Reference no: EM131173017

Read Christensen's The Innovator's Dilemma carefully. Your answers to the questions below should reflect your understanding of and mastery of Christensen's principal points in the book. Any responses that fail to address Christensen's arguments will be given a score of zero.

The Innovator's Dilemma, Clayton M. Christensen, HarperCollins © 2003

Part I-

1. There is a tendency in all markets for companies to move upmarket toward more complicated products with higher prices. Why is it difficult for established companies to enter markets for simpler, cheaper products? Identify two companies that have upscaled themselves out of business. How could they have avoided this? (Answer 1-2 pages singled spaced)

2. One of the hallmarks of disruptive technologies is that initially they underperform the current technology on the attributes that matter most to mainstream customers. The companies that succeed in commercializing them, therefore, must find different customers for whom the new technology's attributes are most valuable. Identify two markets that are emerging today based on attributes or qualities that seemed unimportant to the mainstream markets when they were introduced? (If you can't think of anything, consider the online education revolution as a topic to explore. Does anyone seriously believe that bricks and mortar schools will be the dominant power in twenty years?) When identifying the two markets, explain how older mainstream products or companies are threatened. (Answer 1-2 pages singled spaced)

3. Most people think that senior executives make the important decisions about where a company will go and how it will invest its resources, but the real power lies with the people deeper in the organization who decide which proposals will be presented to senior management. What are the corporate factors that lead midlevel employees to ignore or kill disruptive technologies? Should well-managed companies change these practices and policies? (Answer 1-2 pages singled spaced)

4. What do the findings in this book suggest about how companies will be organized in the future in order to encourage the development and support of disruptive technologies? Should large organizations with structures created around functionalities redesign themselves into interconnected teams, as some management theorists currently believe? Or, recognizing that different technologies and different markets have differing needs, should they try to have distinct organizational structures and management practices for different circumstances? Is this realistically possible? (answer 1-2 pages singled spaced)

Part II-

George is an independent inventor. His usual manner of operation is to invent some new device, obtain a patent on it, then license out the technology to companies that manufacture it under their own brand name. His income is derived by obtaining royalties on each unit of the devices sold by the licensee.

When George invents a tabletop device that produces large quantities of hydrogen from water, he knows he has a winner and decides to produce the device himself. The demand for cheap and convenient sources of hydrogen is high in all chemistry labs - from high school and college labs to industrial and government labs. So he takes a large portion of his life savings and uses it to create a company called Electrolytic Solutions, LLC. Note that at the time he begins this venture, George has applied for a patent.

Electrolytic Solutions begins assembling the hydrogen-producing devices. While interest in the devices is high among scientists he shows it to, actual sales lag. George decides that he should approach major chemical companies that produce chemical feedstocks to see if they would back his device. Each of the companies he approaches earns substantial revenue providing hydrogen gas to customers in the chemical industry. He is open-minded about how he can work with these companies - he is willing to license his technology to them for their own production of the devices, or to provide them with an equity share in his company in order to obtain investment finance from them, or even to sell the technology to them outright.

George approaches two major producers of commercial hydrogen gas (hydrogen gas is important in producing a whole range of products, and demand for it is high both for small scale production in laboratories, and large scale production in manufacturing). Engineers at both of these large companies are impressed with George's technological achievement. They see value in having a tabletop hydrogen generating device. The engineers in both these companies report their enthusiasm for the device to higher levels of management, and in one case, they are asked to write a business case to present to a senior level new product selection committee. But in both instances, higher level managers kill the initiative on two grounds: first, their existing customers see no value in thedevices; and second, pro forma income projections suggest that sales of the devices will not generate enough revenue to make them worthwhile.

Nine months into the effort, George runs out of cash. He considers declaring bankruptcy when one of his licensees for another product, Salvation Enterprises, offers to buy him out. The buy-out covers George's start-up costs ($450,000). George considers himself lucky because he is able to recover his investment, although he makes no profit. After three years of operation, Salvation Enterprises makes $10 million in annual profits from the device. Their principal market is high school and college laboratories in the US. They have received inquiries about their products from universities overseas. More interesting, they are conducting discussions about selling their product to the R&D laboratories of major chemical companies in ten countries. If these discussions lead to sales, Salvation's revenue from these devices can increase five-fold in two years.

This case study is designed to test your capacity to integrate a wide range of business knowledge and insights. Use whatever resources are at your disposal to answer the following questions. If you need to know more about the industrial uses of hydrogen, check this out on the Internet. If you don't remember your lessons on patents, trademarks, copyrights, and trade secrets, look these topics up on the Internet.

1. Clearly, George is inexperienced in business. While his technical capabilities are solid (he has made a good living inventing new technologies for a number of years), his business skills are weak. What factors should George have considered before deciding to manufacture the hydrogen producing devices himself? (Your answer should be about one page long, single space. Be thorough in your discussion.)

