Strategic Management of Technology Assessments

    • Out of all the innovative ideas that come forth, how many become successful products?
      • Very few
    • Among member countries of the Organization for Economic Cooperation and Development, the majority of R&D funds come from ______.
      • industry 
    • After Yahoo! was introduced as an easy way to search the World Wide Web, it was followed by other search engines, some of which had improved or faster ways to search. This is an example of how one innovative idea can
      • stimulate more innovations and create a new market.
    • The Solow Residual refers to
      • technological innovation. 
    • While rapid innovation often benefits society, it often makes success for companies
      • more complicated as they strive to keep up with the latest innovations.
    • Which of the following is most clearly an example of process innovation?
      • a pizza chain is able to develop a method of baking pizza that enables pizzas to be baked in 10 minutes rather than the standard 20 minutes during the late 1980s 
    • Which of the following is true about technology trajectories?
      • some technologies have steeper s-curves than others
    • There are network externalities in the internet access market but neither DSL nor Cable Modems has a clear dominance in technology for broadband Internet connections. Which of the following is most likely to be true?
      • there will be great pressure to select a single dominant design by the market.
      • both platforms might successfully coexist.
      • customers may face a large degree of ambivalence about the choice among them.
    • When both Nintendo and Sega claimed to have over 60 percent market share of the video game console market, both were trying to influence
      • users perceptions and expectations about the installed base.
    • Most graphic artists, newspapers, magazines, and other professionals who work intensely with pictures use Photoshop. To be perceived as a better value, a new graphics program would have to offer more value than Photoshop’s
      • technological ability, complementary goods, and installed base
    • When you buy a product on eBay you can pay for it using an online payment system called PayPal (which accepts credit cards or electronic funds transfers). The payment system is heavily secured using encryption technology. PayPal is offering simplicity, convenience and __________ utility levers according to the Kim and Mauborgne model.
      • risk
    • IBM used MS DOS on its new personal computer because Gary Kildall was slow to sign a contract to license CP/M. This lead to the rapid building of installed base for MS DOS and the eventual dominance of Microsoft in personal computer operating systems. This unfolding of events could best be described as ______________.
      • path dependency. 
    • One advantage cell phone customers in the European Union (EU) had over U.S. customers early in the adoption of cells phones is that_______________.
      • they had a single standard cell phone format that would work in different countries such as Germany, France, and the UK
    • Which of the following would describe a primary activity according to Michael Porter’s model of the value chain?
      • A Wal-Mart advertising campaign
    • Which of the following would be an example of a tacit resource?
      • An oddsmaker who works for a large casino in Las Vegas and is correct 95 percent of the time.
    • Honda’s core competencies lie in manufacturing and innovation which it has used to create its world-renowned engines. These engines are also used in Honda’s portable generators, lawnmowers, motorcycles, automobiles, and several other products. According to the comparison made by Prahalad and Hamel, Honda’s portable generators are ________.
      • the fruits
    • Discounted cash flow estimates are only accurate if
      • the original estimates of profits are accurate.
    • Using the real options approach, if the cost of future investments to capitalize on the R&D program is less than the returns from this investment, then __________.
      • the program should be pursued
    • If a firm has the option of investing in R&D, the cost of implementing the technology is the _______.
      • exercise price CORRECT ANSWER
    • What are some of the negative impacts of technological innovation on society? How would you answer critics of improved technology who cite these negative impacts?
      • The negative impacts on society due to technological innovation include increased pollution and erosion as well as reduction of natural habitats and ocean stocks. Medical innovations can result in unanticipated consequences. To answer critics of improved technology who cite these negative impacts, you might point out how technology is essentially the application of knowledge to solve practical problems. If we have created problems with our technology, the answer is not to go back to more primitive lifestyles, but rather to develop knowledge leading to better technology to solve these problems. For example, rather than abandoning the automobile due to pollution, we should develop new technologies that curb or eliminate pollution. Cleaner fuels or alternate power sources for automobiles are possible technological innovations to solve this problem.
    • Explain how the globalization of markets affects the importance of innovation.
      • As markets become more global, increased competition from foreign competitors puts pressure on firms to innovate. Domestic companies may need to come up with more efficient means of production, and will also tend to compete through innovation to differentiate their goods and services. As communication increases through the internet and global media, consumers will have more choices in making purchase decisions. Competition will become fiercer and companies will need to find a competitive advantage through innovative processes and products.
