Professor Richard S. Rosenbloom
Harvard Business School
Scope and Thrust
This course deals with the strategic issues posed by emerging new technologies. The focus is on two issues: (1) How pioneering firms manage the initial exploitation of novel technologies to create business value and to establish enduring competitive advantage; and (2) how established firms cope with an emerging technology that threatens to diminish their competitive advantage or to displace demand for products or services. Throughout the course, the discussion will deal with managerial, rather than technical choices -- no technical expertise is expected or required. The required term paper can be prepared individually or by pairs of students. Students may define their own topics subject to the approval of the instructor.
Audience
This course is likely to be of greatest interest to students headed for careers in high technology industries, venture capital, or entrepreneurship. But the ideas have clear relevance for a broader segment, concerned with strategic analysis, investment analysis, and the general management of established firms likely to be affected by technical change.
Methods
The course will present a mixture of cases, readings, speakers, and student projects. Some contemporary cases present issues still being debated in companies and industries -- for example, the establishment of standards for digital imaging or the likely impact of computer networks on the desktop PC industry. Other sessions will focus on "learning from history" -- the careful examination of past examples of the strategic impact of major innovations in order to derive lessons applicable to the issues of today and tomorrow. Speakers with first-hand engagement in contemporary and historical cases will share their insights into the issues. Most of the materials will deal with information technologies or biotechnologies -- the most active frontiers of change in industry today. But important lessons can be also learned in other arenas, so there will be classes dealing with other industries.
Mid-term Project
The project this year is intended as an exercise in learning from history by studying past cases of promising technologies that proved to be commercial failures. Students are asked to form teams of 3 or 4 persons and to select one of four options for study. The assigned task is to discover the main story of the selected innovation and to analyze it to identify one to three significant strategic "lessons" that would be relevant for today's managers facing similar situations. A written report is due Monday, February 17, consisting of a brief history of the innovation and its commecial consequences (maximum 500 words) and a one-page discussion of the principal lesson or lessons to be drawn. Team reports wil be distributed to all students and disucssed in class on February 20.
Term Paper
The required term paper can be prepared individually or by teams of tww or three students. Students may define their own topics subject to the approval of the instructor. Topics should be relevant to the themes of the course, but may include, for example, study and analysis of the strategy of a given company pioneering an innovative technology, analysis of an industry in the midst of change, or analysis of an emerging technology and the strategic issues it poses for some set of companies. Papers may be historical or contemporary in character. For students who find the mid-term project especially interesting, the term paper could be based on an extension of that research.
Requirements and Grading
Regular attendance and participation in class discussions is expected. An evaluation of class participation will be given a weight of 60% in grading for the course, with emphasis on the quality of contributions, rather than their frequency. Participation in on-line surveys before class will be recognized as an aspect of class participation. Weights for the required mid-term and term papers will be 10% and 30%, respectively
Alpha-Beta Technology, Inc.: Pioneering Carbohydrate 9-794-093
Alpha-Beta Technology, Inc. (B): Trials with Betafectin *
Bendix Corporation (A) 9-378-257
The Desktop Printer Industry in 1991 N9-797-025
Digital Imaging in 1995: Opportunities in the Descent to the Desktop 9-796-060
Disney in a Digital World (Stanford Case) *
Genzyme Genetics N9-797-073
The Impact of Digital Standards on the Emergence of Interactive Multimedia Personal Computers
N9-796-138
Intel Bubble memory (A) 9-486-048
Microsoft Goes Online: MSN 1996 N9-797-088
Mips Computer Systems (A) 9-792-055
Mips Computer Systems (B) *
MRS Technology 9-390-158
Zoll Medical Corporation (A) 9-795-053
Zoll Medical Corporation (B) *
* To be distributed separately
READINGS
Adam B. Brandenburger and Barry J. Nalebuff, HBR 95402 "The Right Game: Use Game Theory to Shape Strategy."
Robert A. Burgelman and Andrew S. Grove, "Strategic Dissonance," CMR 057 California Management Review, Winter 1996.
Michael A. Cusumano, Yiorgos Mylonadis, and 2-796-097 Richard S.Rosenbloom, "Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS over Beta."
Richard S. Rosenbloom and Michael A. Cusumano, CMR 015 "Technological Pioneering and Competitive Advantage: The Birth of the VCR Industry."
David J. Teece, "Profiting from Technological Innovation," 1-390-127
Excerpts from U.S. Congress, Office of Technology Assessment, 2-796-056 "Innovation and Commercialization of Emerging Technologies."
RECOMMENDED BOOK (on reserve in Baker Library):
Managing Strategic Innovation and Change, Michael L. Tushman and Philip Anderson, Oxford University Press, 1997.