2. Up until now, George has made a good living licensing out his technology and living off of royalties. If you were a consultant educating him on the technology licensing process, what are risks and opportunities associated with this process that you would explain to him? (Your answer should be 1-2 pages long, single space.)

3. This case study illustrates the type of phenomenon that Clayton Christensen describes in his book, The Innovator's Dilemma. This is evident in the last two paragraphs of the case study.

a. As Salvation Technology's success ultimately demonstrated, there is a market for the tabletop hydrogen-producing device. Using Christensen's research findings as the basis of your response, explain why middle and senior level managers are reluctant to adopt disruptive technologies. Show how this reluctance manifests itself in this specific case. (Your response should be at least one page long, single space.)

b. Christensen points out that at the earliest stage of the introduction of a disruptive technology, it is difficult to see how it is a threat to a major competitor's ongoing business. He illustrates this view convincingly with examples from the disk drive, mechanical shovel, and steel industries. Describe briefly (in one page, single space) how the disruptive technology of mini-mills was not viewed as a competitive threat to major US steel producers, and how gradually mini-mills were able to take over high-end, high-margin steel production. Then create a parallel scenario (using Christensen's theory) showing how Salvation Technology's production of the tabletop hydrogen device can ultimately present the big hydrogen producers with a competitive threat. (Write this up in an additional page.)

PART III-

In order to carry out this assignment, students must carefully read Thomas Friedman's book, The World Is Flat

The World Is Flat 3.0: A Brief History of the Twenty-first Century, Thomas L. Friedman, Picador © 2007

To a large extent, a significant component of business policy is strategic management. Many business policy textbooks used in business schools are actually strategic management texts.

We believe that business policy is larger than strategic management. We hold that business policy has two distinctive features: First, it entails integrating a wide range of business knowledge - finance, operations, marketing/sales, IT, HR, and legal. Second, it looks at decision making from the very highest levels of an enterprise. A little reflection shows that these two features are interrelated: For decision makers at the top of an organization to make good decisions, they need to be able to integrate a vast array of knowledge.

Still, strategic management as a discipline is important in business policy. With strategic management, senior decision makers must take steps to assume a long-term view of their enterprises and the environment in which they operate. In order to do this effectively, they must establish a vision of where the organization should be headed. This vision should enable top management to formulate high level corporate objectives, and these in turn provide targets toward which specific strategies are directed.

In his book, The World is Flat, Thomas Friedman takes a strategic view of where the world is headed. He states that we have entered into a "flat" world, where all the rules are changing - social, political, economic, and business. A significant feature of the flat world is the absence of hierarchies. To a large extent, flattening is being driven by technological advances, particularly in the areas of computers and telecommunications. But it also reflects dramatic social changes - for example, in today's flat world, knowledge is increasingly free. Finally, flattening is being accelerated by political changes - for example, with the collapse of the Soviet bloc, the outlook and energies of former socialist countries have become decidedly capitalist and have led to the ascendance of hitherto unproductive economies, e.g., in China, India, and Russia.

Friedman examines "ten forces that flattened the world," reorganizes them as "three convergences," and defines "nine rules" that well-managed companies follow in the flattened world.

1. Let's say you are a senior decision maker in a large computer design, manufacturing and sales company. How do the "three convergences" affect you? (1-2 page response, single space)

2. Let's say you are the head of a management consulting company with headquarters in the Midwest. You have 200 employees. About half of your consulting focuses on pure management issues (e.g., business process reengineering, designing financial systems) while half focuses on more technical matters (e.g., product design, network configurations). Your core business occurs in the Midwest region, while 25% lies outside the Midwest in other parts of the USA. From time to time, you work with international clients.

Use Friedman's Nine Rules to describe the direction your company should follow. Illustrate your points with specific examples (2-4 pages, single space) [If you are reading Friedman's older 2005 edition, it is okay to discuss the Seven Rules instead.]

3. Friedman is constantly referring to Hewlett-Packard as an exemplar of a large, high tech company that has been doing things right to survive and thrive in a flattened world. On several occasions, he focuses on HP's CEO, Carly Fiorina and describes her as the ideal CEO in a flattened world. Yet even as Friedman's book was going to press, HP's performance plunged, leading, ultimately, to the Board of Directors firing Fiorina. By the outset of 2006, HP's performance shot up again (under new management). What does this tell you about what it takes to manage a large company at the highest levels? Was Friedman wrong in his assessment of Fiorina's capabilities? Did events simply overwhelm Fiorina, so that we have a good manager being forced to fall on her sword? Does Friedman's glorification of Fiorina suggest that his theories are just that - theories; and that they can't really predict what businesses will succeed and which will fail? Do you have any other views of what's happening here? (2-4 pages, single space)