    • If you were in charge of a Research and Development (R&D) department for a large pharmaceutical company, would you encourage your researchers to do basic research or applied research? Provide the rationale for your answer.
      • The Research and Development (R&D) department for a large pharmaceutical company should probably encourage its researchers to do both basic research and applied research. Basic research is directed at increasing understanding of a topic or field. This type of knowledge will help the company to better understand the medical field and to come up with approaches to applied research. For example, research to understand why and how people develop diabetes would provide guidelines into approaches to treatment. Applied research is targeted at increasing knowledge for a specific application. The development of new methods of treatment based on the findings of basic research would be the next logical step to take. This type of research would also require creativity and innovation but would be targeted at treating an illness in a certain way
    • At a retreat by the Salisbury City Council, community leaders held a discussion on attracting and developing new businesses and increasing employment rates in the city. One leader suggested that the city consider sponsoring a business incubator. Explain what an incubator is and how this might help the city meet its goals.
      • An incubator is an institution designed to nurture the development of new businesses that might otherwise lack access to funding or advice. It allows companies to share costs and resources until they can stand on their own. If an incubator were started in Salisbury, it would help new businesses to grow and prosper. These businesses could then move out to locations of their own and hire local residents as employees. The city would not have to offer tax breaks or compete with other cities for the location of existing companies, but would be growing their own businesses.
    • Lately, computer users have been using USB jump drives to copy and store files. These are also called thumb drives, pen drives, and other names. These are small drives you can attach to a key chain and plug into any USB port and have the utility of a hard drive. The size of their memory varies from 16 kilobytes to several gigabytes. Assume you are the CEO of the Ajax Thumb Drive Company. How might you use the s-curve model to predict when to switch to a new technology? What would be the limitations of this approach?
      • You could use your own investment and performance data or from the industry if you can get it to develop an s-curve. You could then predict when the jump drive technology is reaching its limits and know when it is time to switch to another technology or develop a new technology. However, there are many limitations to doing this. First, it is very difficult to know exactly when the limits of a technology are reached. Many factors can affect this and often the limit can be extended by market factors, your own development efforts, or other unknown factors. You may also not know what other potential new technologies are being developed and how steep their s-curves are. Switching to a new technology is a risk and the benefits need to be weighed with those risks and costs.
    • Explain how computer-aided design and flexible manufacturing help create small niches in the market place. Provide and example of how a market with different niches might be served.
      • Computer-aided design and flexible manufacturing help create small niches in the market place by allowing firms to develop and produce a greater number of versions of their products. This means that companies can now tailor their offerings to small niches in the market place. For example, if a company manufacturers basketballs it can produce different sizes and colors of basketballs for children, teens, males, and females. It can also produce different basketballs for outdoor courts and for gymnasiums. Different qualities of balls can be produced to meet price levels consumers are willing to pay.
    • Explain how an understanding of the innovation funnel might influence a company’s view of research and development?
      • If a company truly understands the innovation funnel concept, it will know that often at least 3,000 raw ideas are needed for one successful product. Of those 3,000 raw ideas 300 must be submitted. The company can then encourage its R&D staff as well as the rest of the company to come up with and submit new ideas. It will also develop ways of evaluating large numbers of ideas, setting up screening criteria that help the firm decide which ideas to elevate to the next level of attention.
    • Explain the reasons why more efficient keyboards were not able to replace the QWERTY keyboard and what principle this illustrates for other products.
      • The QWERTY keyboard was initially introduced to slow down typist and prevent key jamming on mechanical keyboards. Since so many people had already learned to use this keyboard they were unwilling to learn how to type on more efficient keyboards even after key jamming was no longer and issue. This illustrates the principle of high switching cost and points out how early entries into a new technology may become dominant and be impossible to overcome even with technically superior products.
    • Explain why it is that if a company’s technology is adopted by users ahead of other technologies, it might be at a tremendous advantage and competitors will have trouble catching up.
      • As users adopt the technology, this generates revenue that can be reinvested in improving the technology, provides feedback about how the product works and can be refined, and attracts developers of complementary goods. Furthermore, the company that produced the technology gains absorptive capacity which means that they can learn more in the future and have a better understanding of the components of the technology. Thus even a technology that was initially inferior to other technologies may improve faster than others if it is adopted earlier. It can be very hard for competitors to catch up.
