting to refine the product according to the results of the test.

Technical Feasibility

Design Solutions and Descriptions

The Sphinx SmartLock features three main components, the fixture that fits over the existing deadbolt, the RFID tag, and the text notification system. The fixture is then broken down into two main components. First, there is a mounting plate that fits

over the customer’s existing deadbolt. This plate attaches to the door with four screws. The actual fixture then attaches to the mounting plate with two screws at the bottom, and two screws at the top.

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Inside this fixture, there is a deadbolt housing that fits snugly over the knob on the customer’s existing deadbolt. This is automated using a servo motor with rack and pinion gears. When the servo is activated, it will turn the pinion gear that moves the rack gear. This rack gear will be attached to the deadbolt housing, so it will turn the deadbolt housing and therefore the knob on the original deadbolt, locking and unlocking the door. This will all be controlled using an Arduino board, and it will be powered using a 9 volt battery. The diagram below shows all of the components of the fixture, as well as a full assembled view.

Deadbolt Housing Servo Motor Rack and Pinion Gears Arduino Battery

In order for the lock fixture to automatically lock and unlock, the fixture will need to

detect an RFID signal from an RFID tag. In order to detect this signal, the fixture will contain an RFID reader attached to the arduino board that can detect an RFID signal from up to 1 meter away. The RFID reader will send a signal to unlock the door once the RFID signal is read, and once it no longer detects a signal the RFID reader will communicate with the arduino board to lock the door again. An RFID reader with such a large read range was chosen so that the signal could be read when the child approaches the door and that the child would not have to do anything special, like put their backpack up against the door. While this RFID reader would be more expensive, it was worth it for the convenience of the solution for the child.

The RFID tag itself will be contained inside of a security tag, similar to what can be found on clothing in stores in order to prevent shoplifting. This RFID security tag is secure, so it is unable to be removed. The reasoning behind this choice was to prevent the child from being able to lose their tag,

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since there is no way to remove it. The tag is intended to be hidden and secured on the inside of the child’s backpack. This is because the child will be taking their backpack to school everyday, so it is a convenient option. Additionally, hiding the tag in the backpack will add an extra level of discretion so that the child will not be identified as a latchkey kid and followed home. This option for the RFID tag will provide a permanent, safe, and discreet solution for the child.

The RFID tag will use 14443A RFID technology, which adds an extra level of encryption to prevent its duplication. This was the safest type of RFID technology possible, so it was the clear choice for the tag. Additionally, the tag will be a passive tag rather than an active tag. An active tag would mean that the tag would be actively sending out a signal and constantly tracking the child. This was not necessary because the child did not need to be tracked throughout the entire day. Constantly tracking the tag would also be expensive and require batteries in the tag, so the passive tag was the best choice. With the passive tag, the RFID reader will do all of the work rather than the tag actively sending out a signal. This was the most cost effective and the smartest choice for the Sphinx SmartLock.

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Additionally, when the door is unlocked and then locked again for the child, a notification will be sent to the parents through a notification system. In order to set up this system, the user will hook up their smartlock to their computer using USB. They can then put an RFID tag they would like to register in range of the lock, and then they will be able to enter their child’s name. The user will also be able to input any phone numbers or email addresses that they would like their notifications to be sent to. Once this system is set up, the notifications will be sent wirelessly from the arduino board inside the lock. The user will be sent a notification to either their

phone or computer, letting them know that their child is home safely and that the door has been locked behind him/her.

The Sphinx SmartLock is also very easy for the user to install and use. In order to install the lock, the user will attach the baseplate to their existing deadbolt. The baseplate fits over the deadbolt and then the user will screw it into the door using four screws, one in each corner. Once the baseplate is secured, the user will place the deadbolt housing on top. The housing will be installed using four screws, with two placed on the top and two on the bottom. After the deadbolt housing is screwed in, the Sphinx SmartLock will be installed and ready for use.

In summary, once the Sphinx SmartLock is installed over your existing deadbolt on the inside of the user’s door, its usage will be simple. The child will approach the door with their 14443A RFID security tag hidden and

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secured inside their backpack and the RFID reader will detect this signal. Once the signal is detected, the arduino will control the servo motor to turn the rack and pinion gears to unlock the door. After the child is safely inside his/her home, the RFID reader will no longer detect a signal, and the arduino will control the assembly to turn back into the locked position. At the same time, the parents of the child will be notified using through text or email, informing them of their child’s safe arrival. This ensures that the latchkey kid is safe and that the parents will have the peace of mind of their child’s safety.

