MODULE 1

INDIVIDUAL ASSIGNMENT

"Case Analyses of Advent Corporation and EMI; Plus History of the Internet"

Prepared: 11 April 1997

Prepared For:

TM 600.88 Course — Spring 1997

Mercer University

Dr. Linda Brennan, Professor

FAX (770) 645-0864

Prepared By:

Dwayne O. Fulton — Graduate Student

The purpose of this document is to response to the questions in Individual Assignment Module 1. Section 1.0 of this document presents the case analysis for the Advent Corporation. Section 2.0 of this document presents the case analysis of EMI and the CT Scanner. The final section of this document, Section 3.0 presents a brief history of the Internet to include a discussion of its evolution and predicted future.

Section 1.0 - Case Analysis of the Advent Corporation.

Advent’s initial strategy was to use the latest innovations in microelectronic circuitry as a baseline to manufacture specialized electronic products for home entertainment. Advent’s products would offered high fidelity, but would also be cost-effective for the average household. The corporation’s initial focus was to develop a large screen television system for home entertainment. Advent’s greatest strength was the core competencies within its CEO and other senior officers. The men who started Advent all had several years of experience in the home electronics business. The primary weakness of Advent, at startup, was lack of capital. Mr. Kloss started the corporation with an initial investment of $60,000.00. One of the ways that Advent gained and maintained the competitive advantage was through the use of a nation wide network of dealers who could also repair/maintain Advent’s equipment. This distinctive technological competency differentiated Advent from other similar corporations and allowed Advent to gain an advantage in the marketplace.

Mr. Kloss, the CEO of Advent, had several years of technical experience in the acoustic suspension speaker business prior to starting the corporation. He also had ten years of experience as President of a similar electronic products corporation. This experience allowed Mr. Kloss to have detailed knowledge of the development, marketing and distribution cycles for home electronic equipment. Creative freedom was very important to Mr. Kloss. Mr. Kloss’ primary objective at Advent was to make the most efficient piece of equipment, and provide it to the customer at the lowest possible price. Mr. Kloss closely supervised production operations within the corporation. Although there were production managers, Mr. Kloss dictated a detailed sequence of assembly steps for each product development cycle. Mr. Kloss placed emphasis on continually optimizing Advent’s position in the marketplace rather than responding to a long-range plan that placed substantial importance upon production efficiency and rapid response to marketing goals. Of course marketing goals were important, but maintaining the best position in the marketplace based upon technological innovation was more important at Advent. As a result, operating managers were expected to monitor the functions in their departments in fine detail, looking for ways to make Advent’s products better. Mr. Kloss had hands-on involvement in the production of Advent’s products. When Mr. Kloss was not monitoring production, he was devoted to conceiving new products and staying abreast of changes in consumer electronics technology. His leadership was key to the innovation process within Advent.

Product innovations within Advent were usually started with an observation that a requirement exist for a new product in the market place. In order to meet this requirement, Advent would initially look at is core technological competencies and internal resources to determine what and how competencies and resources could be re-configured to meet this new requirement (market opportunity). Innovations were driven by the manager’s view of emerging requirements (needs) in the market as related to Advent’s capability to re-configure and response to these requirements.

Several resources were required for Advent to produce the large screen projection television. Prevalent among those resources were the following:

a. A means of finishing mirrors at a very low cost to support image projection;

b. Access to screen technology which was owned by Kodak;

c. Resources would have to be applied toward research to develop new ways of

prolonging the life of the cathode ray tube;

d. Indirect resources such as building space, raw materials, tools and investment capital would be required to support device production;

e. Direct resources such as labor would be required.

Mr. Kloss estimated that direct labor cost for production of the large screen projection television would be approximately ½ the cost of materials.

At the end of the case, two major decision points remained for Advent. The first major decision was How should the large screen projection television be produced? The first production option analyzed was the use of an automated production line. The automated production line could generate 100 devices per week. However, the automated production line would be very inflexible with high fixed costs that would prevent great economies of scale. Tooling costs for an automated production line would be "many tens of thousands of dollars." With respect to the method of production, I (Dwayne O. Fulton) feel that Advent should have avoided high production costs for the first year of device sales. Because of Advent’s lead in Research & Development (R&D), the corporation was the leader in the projection television market. At that time, all other competitors were at most two years behind Advent. Based upon that fact, the first year of device production could have been done at minimal cost (risk). The second major decision facing Advent was Should the innovation process be divided within the corporation and if so, how? As stated early, Mr. Kloss was the key to corporate innovation at Advent. Basically, he accomplished the following:

a. Perceived market needs (requirements);

b. Matched market requirements with the appropriate technological state of art;

c. Completed product conception that fulfilled the market-technology match.

Over time it became increasingly difficult for Mr. Kloss to manage this entire process, but it was beneficial to have one single source of reference for product innovation. The corporation was faced with "separating more routine R&D functions from the esoteric, or should Mr. Kloss attempt to pool the efforts of a large number of people in order to arrive at an effective product conception function?" This problem was a result of normal growing pains within a small business. There is no simple answer to this question. Eventually, major R&D functions would have to be separated as the corporation grew, but the Marketing Strategy should be used as the thread for linking R&D efforts to functions accomplished in other divisions within the corporation. On the other hand, I do agree with the approach of hiring an Administrator for the corporation who would enact the daily management policies and therefore allowed Mr. Kloss more time to focus on production control and product innovation.

Section 2.0 - Case Analysis of EMI and the CT Scanner.

In the early 1970s, industry began to use automation as a primary tool for improving there internal production processes. Automation became a major part of the firms’ R& D process. Automation was used to leverage technological innovations and therefore gain a competitive advantage in the market place. During World War II, EMI developed a very strong electronics division. After the war, this division was focused on defense related products and automation. The CEO of EMI was able to lever their core automation competencies and use it to diversify from the music business into the diagnostic imaging industry. Automation was a key force behind the Technology Revolution of the 1970s.