    • Explain what factors affect the technology trajectory and chance of success of a new technology besides its quality and technical advantage.
      • Timing is an important influencing factor. If a company can be first with its technology, it may become so entrenched that even technically better offerings cannot overtake it in the market. The sponsor of the new technology can also make a big difference. If a new technology is introduced by an industry leader, it has a greater chance of success and a longer life span. This is due not only to the reputation and past success of this market leader but also due to the pressure this company can place on its distributors and suppliers to support the technology. Complementary goods and installed base can also be very important; a company that gets a jumpstart on either of these (because of luck, or because it gives its product away for free, etc.) may start a network externalities cycle that makes it more and more dominant.
    • Why is it that after a product has been on the market for a while and is selling very well, the price may go down?
      • The price could go down due to competitive pressure from newer entrants into the market. Thus firms lower their prices and accept lower margins in order to compete. It may also go down because actual production costs have gone down due to learning curve effects. As the company makes more of the product it learns how to make the product more efficiently, often using new technology and having less waste. This means the company can lower the price to increase sales and still earn more profits.
    • Joseph had an idea that he could speed up a floor buffing machine by putting a different motor on it. He even tried a lawnmower motor and almost blew himself up with another motor. After about 25 tries, he was able to make a buffer run much faster with a new motor and started his own company. Other companies began making competing products that were similar to Joseph s design, but they were unable to improve their designs as fast as Joseph. Why might this be the case?
      • Each of Joseph s prior failures taught him something else about how buffers worked. He also learned what would not work. This increased his absorptive capacity. The knowledge base Joseph built about how buffers work and about how different motors affect buffers will help him understand which avenues of research will most likely be successful in the future. It will also help the company to more quickly evaluate suggested ideas. This will all help his company to stay ahead. His company will also have the profits reaped from the early sales to reinvest into research and development.
    • Why is the installed base of users of a technology that requires complementary goods so important to a company’s future success?
      • The larger the installed base the more likely complementary products are to be produced. The more complementary products that are available, the more purchases of the original product will occur. These processes reinforce each other. Furthermore, the larger the installed base, the easier and less expensive it is to train new users and the more costly it will be for competing products because of the cost of learning how to use them.
    • In the 1970s, Church & Dwight began selling Arm & Hammer Baking Soda Deodorant. Within 6 months the product was very successful and another company released Arm & Arm Deodorant to try to capture some of the market created by the Church & Dwight product. Can Church & Dwight prevent the other company from selling their product? What must Church & Dwight do?
      • Church & Dwight must have registered this trademark before it can take any legal action. If that is the case, Church & Dwight can file an infringement suit against the maker of Arm & Arm because the trademark is too similar to their mark and is clearly an attempt to get customers to buy their product due to confusion. [This is a real case and Church & Dwight won the suit.
    • Andrew designed a license plate holder for automobiles that attaches to a car in such a way as to make theft of the license plate practically impossible. He has limited income and feels that he needs to protect his patent in numerous countries so he can sell his product there later on. Explain how Andrew can accomplish this.
      • Andrew can file an application for a patent with the Patent Cooperation Treaty (PCT) office. The PCT currently covers more than 100 countries. The PCT will do a patent search in the member countries to verify that the invention is not subject to a prior claim. If that is the case, it approves his application and this date is established as the date for which he can claim priority for his invention. Then after Andrew has the funds to do so he can file for patents in all the member nations of the PCT.
    • Gallon, Stillman & Coates suggest a six-step approach for identifying and cultivating a firm s core competencies. Describe this approach and provide examples.
      • i. Starting the program begins with the formation of a steering committee, the appointment of a program manager, and the communication of the overall goals to all team members. The program manager should organize teams that will be responsible for circulating throughout the firm to compile an exhaustive inventory of capabilities.
      • ii. Constructing an inventory of capabilities is done by categorizing the capabilities identified in step one by type, strength, importance, and criticality to firm operations.
      • iii. Assessing capabilities proceeds by evaluating the criticality of each competency followed by an evaluation of the organizations current level of expertise in each competency.
      • iv. Identifying candidate competencies culls the list of capabilities to those the firm should focus on and grow.
      • v. Testing the candidate core competencies using Prahalad and Hamel’s original criteria is the next step (see above).
      • vi. Evaluating the core competency position of the firm to determine whether competitors have similar competencies and to identify areas in which the organization needs to improve.