Preliminary Bill of Materials

There are 15 different parts required in the production of the Sphinx SmartLock. These different parts, as well as their costs can be seen in our preliminary bill of materials below.

Ultimately, the team chose between plastic and metal for the material for the majority of the smartlock. The biggest determining factor of our decision was Lockitron, a company that produces a competing lock attachment made of plastic. Their product has a 10% mechanical failure rate, so the choice was clear to produce a metal lock attachment for increased durability and functionality. In determining which metal to use, the team decided between copper, steel, and aluminum. However, steel was clearly the best choice because it was the most durable and the least expensive of the three choices. Stainless steel was also used to prevent rust from occurring and to provide an appealing finish for the consumer.

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Parts 1 and 4 are the base plate and housing that will be installed onto the door. Both will be made of stainless steel and will be easily installed into the home. The mounting plate will cost $0.87, while the fixture itself will be $2.42, and one of each piece will be packaged.

In order to install the Sphinx SmartLock, the user will need screws. Parts 2 and 3 are the screws that will be packaged with the product. The wood screws cost $0.03 per screw, while the machine screws cost $0.15 each. Four of each screw will be included, so the total wood screw cost will be $0.12 while the machine screws will be $0.60.

Parts 6 and 7 are the RFID security tags as well as the RFID reader. Each RFID tag will cost $0.40 and five will be included in each smartlock, which is a total of $2.00. The RFID reader is the bulk of the material cost, as it costs $28.99.

Parts 5, 8, 9, 10, 11, 14 and 15 are what control the locking mechanism. The servo motor has a cost $2.40, while the arduino board that controls the entire process has a cost of $14.50. The wires that attach all of these pieces together will cost $0.03 each, and six wires will be needed for a total cost of $0.18. The gear rack and pinion will cost $0.78 and the connection plate that holds these gears and moves them costs $0.13. The fixture that mounts these gears in place will cost $0.07, and the wire that connects the power supply to the arduino will cost $0.20.

Parts 12 and 13 are the pieces that fit over the existing deadbolt and on the fixture itself. The original deadbolt housing fits over the existing deadbolt to turn it, and it has a cost of $0.31. The deadbolt knob will fit on the outside of the fixture and will allow for manual locking and unlocking, and this piece will cost $0.42.

Overall, the materials for the Sphinx SmartLock have a total cost of $53.44 per unit. Each part is necessary and vital to the functioning of the unit, and the materials chosen will allow for a durable and functioning product.

Manufacturing Issues

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In choosing how to manufacture the Sphinx SmartLock, the team had to decide between in house manufacturing and outsourcing. They spoke to Voortman Steel Machinery, a leading supplier of steel processing machinery, to research the costs of in house manufacturing. They also spoke to Foxconn, the largest electronics manufacturing company in the world, to ask about outsourcing the production of the smartlock.

Purchasing a machine from Voortman would require a very large overhead cost from the company. Additionally, it would require teaching workers how to use the machine to properly to make the smartlock, and these workers would require hourly wages for this production. This overhead cost of purchasing a machine would be a large risk, especially for a startup company.

After speaking to Foxconn, the team learned that they could mass produce their smart locks for a total cost of $12.60 per unit, including shipping and packaging. This cost per unit is low enough for a startup company to manage, so the risk is low. Ultimately, the team decided that outsourcing our production to Foxconn would be the best option for the company.

By outsourcing manufacturing, Foxconn would mold the steel to fit the designs of the Smartlock, and they would also put all of the pieces of the product together. However, there are definitely risks that could occur in manufacturing the product in this way. For instance, if one production run of the product is bad, the smartlock may not work and all of the products would need to be recalled. This is a risk that could incur a large cost for the company. Additionally, the production and shipping of this outsourcing will take significantly more time than in house production. That being said, a large company like Foxconn will be able to manufacture this lock in a fraction of the time that it would take for in house manufacturing. Overall, outsourcing production seems to be both the safest and most cost effective choice.

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Financial Feasibility

Market Strategy and Channels of Distribution

For our market strategy, the team decided to break the launch of the Sphinx SmartLock into two segments. The first is a 90 day trial, followed by a year long projection. The 90 day trial would be focused on spreading the company name while minimizing costs. The marketing during the 90 day period would revolve around online advertising and social media. These methods are less expensive, easily managed, and do a good job of reaching the target market. Also, a recent eMarketer study found that young mothers, part of our target market, are significantly more likely to be internet users than the average American, at 94.5% vs. 75.7%.