Course Outline
INTRODUCTION
Overview of the course
Concepts for the Strategic Analysis of Major Innovations
Readings:
Adam M. Brandenburger and Barry J. Nalebuff, "The Right Game: Use Game Theory to Shape Strategy" HBR 95402
1/22 Introduction
Case: Zoll Medical Corp. 9-795-053
This case addresses the question of how one decides when a product is ready to go to market. In the case, Zoll Medical's CEO is presented with a product that engineers have quickly redesigned to meet competitors' offerings. Engineers assure him that it matches the specs of competitors' products, but the CEO is uneasy about introducing a "me-too" product offering. Product developers are proud of their speed and concerned about the costs of delaying market introductions. Students discuss the pros and cons of the introduction and decide what the CEO should do next.
MODULE I: Creating value and building competitive advantage
How and for whom does innovation create value? How does a firm position itself to capture value from innovation? To establish and sustain competitive advantage?
How do firms achieve advantage when new technologies redefine markets and industries? How do you analyze what capabilities the firm needs to become a leader in a business being created by technological change?
1/24 Case: Alpha-Beta Technology, Inc.: Pioneering Carbohydrate Technology N9-794-093
Alpha-Beta Technology is a pioneer in carbohydrate-based biotechnology. This is the first of two classes presenting issues in the early development of the corporation, which has yet to realize revenues from product sales. The question the firm faces in today's case is how to choose its market focus and lead product.
Guest: Spiros Jamos, President and CEO of Alpha-Beta Technology, Inc.
Study Questions:
2. Which indication should Alpha-Beta choose in 1991 for clinical trial? Why?
3. How can Alpha-Beta ensure that it will create and capture the most value from its distinctive capabilities?
Note: Within the next week you should form teams and indicate preferences for topic asssignment for the mid-term project. Procedures TBA
1/29 Case: Alpha-Beta Technology, Inc (B): Trials with Betafectin 9-795-045
Guest: Gustav Christensen, Chairman of the Board, Alpha-Beta Technology, Inc. Study Questions:
1/30 Topic: Concepts for the Strategic Analysis of Major Innovations
Adam M. Brandenburger and Barry J. Nalebuff, "The Right Game: Use Game Theory to Shape Strategy," HBR 95402
Concentrate your study of this article on the concept of the Value Net (pp. 57-60) and scan the remainder.
1/31 Case: Mips Computer Systems (A) 9-792-055
Mips was the first-mover in the markets for commercial RISC microprocessors and workstations. It developed powerful capabilities to advance a technology that was creating enormous value in the fastest-growing segment of the IT marketplace. Five years after its launch, Mips faces numerous competitiors and some pressing strategic issues.
Team preference sheets for the mid-term project are due in class today! A copy of the project information sheet is available on-line in the Resources section of this platform.
Study Questions:
2. What is the logic behind the overall network of alliances created by Mips? As a whole, did this strategy make sense?
3. All of the players in the RISC "game" have created a network of alliances of some type. What drives competition between these networks?
4. What are the main strategic issues for Mips in 1991? What should Bob Miller do?
2/5 History:
The VCR was invented in the U.S. and commercialized for the consumer market by Japanese firms. The readings describe the history of VCR development and commercialization. The class discussion considers why different firms chose different paths of innovation following the initial technological breakthroughs. It also examines the common view that Sony lost because Beta did not become standard.
Readings:
Richard S. Rosenbloom and Michael A. Cusumano, "Technological Pioneering and Competitive Advantage: The Birth of the VCR Industry" 1-390-125
Read the articles in the order indicated above; in the second one (Technological Pioneering) you may limit your study to the section beginning in the middle of page 64 and running to page 71.
Study Questions:
2. What are the main lessons that future pioneers and innovators should draw from this history?
2/6 Case: MRS Technology 9-390-158
MRS is a Route 128 start-up founded to produce photolithographic equipment for producers of active-matrix liquid crystal flat panel displays. The case describes the venture just as the market begins to grow and MRS is ready to ship its first products. Difficult financial, technical, and manufacturing choices must be considered in formulating a strategy to turn MRS's technological leadership into a sustainable competitive advantage.
Guest: Griff Resor, Chairman and CEO of MRS Technology
Study Questions:
2. What is the strategic significance of the production decision that Griff Resor was grappling with in April, 1989?
3. What should Resor do?
2/7 NO CLASS TODAY - Use the time to work on mid-term project
MODULE II Promoting Substitutes
What are the special characteristics of an innovation that creates a substitute for an established product or industry? How should incumbents deal with the threat of substitutes promoted by prospective entrants? Under what circumstances are entrants likely to be successful in displacing incumbents?