    • Even though many aerospace manufacturing firms are very profitable, there are very few upcoming firms. Explain the reason using at least one force from Porter’s Model.
      • The important factor from Porter’s Five-Force Model is the threat of potential entrants. This threat is relatively low because of the entry barriers. The cost of starting an aerospace company is high and the existing companies are well-established. These companies are large, have the contacts, personnel, and skills necessary to meet the market demand, making it almost impossible for a new company to compete with them. Hence the threat of potential entrants remains low. 
    • Recently, three cell phone companies announced the addition of a nationwide walkie-talkie service to supplement their regular cell phone service. Will this be a sustainable competitive advantage?
      • This will most likely not be a sustainable competitive advantage. As pointed out in the text, to be a potential source of sustainable competitive advantage, resources must be rare, valuable, durable, and inimitable. Since three companies are offering this service it is obvious that this resource can be imitated and while it may be somewhat rare initially, it will most likely soon be commonplace. This does not mean that the cell phone companies should not offer this service, however. To do so would only make them fall behind the competition. 
    • Prahalad and Hamel offer three tests to identify a firm’s core competencies. List the tests, explain them, and provide examples.
      • i. Is the competency a significant source of competitive differentiation? Does it provide a unique signature to the organization? Does it make a significant contribution to the value a customer perceives in the end product? For example, Sony’s skills in miniaturization have an immediate impact on the utility customers reap from its portable products.
      • ii. Does the competency transcend a single business? Does it cover a range of businesses, both current and new? For example, Honda’s core competence in engines enables the company to be successful in businesses as diverse as automobiles, motorcycles, lawnmowers, and generators.
      • iii. Is the competency hard for competitors to imitate? In general, competencies that arise from the complex harmonization of multiple technologies will be difficult to imitate because these competencies usually take years to build and are path-dependent.
    • Explain why the cash flows (profits minus costs) for a project that are expected to continue for 20 years need to be discounted. Why not simply use the amounts as they are? Would it make a difference if 80% of the profits came in during the first 5 years?
      • The reason cash flows must be discounted has to do with the time value of money. The theory is that $100 today is worth more than $100 in five years. The reason for this is that you could take the $100 today and put it in a savings account and earn interest for five years. After five years you would have more than the $100 in five years. The interest rate you could earn is the discount rate you use. The longer you have to earn that interest, the more money you would have. So $100 five years from now is worth more than $100 in ten years because it has 5 more years to earn interest. So if 80 percent of the profits come in during the first five years of a project it does make a difference. That money will be worth more than the money that is earned later.
    • Johnston Products has gathered data to evaluate the attractiveness of a potential project. It knows the cash flows expected under different scenarios. It has conducted a focus group that ranks various product attributes, and it has the ranking of various marketing techniques provided by a consulting company. What method should Johnston use to evaluate this project? Why is this method the best one to use?
      • Johnston should probably use data envelopment analysis (DEA) to conduct its evaluation. This method allows analysis of multiple criteria that have different kinds of measurement units. In this case measurement units include dollars (cash flows) and rankings (focus group and consulting company). DEA uses linear programming to combine these different measures to create a hypothetical efficiency frontier that represents the best performance on each measure. These values can then be used to compare this project with other projects.
    • Poduck Regional Medical Center has decided to build a new wing for its outpatient services. Poduck wants to know which services are important to its patients in this new wing. Do they prefer large waiting rooms for family members or small rooms adjacent to recovery rooms? Do they prefer patient advocates to keep them informed or would nurses be better? What technique would be appropriate to come up with weights and tradeoffs for these types of services? Explain why the technique you recommend is best.
      • A conjoint analysis technique would be the best choice for this analysis. Conjoint analysis can estimate the specific value of features of the outpatient center. As part of the analysis, pricing for these services can also be determined. Multiple regression can be used to assess the degree to which each service influences the overall rating, resulting in the assignment of specific weights to individual criteria for different configurations of the outpatient center. Although the Medical Center cannot please everyone, it can come up with the “best” configuration for its patient base.
    • While rapid innovation often benefits society, it often makes success for companies
      • more complicated as they strive to keep up with the latest innovations.
    • The relationship between speed of innovation and product obsolescence is
      • direct (as innovation speed increases, products become obsolete more quickly).
    • Which of the following products would be considered novel?