From the case study, it was revealed that EMI’s competitive advantages were innovative leadership by their CEOs and initial patenting of advanced diagnostic imaging technology. It was EMI’s leadership who developed an incentive program for employees to explore new R&D methods. This R&D incentive program resulted in the CT scanner. Obtaining the initial patent on advanced diagnostic imaging technology was another competitive advantages for the firm. Through these patents, EMI was able to remain a strong force in the industry, even though their product prices were too high. The major competitive disadvantages for EMI was premium pricing as well as product delivery problems. Because of EMI’s position in the marketplace, the firm decided to take as much as possible for the CT scanner. Another competitive disadvantage for EMI was their distribution channels. Other scanner developers could delivery their systems when EMI failed to deliver. EMI loss a large amount of market share because they failed to deliver.

It was an excellent decision for EMI to enter the diagnostic imaging industry. This diversification made great use of internal resources and pervious R&D efforts. Although, there was some initial fear of entering the U.S. market, once EMI’s strategic direction was established the firm was in a good position internationally.

The first step in implementing product diversification is to analyze internal resources to identify how resources can be re-configured to create the new product. The second step is to educate management on the advantages and disadvantages of diversification. Risk analyses can be used to isolate the value associated with diversification.

Section 3.0 - History of the Internet and My Prediction for its Future.

Some thirty years ago, the RAND Corporation, America's foremost Cold War think-tank, faced a strange strategic problem. How could the U.S. authorities successfully communicate after a nuclear war? Post nuclear America would need a command-and-control network linked from city to city, state to state and base to base. But no matter how thoroughly that network was armored or protected, its switches and wiring would always be vulnerable to the impact of atomic bombs. A nuclear attack would reduce any conceivable network to tatters. How would the network itself be commanded and controlled? Any central authority would be an obvious and immediate target for an enemy missile. The center of the network would be the very first place to go. RAND mulled over this grim puzzle in deep military secrecy, and arrived at a daring solution. The RAND proposal (the brainchild of RAND staffer Paul Baran) was made public in 1964. In the first place, the network would have no central authority. Furthermore, it would be designed from the beginning to operate while in tatters.

The principles were simple, the network itself would be assumed to be unreliable at all times. It would be designed from the begining to transcend its own unreliability. All the nodes in the network would be equal in status to all other nodes, each node with its own authority to originate, pass, and receive messages. The messages themselves would be divided into packets, each packet separately addressed. Each packet would begin at some specified source node, and end at some other specified destination node. Each packet would wind its way through the network on an individual basis. The particular route that packets take would be unimportant, only final results would count. Basically, the packet would be tossed from node to node to node, more or less in the direction of its destination, until it ended up in the proper place. If big pieces of the network had been blown away, that simply would not matter; the packets would still stay airborne and be routed across the network to the surviving nodes. This rather haphazard delivery system might be "inefficient" in the usual sense (especially compared to, say, the telephone system) -- but it would be extremely rugged. During the 1960s, this intriguing concept of a decentralized, blast proof, packet-switching network was kicked around by RAND, MIT and UCLA. The National Physical Laboratory in Great Britain set up the first test network on these principles in 1968. Shortly afterward, the Pentagon's Advanced Research Projects Agency decided to fund a larger and more ambitious project in the USA. The nodes of the network were to be high-speed supercomputers (or what passed for supercomputers at the time). In fall 1969, the first such node was installed in UCLA. By December 1969, there were four nodes on the infant network, which was named ARPANET, after its Pentagon sponsor.

The four computers could transfer data on dedicated high-speed transmission lines. They could even be programmed remotely from the other nodes. Thanks to ARPANET, scientists and researchers could share each others computer facilities by long distance. This was a very useful approach because computer processing time (CPU Units) were precious in the early 1970s. In 1971, there were fifteen nodes in ARPANET. By 1972, there were thirty-seven nodes.

The ARPA's original standard for communication was known as NCP, "Network Control Protocol," but as time passed and the technique advanced, NCP was superceded by a higher-level, more sophisticated standard known as TCP/IP. TCP, or "Transmission Control Protocol," converts messages into streams of packets at the source, then reassembles them back into messages at the destination. IP, or "Internet Protocol," handles the addressing, ensuring that packets are routed across multiple nodes and even across multiple networks with multiple standards -- not only ARPA's pioneering NCP standard, but others like Ethernet, FDDI, and X.25. As early as 1977, TCP/IP was being used by other networks to link to ARPANET. ARPANET itself remained tightly controlled through 1983, when its military segment seperated and became MILNET. TCP/IP remained common to both architectures.

As the 1970s and 1980s advanced, many different social groups found themselves in possession of powerful computers. It was fairly easy to link these computers to the growing network-of- networks. As the use of TCP/IP became more common, other networks fell into the digital embrace of the Internet, and messily adhered. Since the software called TCP/IP was public-domain, and the basic technology was decentralized and rather anarchic by its very nature, it was difficult to stop people from barging in and linking up. In fact, no one wanted to stop them from joining this branching complex of networks, which came to be known as the "Internet."

I (Dwayne O. Fulton) feel that Low Bit Rate Video (LBRV) technology will be economially merged with the Internet within the next two years. When local telephone service providers increase the data rate to and from our homes to at least 256 KB/s real time, low bit rate video will be available from point to point on the Internet. I predict that this will replace the current telephone technology. I just hope that people are ready to see who they are talking with. I know that I do not want my boss to see what I am actually doing when I call in sick on Monday mornings.