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Explain cross licensing with appropriate examples; pros and cons
- Firms agree to license patents to all of its existing and future inventions for a particular field of use for a specific period of time
- Lower cost because companies don’t need to negotiate every individual licensing
- Don’t need to worry about patent infringement; especially important for industries in which the cost of locking down a factory can drive a firm into bankruptcy
- Startup are disadvantaged as they lack the patent portfolio large enough to cross license with other firms
Pros and cons of joint venture
- Gain economies of scale in production or distribution
- Objectives of the partners may diverge
Pros and cons of licensing As licensor
- Important part of the technology strategy especially for startup who base their entire business model upon it
- Effective way to earn revenue(IBM’s royalties account for 20% of its Net Income; Texas Instruments’ royalties account for more than 55%)
- Firms develop technologies to enhance their own products and find non-competitors to license the technology to spread out the cost and risk
- Focus on core competency: Focus on developing new products and license to companies that are more market-oriented and have the resources to bring the products to market
- Exclusive licensing: greater incentive to licensee to expend effort and money to get a product based on the licensed technology to market; however, it is riskier than nonexclusive licensing since the licensor will earn much less return if the licensee cannot develop a product based on the licensed technology
Pros and cons of licensing As licensee
- Increase sales
- Keep up with the market
- Move into more lucrative line of business
- Merchandise and character licensing: promote the sale of their product to a host of current and potential customers
Essay: Explain briefly why established companies have trouble in dealing with disruptive technologies.
- - Mainstream customers don’t value them
- - Technology performance of established company’s product still better
- - Emerging markets not attractive
- - Processes and valuesnot suited
Explain what are the advantages and disadvantages of focus group market research method.
- High response rate
- Reduce non-response bias
- Relatively expensive
- Hard to control the direction of discussion
- Data is rarely independent on the views of other focus group members
- May not be representative of the larger population
- Resource: people, cash, intellectual capital, brand
- Process: product design, manufacturing, marketing
- Value: culture, standards used to prioritize between projects
Use the RPV framework to explain the failure of “DEC” in the PC business, although it was a successful company that manufactured mini-computers
- In terms of Resource in the RPV framework, DEC has enough cash, sound intellectual capital, enough talent and a good brand name. DEC was in a good shape.
- In terms of Process, however, there are two key difference between making minicomputers and microcomputers. The first difference is the length of design cycle. The design cycle of minicomputer takes 3 years while that of microcomputer takes 1 year. DEC was used to a much slower pace of innovation, thus it failed to pace with the rapidly development microcomputer market. The second difference is the development process. Due to the complex nature of minicomputers vertically integrated development was adopted while for microcomputers, outsourcing is more appropriate.
- In terms of Value, DEC was used to high margin business of minicomputer. The gross margin for minicomputers was 35-40% while that for microcomputers was only 20%. DEC focused its resources on development of minicomputers and had little incentive to develop microcomputers.
- Overall, the process and value of DEC was not suited for disruptive technology, hence it failed in the microcomputer business.
Responding to disruptive innovation
- Internal change-hard because it is difficult to change the process and value of a company
- Create an independent subsidiary
- Acquisition (should not integrate the acquired company; otherwise the unique process and value are lost
Benefits of lead user innovation
- Access to richer and more reliable information on emerging customer needs than available through traditional market research
- Help the development of better product and service concepts because lead users have already developed some prototype product
- Faster product development as there are greater collaboration and less time is required to develop new concepts
Challenges of lead user innovation
- Difficulties in assessing the lead user participation in team-based effort; prove to be problematic in assessing royalties and promotion
- High level of commitment in needed in terms of quality and quantity of human resources.
- Apple mac vs ibm pc
- 2.5” and 3.5” disk drive; market share of integrated and less integrated companies
- Low-end, mid-tier and high-end market of microprocessor(Dell; Sun microsystems; sgi)
- Digital integrated in undersupply; prime, wang and data general outsource in oversupply
- CORNING and Siemens re-integrated because internet downloading led to jump in performance demand
Comparing two architectures
- Reliability and functionality
- Profit margin and charging premium
- Fast development
- Consumer choice
- Product control and degrees of freedom
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