      • A company announces it has produced a recreational hovercraft for sale in toy stores.
    • Which of the following persons is most likely to come up with a new way of manufacturing socks for a textile company?
      • Kate, who knows the basics of how the socks are now manufactured and how the machines work but comes from a completely different background as far as training and experience are considered.
    • Which of the following is most clearly an example of process innovation?
      • A pizza chain is able to develop a method that enables pizzas to be baked in 10 minutes rather than the standard 20 minutes during the late 1980s.
    • TechSense was the first company to introduce a GPS-enabled shoe into the market, and shoe sales are rapidly increasing. Which of the following is most likely to be true for TechSense?
      • TechSense has incurred significant research and development expenses.
    • WordPerfect Corporation noticed that the more of its word processing software packages it sold, the more customers complained or suggested improvements. In such a situation, WordPerfect Corporation has the opportunity to
      • steadily improve its word processor software. 
    • Absorptive capacity
      • increases a firm’s future ability to assimilate information. 
    • During the 1990s, more and more people started using cell phones. As a result, the cell phone
      • became better in quality.
    • The scientists at Gerusa are former award-winning Soviet scientists who have all focused their attention on cancer treatment. Working together, they have come up with remarkable solutions. The knowledge base they have
      • is socially complex.
    • To make sure companies do not receive patents in countries where they do not intend on making the invention, some countries have a “working requirement” that the invention must be manufactured in the country where the patent was granted for a specified period of time.
    • In the 1970s, Church & Dwight developed Arm & Hammer Baking Soda Deodorants. Within 6 months, the product was very successful and another company released Arm & Hamer Deodorant to try to capture some of the market created by Church & Dwight. Can Church & Dwight prevent the maker of Arm & Hamer from selling their product?
      • Probably, because the other company’s brand name is very similar to the trademark of Church & Dwight.
    • Many people dream of opening their own restaurant someday and restaurant supply houses provide easy financing for equipment. This is one of the reasons why the _____ in this industry is so high.
      • threat of entry
    • For several years, Mountain Home University had used IBM computers. Recently, Apple Computers offered them a better machine at lower a price for one of the University’s labs; however Mountain Home did not buy them because the _____ costs were too high.
      • switching 
    • Which of the following would describe a primary activity according to Michael Porter’s model of the value chain?
      • A Walmart advertising campaign 
    • Sheila Kessler is a retired millionaire who still likes to invest in new businesses and help other people get started in business. She would be called a(n)
      • first generation mentor.
    • When Susie calculated the Net Present Value (NPV) of a project, the value came out to be -$2,000,0000. If this is the only information she has, Susie should recommend
      • the project be rejected.
    • Natal Technologies is developing a superior ultrasound machine for which it is required to invest $800,000. Based on the company’s analysis, the product will generate $200,000 from the first year till perpetuity. According to this, the payback period is ________.
      • 4 years
    • When technology is progressing rapidly, firms are more likely to
      • use linkages with other specialized firms to access resources they do not possess.
    • One result of collaborative research has been
      • more innovation than before.
    • Gerusa has developed a technology called Photodynamic Therapy (PDT) for cancer treatment. The scientists who started the company want to learn how to set up clinics and actually treat patients with this technology; hence they want to begin opening clinics quickly. To meet this objective Gerusa should
      • collaborate with a company who has gone through a similar process to learn from them. 
    • Schumpeter said that large firms are likely to have
      • better-developed complementary activities that enable them to be more innovative.
    • Tracie Fashions has become very profitable and now employees 80 persons. Tracie needed to have better regulation of employee behavior so she formalized the company with more rules, procedures, and written documentation. This may result in
      • less creativity.
    • ErgoFlex manufactures office furniture. The company is considering adopting a modular production system. In which of the following scenarios would a modular system offer greater value to the company?
      • When some customers want office chairs with rubber wheels and lumbar support while the remaining prefer headrests only
    • Even though WordPerfect had a great product that fit customer requirements, it lost critical market share to Word for Windows as it was slow in coming out with its Windows-based word processing program. This was probably due to the fact that its
      • product development cycle time was too long.
    • Bob King is a Senior Vice President at Associated Grocers and has been assigned to be the project champion for the development and implementation of a software pricing program. Both the buying department and the pricing department have determined that the new software pricing program is worthless, but they do not tell Bob. This is probably because
      • of Bob’s seniority.