The team decided Google Adwords would be an efficient way of promoting the company. It is a very cost-effective means of advertising, as the company is only charged when someone clicks on their link and visits the website. The cost-per-click was estimated at $1.50, which would cost the team an estimated $5000 over the entirety of the 90 day period. The company will also have a Facebook page. On this page the team would explain the technology and provide information about the product. There would also be promotional campaigns and a link to the Sphinx Smartlock Youtube channel. As Facebook is becoming increasingly popular among parents, the team would spend $20 a day to promote the page. By getting more people to like the page, it would serve as an advertisement for the company.

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On the Facebook page, the team will also introduce and promote the company’s product trial. The product trial would come after the testing and refinement of the product, and serves as a way of gaging market demand before officially launching. It would be a colossal waste of money to go into full scale production and subsequently discover the lack of demand for the smart lock. Therefore, 250 locks would be produced with the hope of selling all of them. 125 of these locks would be sold through the retail distributor Lowes. There would be 5 locks placed on the shelves of 25 different locations to see if there is in fact a market demand for the product. The other 125 locks will be offered online through the company website. The website will also offer information about the product as well as a video that guides customers through the simple installation process. If at the end of the 90 day period very few locks have sold, the team knows that it cannot move on the full scale production. However, if the vast majority of the smart locks are sold, the team would know to expand production and would move to a more ambitious marketing campaign.

If the 90 day marketing plan proves successful and it is found that there is a demand for the Sphinx SmartLock, the team would begin the 1 year plan. The 1 year plan would consist of more costly and far reaching marketing efforts. Taking ads out in magazines would allow the company to more directly reach the target market. The team will get a full page color advertisement in Working Mother magazine for $77,585. This magazine has a total audience of 2.1 million, most of which are busy parents. Additionally, they have children whose average age is 7, meaning they are current latch-key kids. As part of the 1 year marketing plan, the team will also display the Sphinx SmartLock at several trade shows, including the International Security Conference in New York City. There we will get a featured showroom, for $1000.

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In terms of retail distribution, the team will expand from Lowes to Home Depot and Ace Hardware. These three outlets of a total of 8,079 locations in the US. The company will also be continuing to distribute locks online, and in the 1 year plan sell on Amazon as well. Amazon is the world’s largest online retailer, and is typically the first place consumers look for a product online, so that is where the team wants their product to be. The marketing methods utilized in the 90 day plan will also be continued and expanded in the 1 year plan. It is estimated that the Google Adwords will cost the company $30,000 over the year. Advertisements in magazines will cost $138,000. Maintenance of social media and the company website will

cost $23,000. Overall, the 1 year plan of marketing for the Sphinx SmartLock will cost the company $192,000.Target Cost and Price

Based on the peace of mind our product ensures parents, we found they would be willing to pay $240 for our lock. Therefore, we will be selling the Sphinx Smartlock at a wholesale price of $120 and a retail price of $240. Subtracting the cost of goods sold of $66.04, we get a profit per unit of $53.96. This pricing was based off the current solutions’ prices and the fact that our product is going to be marketed as a high quality, value priced product. The Sphinx Smart Lock will also be sold online on the team's

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company website at the same price that the Sphinx Smart Lock is sold at retail locations for $240. This price keeps the lock competitive within the smart lock industry.

Financial Assumptions

When determining the Sphinx Smart Lock’s financial elements, there were of course a few assumptions the team had to make. First, the team assumed that all the retailers would sell our product at a 100% mark up from what the product’s wholesale value is. The next assumption is that the discount rate will remain constant at 10%. This discount rate assumption enabled the team to determine the discounted cash flow, and went into determining the cash flow analysis, NPV, IRR, and ROI.

The next financial assumption our team made was to determine the market share we would obtain and how many we would sell per quarter and per year. The team researched the financials of our competitors, Lockitron and Kwikset, to see how their annual sales are laid out. Based on the data, with the start- up, Lockitron, being much more relative to our product and business standing, the team decided follow their sales model. Lockitron sold nearly 15000 units in a recent quarter. Similarly, with our target market of around four million, our team thought that this quarterly sales maybe a little low. The team decided on a goal of around 2% percent market share after a year of full production and sales. This gave the team the tentative number of around 80,000 units in the first year. The team estimated that if we produced nearly 80,000 units, that not all would sell. So to allow for any units to be held in inventory, the team estimated that we would sell around 75,000 units, with a production of slightly higher than 80,000 at around 88,000 units. However, in this estimation the team concluded that we would equal Lockitron’s sales in retail, but in addition have 25% sales online through our website. So, overall our retail would equal roughly 60,000 units and our online sales would be around 20,000 units.