2/12 Cases: Digital Imaging in 1995: Opportunities in the Descent to the Desktop N9-796-060
1996 Supplement to Digital Imaging in 1995
Digital Imaging is an emerging business building on the consequence of many technologies. The case focuses on opportunities in electronic still photography and the future options that digital imaging capabilities may create. While electronic still photography in itself appears not to be an especially attractive market in the near term, managers in many firms believe that failure to participate and develop capabilities will lock them out of profitable future opportunities. Our discussion in class will focus on the prospective emergence of a mass market for digital photographic products. Consider the situation as if you were a senior executive at Polaroid.
Guest: Maarten DeHaan, Head of Digital Imaging Development, Polaroid Corporation
Study Questions:
2. How should Polaroid position itself to prepare for that possibility? What are its main strategic options?
3. What guidance is provided by the "lessons" we derived from the VCR history?
2/13 Case: Bendix Corporation (A) [Fuel Injection] 9-378-257
Optional Reading: "Timing Technological Transitions" by Richard Foster 1-390-126
Bendix invented electronic fuel injection but other firms commercialized and profited from the innovation. The case discussion analyzes how the attributes of the innovation create values, how one identifies lead customers who will assign the most value to an innovation, and how a firm can work with those lead customers to get up the learning curve and to expand the market.
Study Questions:
2. What strategy should Bendix pursue if it decides to commercialize EFI?
3. Should Bendix build the injector manufacturing facility described on page 17?
2/20 Case: Intel Bubble Memory (A) 9-486-048
2/21 Case: The Impact of Digital Standards on the Emergence of Interactive Multimedia Personal Computers N9-796-138
Comment on Convergence Still and video images are an integral part of the performance of multimedia personal computers. The consumer electronics, motion picture, still photoography, and TV broadcasting industries are all currently engaged in one or more of a number of independent standard-setting processes defining the way those images will be created, stored, and transmitted in digital form in the future. The case describes the current state of those activities and considers the position of the producers of computers and multimedia products whose business prospects will be affected by their outcomes.
Guest: Leslie Vadasz, Senior Vice President, Intel Corporation
Study Questions:
Put yourself in the position of a manufacturer of personal computers intending to develop a leadership position in the market for multimedia computers (e.g Apple, Compaq, Hewlett Packard).
2. What would you try to do, if anything, to influence the various standards now emerging?
3. Digital cameras, Digital video programming, DVD drives, and the like are potentially important complements to your business. How would you attempt to relate to producers of those products and services?
WorldWideWeb References for The Impact of Digital Standards on the Emergence of Interactive Multimedia Personal Computers
There are 1,875,736 sites on the WorldWideWeb which deal in some way with digital standards and 649,679 dealing with digital imaging. Because of the overwhelming abundance of WWW sites relevant to this case, below we provide links to five key sites where we know you can access either useful information or further references to valuable resources.
2/26 Topic: History: Midterm Project Reports
2/27 Topic: A Media Conglomerate in a digital world
Case: Disney in a Digital World (Stanford Case)
3/12 Topic: Digital World II
Case: Microsoft Goes Online: MSN 1996, N9-797-088
3/13 Case: The Desktop Printer Industry in 1991, N9-797-025
MODULE III: Managing the Research-based Enterprise
3/19 Topic: Research Strategy in Biotech
Case: Genzyme Genetics, N9-797-073
Guests: Elliott Hillback, Senior Vice President, Genzyme Corporation and Dr. Katherine Klinger, Vice President, Science, Genzyme Genetics.
3/20 Topic: Corporate Research at Xerox
Guests: Dr. Mark B. Myers, Senior Vice President, Corporate Research and Technology, Xerox Corporation
Reading: Chapter 4, "Research and Change Management in Xerox" by Mark B. Myers. In Engines of Innovation: U.S. Industrial Research at the End of an Era edited by Richard S. Rosenbloom and William J. Spencer. This reading will be distributed through Baker 20 on Thursday, March 13.
Recommended Reading: Chapter 9, "Rethinking the Role of Industrial Research" by Mark B. Myers and Richard S. Rosenbloom. In Engines of Innovation: U.S. Industrial Research at the End of an Era edited by Richard S. Rosenbloom and William J. Spencer. This reading will be distributed through Baker 20 on Thursday, March 13.
3/26 Case: Evolve Software, Inc., (Stanford Case)
3/27 SUMMARY
Excerpts from U.S. Congress, Office of Technology Assessment, "Innovation and Commercialization of Emerging Technologies" (In casebook)
Recommended Reading: Robert A. Burgelman and Andrew S. Grove: "Strategic Dissonance", CMR Winter 1996 (in casebook) Courseware