    • An anti champion is
      • one who plays the role of the devil’s advocate.
    • Kate’s supervisor called her to talk about her participation in a new product development team. The supervisor told Kate she had been engaging in social loafing. This meant that Kate
      • would not put much effort into the team’s work because it was a large team and she figured her effort would not be needed or recognized.
    • Your boss does not favor the use of cross-functional teams. How would you respond to this?
      • A cross-functional interface can help better ensure a product’s quality and price.
    • Jan is a member of a new product development team. Her supervisor asked her how she likes the experience and she replied, “Our team seems to be suffering from homophily.” This means that
      • team members only like other people whom they perceive as being similar to themselves.
    • When Johnson Tanning Products finally developed a superior sun tan lotion, it decided that the best time to introduce it was in the spring. This would help take advantage of
      • seasonal effects.
    • Mallard Prosthetics was a leader in the prosthetic arm market and profits from its prosthetics were very high. When Mallard developed a computerized prosthetic that would render its previous prosthetics obsolete, it decided to withhold it from the market probably so that
      • it would not cannibalize the sales of its current prosthetics.
    • If a firm invests in continuous innovation and willingly cannibalizes its existing products with more advanced products, the firm can
      • prevent competitors from achieving a significant technological gap.
    • Which of the following is an advantage of making a new generation of technology backward compatible?
      • Consumer switching costs may be lower because they anticipate using their existing complements.
    • When eBay developed its online auction service, a need arose for making online payments, and PayPal was born. This is an example of how moving commerce online
      • can create additional intermediaries.
    • Which of the following is a predictable competitive response to high initial prices?
      • Competition has an incentive to enter the market
    • Explain why it is that sometimes the follower and not the first mover of new technology is more successful in the market place.
      • Although first movers have the opportunity to shape the market and first shot at becoming the dominant design, often they are not sure of consumer preferences. As consumer preferences become known, they may have to modify their product designs. Sometimes they must also engage in consumer education about using the new technology, which can be an expensive proposition. Followers can capitalize on what is learned about consumer preferences and from the market place education. They can introduce products that meet consumer preferences without having to make costly adjustments and not worry as much about consumer education. This will help them in becoming more successful in the market place.
    • In the opening case, Honda was developing both hybrid electric vehicles and hydrogen fuel cell vehicles. Which do you think would take longer to diffuse through the market and why?
      • Hydrogen fuel cell vehicles would take longer to diffuse through the market. Hybrid electric vehicles do not require the customer to have any knowledge specific to the hybrid technology nor to change their driving behavior. Hybrid electric vehicles also do not require any significant changes to the existing fueling systems. For customers and oil companies then, hybrid electric vehicles probably represent a component innovation (even though their design may constitute an architectural innovation to an automaker). Hydrogen fuel cell vehicles, on the other hand, will require significant changes in the fueling station infrastructure, and likely in the way that people fill their fuel tanks. Thus new fueling systems will have to be developed, and customers will have to learn how to use them. Furthermore, many oil companies may not be able or willing to make the transition to providing hydrogen. Thus oil companies might be reluctant to help build the new fueling systems that will be needed.
    • Why did Schumpeter call the technology cycle one of creative destruction? In your answer, explain what is meant by this term and why it is appropriately applied to the technology cycle.
      • Creative destruction refers to the fact that as new technology is developed it replaces or destroys old technology. There is a period of turbulence as the older technology is displaced by the new one. Then those companies providing the new technology seek to make improvements to increase their competitiveness. As competitiveness increases profit margins tend to decrease. Finally, a new technological breakthrough is achieved. This is a new discontinuity that replaces the existing technology. Thus the creative process eventually develops a new technology that leads to the destruction of the existing technology.
    • Fred Stringer has come up with a new computer program to help online sellers manage online auctions at sites such as eBay and others. It is superior to just using a spreadsheet to track auctions. He would like for his program to become the dominant design, but he also wants to earn a profit from all his hard work. What can Fred do to meet both of these objectives?
      • Instructor Explanation: If Fred uses open source software it will help it to quickly diffuse and increase the likelihood that it will become the dominant design. However, Fred will receive little, if any, profits from the program. If he makes the program a wholly proprietary product, then it will be slower in moving towards dominance. It will be very difficult to get complementary programs, such as payment software, to be written that will interact with his program. The result may be low sales of his program and also low profits. The answer is to allow limited licensing or partial protection. He may have to allow other developers access to his source code to develop complementary programs, but will still want to maintain control over that source code and have approval over their programs. This way he can still sell his program and reap the profits.