The team assumed through our aggressive advertising through

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social media, such as Facebook and Pinterest, that the lock sales through the company’s website would be roughly around 25%. The team believed that the website would function as reference in addition to the sales distributor, but that our target market would still be more likely purchase our product in retail stores.

The team’s

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estimated revenue is derived from the assumption of units sold per quarter, and quantity sold online versus in retail stores. In addition, the revenue takes into account the revenue taken from selling our product online, $240, versus in a retail store, $120.

Cost Breakdown Summary

The costs of starting the company and producing, selling, and marketing the Sphinx Smart Lock were broken down into two categories, fixed and variable. The fixed costs consisted of three major segments, development costs, ramp-up costs, and marketing and support costs. All costs were based off of quotes given to the team through direct contact with experts and contractors in their respective fields.

The development costs were broken down into four costs, prototyping, software development, design, and market testing. For prototyping, the team contacted our manufacturer, Foxconn, in order to obtain a quote for the cost. Overall, the lock’s cost of goods sold was $66.04. The team planned to run extensive market testing and trials in order to gain feedback during a preliminary market phase. Within this phase, the company budgeted to have $500 in prototyping costs. The bulk of the development costs would be from software development. The text notification system, as well as Arduino coding would cost the company a combined total of $9,000. The next development cost is design. The team estimated that through the CAD program and paying engineers that our design would costs would be around $2,000. Furthermore, the costs for initial market testing of the 25 units, would be $2,000. This includes production costs, customer support and the analysis of customer feedback. Overall, development accounted for $13,500 or 24% of the company’s total costs.

The next of the fixed costs is ramp-up. Ramp-up is broken down into three separate costs. Website design was quoted to cost the company $2,500. As the preliminary market tests moved forward, our final testing and marketing would rise in cost. The team found the costs to be $1,000 and $2,000 respectively. Ramp-up costs are derived from the costs it takes to get Sphinx Smart Lock’s name into the marketplace. The total for ramp-up costs is $5,500 or 9% of the total costs.

Rounding out the fixed costs is the marketing and support costs. Marketing and support costs are the costs necessary to sell our product and

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maintain our customers. These costs are broken down into five sections. The first and most expensive is the Product trial. This is the selling of the initial 250 units and receiving customer feedback. The product trial will cost the company $8,000 as quoted by the manufacturer. The next cost is social media advertisement. The social media advertising costs will rise in this section because after ramp-up we will spend more money getting our name out into the marketplace and maintaining it. The Social Media Advertising costs will be $6,000. Customer Service Management is the next costs, at $3,000, customer service management is budgeted in order to help our company remain in contact with our customer and help them to fix anything they could need. Sales management and the team in charge of selling our product will cost the company $2,000. Finally website maintenance as we move our product into a more popular advertising spots, our web traffic will increase and our website will need constant maintenance. The website maintenance cost is $2,000. In total Marketing and Support costs are $21,000 and are 37% of our total costs.

The next part of total costs is variable costs. Variable costs are the costs of production, shipping and packaging. The cost of materials was $53.44, and Foxconn quoted us for $12.60 for manufacturing, shipping and packaging. Overall, our production costs are $17,000 and account for 30% of our total expenses.

Potential Funding

With the initial investment for Sphinx Smart Lock being $60,000. With 30% of that going to production, and 37% to marketing and support, as well as 9% and 24% to Ramp-up and Development respectively. Potential Funding for Sphinx Smart Lock would come from private investors. The team is seeking our venture capitalists from Silicon Valley as well as Boston and Chicago.

Base Case Financial Model

Based off all of the prior assumptions made when finding the rates and costs for the Sphinx Smart Lock, the discounted cash flow and revenues were calculated. With these numbers, the team was able to calculate the present value, using a 10% interest rate. After calculating the cash flow for each quarter back, the costs were then subtracted from the revenue to find profit

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and cash flow. With this we were able to calculate, with our units sold, and total costs, the revenue stream and cash flow.

