Reference no: EM131400153

Lynda Murray, chief executive officer of Peak Electronics, faced a difficult decision. Her company was a leader in making parts for standard cassette and reel-to-reel tape recorders. Murray had watched with some misgivings as digital technology hit the market in the form of compact disc players, and she had to decide whether to lead Peak into the digital age. Even though digital tape players were encountering legal hurdles in the American market, they were starting to take hold in Japan and Europe. Was America—and Peak—ready for them?

Murray had plenty of help in making the decision. First she met with the company’s marketing division. Everyone had an opinion. Some predicted that every audio component would be digital by the turn of the century; others believed the popularity of even compact disc players was already waning. Everyone agreed that they needed time to conduct surveys, gather data, and find out what products the public really wanted and how much they would be willing to pay for them.

The people in research and development had a different approach. They were tired of making small improvements in a mature and perfected product. They had been reading technical material about digital tape, and they saw it as an exciting new technology that would give an innovative company a chance to make it big. Time was of the essence, they insisted. If Peak was to become an important supplier of parts for the new decks, it had to have the components ready. Delay would be fatal to the product.

A meeting of the vice presidents produced a scenario with which Murray was all too familiar. Years ago these executives had discovered that they could not outargue one another in these meetings, but they had faith in their staffs’ abilities to succeed where they had failed. Before Murray even walked into the room, she knew what their recommendation would be: to create a committee of representatives from each division and let them thoroughly investigate all aspects of the decision. Such an approach had worked before, but Murray was not sure it was right this time.

Desperate to make the decision and get it out of her mind, Murray mentioned it to her fifteen-year-old son, who, it turned out, knew everything about digital tape. In fact, he told her, one of his friend—the rich one—had been holding off on buying a new tape deck so that he would be on the cutting edge of digital recording. "It’s gotta happen, Mom," her son said. "People want it."

Intellectually, Murray believed he was right. The past thirty years had shown that Americans had an insatiable appetite for electronic gadgets and marvels. Quadraphonic sound and video discs were the only exceptions she could think of to the rule that if someone invented an improved way of reproducing images or sound, someone else would want to buy it.

But intuitively, Murray was not so sure. She had a bad feeling about the new technology. She believed the record companies, which had lost the battle to tape manufacturers, might get together with compact disc makers and audio equipment manufacturers to stop the digital technology from entering the American market. So far, no American company had invested substantially in the technology, so no one had an interest in funding the legal battle to remove the barriers to the new machines.

Exhausted, Murray went to bed. She hoped that somehow her subconscious mind would sort out all the important factors and she would wake up knowing the right decision.

Case Questions

1) What sources of information and opinion about the new technology seem most reliable? Which would you ignore?

2) If you were Murray, what would your next step be?