    • Your friend states that the enforcement of copyright law in the music industry is bad for consumers because it prevents them from being able to access, download, and trade music freely. How might you attempt to explain the benefits to consumers of copyright protection of music?
      • Instructor Explanation: Without copyright protection, artists will not be able to capture the value of their work, and might have little incentive to produce the highest quality music they can produce (or to enter the industry at all). Similarly, record producers and distributors will have little incentive to provide their services to the market. Without a way of allocating the property rights to music so that those that invest in the recording, production, distribution, etc. can benefit from their investments, the market is likely to provide less quality and quantity of music than consumers would desire.
    • Joshua just came up with a new kind of camera. He has a working prototype and needs to raise money for production, so he wants written articles about his camera to appear in various publications. What kind of problem might that pose for Joshua if he wants to seek patents in other countries later on?
      • Many countries will require that a patent be applied for before publishing information about the invention. If Joshua publishes information about his camera in the United States to create interest and raise funds for production, this may prevent him from obtaining patents in other countries later on. Some countries even require that the product be manufactured there for a length of time (3 years, for example) after receiving the patent. If Joshua decides to not worry about other countries, his patent could be ignored in some countries.
    • Explain why Prahalad and Hamel compare core competencies to roots. Provide examples of company products that fit this description.
      • Instructor Explanation: They see core products as coming from core competencies in the way that trees are dependent on strong and sound roots to grow. From these core products come business units which are viewed as the branches of the tree. End products are viewed as fruits.
    • Explain the advantages and disadvantages of rewarding and promoting the development of the core competency.
      • The advantages are that by rewarding sticking to and developing your core competency you can really excel at it and continue to be successful in your industry. After all, the core competence gives you an advantage over your competition and you should leverage that as far as possible. The disadvantage is that it may hinder the development of new technologies or ideas. If you are preoccupied with just what you currently do well, you will not be looking for new and improved ways to do things. You will be less likely to search out further improvements and could eventually lose any competitive advantage you have.
    • What is it called when firms focus on current capabilities and do not develop new ones. Why does it happen? Provide some an example of this that is not in the book. What are the risks of this to the organization?
      • The Risk of Core Rigidities Sometimes the very things that a firm excels at can enslave it, making the firm rigid and overly committed to inappropriate skills and resources. For example, a firm’s emphasis on a scientific discipline that is central to its core competency can make the firm less attractive to individuals from other disciplines. In addition, the rewards for engaging in activities related to the organization s core competencies can discourage employees from pursuing more exploratory activities. Firms that have well-developed knowledge sets along a particular trajectory may find it difficult to assimilate or utilize the knowledge that appears unrelated to that trajectory thereby limiting the firm s opportunities.
    • Based on your reading of the case “Genzyme’s Focus on Orphan Drugs,” what do you think would be some of the barriers to entry into the biotechnology industry?
      • Most biotechnology companies must spend a considerable amount on research and development for years before they ever begin to earn sales. This makes it extremely difficult and risky for new entrants. Also, the output of biotechnology companies (drug targets, drugs, etc.) are typically patented so a new biotechnology company has to be able to develop products that are considerably different from those that are produced by existing competitors.
    • Dr. Low, a chemistry professor at Purdue University, has been working on a new cancer treatment method. She has formed her own company to develop and market her results. She has heard about collective research organizations and is considering joining one sponsored by a medical society. Explain to her the factors she should consider in making this decision.
      • Collective research organizations such as this are involved in more basic research so they will tend to be slow in bringing applied ideas to the market. While the cost and amount of control she can expect from such collaboration varies, such collaboration will give her the opportunity to leverage her existing capabilities in chemistry and develop new competencies in the medical sciences. It will also provide her with access to the research behind what others are doing which may help her further her own research. It may also help her get acquainted with a suitable joint venture partner for bringing the product to market.
    • GERUSA is a company that uses Photodynamic Therapy to treat cancer and has major divisions in Germany, Russia, and the United States. The scientists in Russia develop cancer treatment methods. The Germans organize treatment clinics. The U.S. division gathers the financing and markets the treatment methods. What type of strategy is this, and what are the advantages and disadvantages of this type of strategy?