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Conclusion and Recommendations

Summary Description

The Sphinx SmartLock is a product that started at the root of a large problem: latchkey kids need a safe and reliable way to enter their homes. The team did primary market research in order to learn about this problem and learn about how it could be solved. There are 4 millions households with latchkey kids in the US, and many of these households need a safer and more dependable way for their child to enter the home, as well as a way of knowing that their child is safe. With a decrease in the government’s spending on after school programs, the amount of latchkey kids each year is increasing and this problem is becoming widespread.

There are many solutions already on the market that attempt to solve this problem. Many latchkey kids use a standard lock and key or keypad to enter their homes, but others have moved on to try other smartlocks that are available on the market currently. However, the problem that all of these solutions share is that they are not kid friendly, which is an important feature which parents of latchkey kids value. The Sphinx SmartLock fulfills this need.

After doing design research with many professors and local companies, the team was able to develop a design that fulfills all of the needs of the typical customer and is also technically feasible. Taking apart a deadbolt lock made it clear to the team that it was unnecessary to build an entirely new lock, so instead they designed an assembly that fits over the user’s existing deadbolt.

The Sphinx SmartLock uses RFID technology to automatically lock and unlock. Inside the lock assembly is an RFID reader which can detect an RFID signal from up to one meter away. The child will have an RFID security tag permanently hidden and secured in his/her backpack, so when he/she

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approaches the door the smartlock will automatically unlock, allowing easy entry for the child. Once the child is inside, the door will automatically lock to ensure his/her safety. At the same time, the parents of the child will be sent a notification of their child’s arrival through text or email, providing them with the peace of mind that their child is safe.

The team was able to determine that their total cost of materials per smartlock is $53.44. In determining how to manufacture the product, they decided to outsource to Foxconn who could mass produce the product for $12.60, which is a total cost of goods sold of $66.04 per unit. The choice to outsource was made so the team would not have to pay a large overhead cost for machinery, which would be difficult for a small startup.

Sphinx SmartLock has a two-phase plan to start selling: an initial 90 day trial run followed by a full launch of the product with a year of sales. During the first 90 days, 250 smartlocks would be produced. Half of these locks would be sold online through the company’s website, while the other half will be distributed in 25 different Lowes locations with five units in each store. Advertising during this period would focus heavily on a social media campaign, as well as Google Adwords to promote the product.

Afterwards, the team wants to continue selling their product through their website as well as distributing through Amazon and the 8,000 Lowes, Home Depot, and Ace Hardware locations throughout the country. They will advertise in Working Mother magazine in addition to their social media and Google ads, as well as attending the International Security Conference with a featured showroom. Revenue is expected to surpass $3 million by the end of the fourth quarter.

The Sphinx SmartLock team requires an initial investment of $60,000 to fund their product. They hope to receive this funding from private investors so they can sell their smartlock and help keep latchkey kids safe. And that is the Sphinx SmartLock: Safe, Simple, and Secure, because your child is worth it.

Future Work

If the Sphinx SmartLock is successful, there are many steps that the team can take to grow the product and expand. For instance, once the company is large enough, it would be possible to do all of the manufacturing

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in house rather than outsourcing the project. This would decrease costs in the long run and would help the Sphinx SmartLock to have long term success.

Additionally, one important future step is to develop the software to send out text notifications, and to figure out how to send them wirelessly. Developing software is both time consuming and costly, and it is an important step to take to notify the parents of their child’s arrival. Beyond software sending text notifications, a compatible mobile phone application could be developed to add features to the smartlock. For example, the notifications could be sent directly through the application rather than through text or email. The lock could also be improved to allow for remote locking and unlocking from miles away directly from the phone. These are great features that consumers would value and enjoy, but they would require development of the application. App development can also be very costly, but it would be a worthwhile future step in order to improve the Sphinx SmartLock.

It is also possible for the company to expand beyond the market of latchkey kids and explore using this technology to create a product that appeals to other markets. For example, many elderly people have difficulty with keys, whether it is because they lose them or because they have arthritis and it hurts to turn their wrists to use them. With the RFID technology from the Sphinx SmartLock, it would be possible to create a keyless way for elderly people with arthritis to enter their homes. Additionally, this technology could be used for places like hotels and resorts rather than using a keycard system. The technology could also be used for college students by providing them with one simple RFID tag that could be used to both access their residence halls and enter their dorm rooms.

Clearly, there is much work to be done in the development of the Sphinx SmartLock. However, there are so many possibilities for directions the company can take and ways the product can expand.

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