      • This is the globally linked strategy. Each division uses its R&D expertise to develop different aspects of this service. Each is meeting a different need of the global company. Innovation is decentralized to take advantage of resource and talent pools, it is also spread globally to meet GERUSA s objectives. The problem with this lies in the coordination. It will be expensive in both time and money to coordinate.
    • Joe attended a workshop where the Quality Function Deployment (QFD) method of new product development was explained. During the workshop, he asked the following question: “This all seems very complex and quantitative to me. I prefer qualitative checks instead; they are less confusing.” If you were the workshop leader, how would you address Joe’s concern?
      • The QFD method along with The House of Quality does provide quantitative and sometimes complex factors. However, the real value of this approach is that in leads to improved communication and coordination among engineering, marketing, and manufacturing personnel. It provides a common language and framework within which they can interact. These are certainly important qualitative factors and you should find them appealing.
    • Dr. Askew was the chairman of the Freshman Program Committee at Mountain Home University. This committee was designing a new curriculum for freshman. How might Dr. Askew perform all three boundary-spanning activities?
      • For the ambassador activity, Dr. Askew will be the gatekeeper that protects the committee from others trying to tell them how to do their job. She may direct that all communication go through her and speak on behalf of the committee at faculty meetings. In performing the task coordination activity she may negotiate with the Dean of the University that committee members have no other service assignments so they can concentrate on this project and that the team be given 12 months to complete its goals. For the scouting activity she may do an Internet search of the websites of other colleges and universities to discover what type of freshman curriculum they have developed.
    • When John Vegas contacted Dr. House about developing a marketing plan for GERUSA, Dr. House learned the following facts. Mr. Vegas lived in Kentucky. Dr. House was in North Carolina. The marketing expert lived in New Mexico. The medical director lived in Germany, and the scientist who had come up with this cancer treatment lived in Russia. What type of team would work for this far-flung organization? What problems might they encounter?
      • This organization is ideally suited to be a virtual team. They all live and work in different locations and will have to interact via telephone, fax, email, chat rooms, video conferencing or regular mail. It will be highly improbable that face-to-face meetings will occur. The potential problems are that the project may move slowly until all communications can be completed. Gaining commitment and loyalty to this team will also be a problem as it appears that they all have other careers and do not know each other. Developing a high level of trust will be a problem, especially since several cultures are involved in this project.)
    • Friction Technologies has come out with a new fuel-efficient engine for automobiles. Explain how Friction might use connectors, mavens, and salespersons to create an information epidemic about this new product.
      • Friction might use research or consulting firms to identify these groups. The connectors, mavens, and salespersons could be given information or allowed to drive cars with this new engine in it. The connectors would then tell a large number of persons from diverse backgrounds about the engine. The mavens would tout the efficiency and cost savings of the engine to everyone they know and the salespersons would help to create enthusiasm for the engine.
    • Mallard Prosthetics was a leader in the prosthetic arm market, and profits from its prosthetics were very high. Mallard developed a computerized prosthetic arm and is trying to decide when to introduce it to the market. What options does the firm have?
      • One option is to withhold the computerized prosthetic from the market until sales and profits from its current offering begin to decline significantly. This will allow Mallard to maximize its investment in its current prosthetic. The danger in this is that the competition might introduce a computerized prosthetic that could steal market share from Mallard and cause the company to fall behind in the market. The other option is to introduce the product now and embrace cannibalization of its current product. This could help the company to increase its lead in the market and could create a bigger gap between itself and competitors.
    • Gray London is a retired race car driver who helped Dale Earnhardt, Jr. get his start. He is writing a book and making a video about the early days or Dale Earnhardt. He is trying to decide whether to market these items directly over the Internet or to use intermediaries. To make this decision, he needs to know the pros and cons of each route. Provide that information and make a recommendation to him.
      • Mr. London can sell the book and video online. This will give him complete control over the product and the profits. He can establish a website and even sell on eBay. However, he will have to advertise to get customers to his website. He will have to have his own storage and shipping facility as well as personnel to handle the orders. If he sells through intermediaries, they may also sell his items via the Internet. Amazon.com may sell the item for him. Bookstores may sell the items both in their retail outlets and online. In this case he will ship large quantities to the intermediaries and they will break them down into single units and do the shipping. Of course, he will have to share his profits, but will also have reduced costs. The best recommendation seems to be to use intermediaries.