MAS.967/Sloan15.393

TECHNOLOGY & ENTREPRENEURIAL STRATEGY:

Competing on Technology’s Emerging Frontier

INSTRUCTOR INFORMATION

Fiona Murray Joe Jacobson

Assistant Professor Associate Professor

Sloan School Media Lab

Room: E52-551 Room: E15-430

Email: fmurray@mit.edu Email: jacobson@media.mit.edu

TA INFORMATION

Piyush Lumba Joost Bonsen

MBA 2003 MIT Sloan SM Candidate, MIT EE

Email: plumba@mit.edu Email: jpbonsen@alum.mit.edu

Course Rationale: To incorporate and combine technology and strategic elements of “technology strategy” in the context of start-up, entrepreneurial firms. The technology focus is on nanotechnology. The strategy focus is on nanotechnology and on other classic, illustrative cases in addition to conceptual material and tools.

Course Description: This course provides a strategy framework for managing new, entrepreneurial high-technology businesses. The emphasis throughout is on the development and application of conceptual models, which clarify the interactions between competition, patterns of technological and market change, and the structure and development of internal firm capabilities. The emphasis is on new enterprises in new industries based on emerging technologies.

The main focus of the course is on the acquisition of a set of powerful analytical tools that are critical for the development of a technology strategy. These tools can provide the framework for insightful planning when deciding what strategies to use in exploiting complex emerging technologies, and how to anticipate and respond to the behavior of competitors, suppliers, and customers. The course should be of particular interest to those interested in creating and managing a new enterprise with significant technical content, and to those interested in venture capital, incubation and industry analysis in new sectors.

Teaching Format: The course utilizes lectures, case analyses, and team projects. The cases are typically drawn from local start-ups although a few cover classic successful firms. There are also a series of technical articles, mainly taken from Scientific American. A few of the journal articles may be quite difficult for the non-technical class members. Discussion and evaluation of these readings will be exclusively on the broad ideas and contributions; the aim is to make you comfortable with the broad arenas of emerging technology rather than technical experts. The projects & case studies provide an opportunity to integrate and apply these tools in a practical, entrepreneurial context.

COURSE STRUCTURE

Strategy Briefs: These briefs are lectures intended to provide key tools and frameworks for strategic analysis of entrepreneurial start-up ventures. They will follow two key themes:

• Creating Value includes technological and market dynamics and how they are matched. We will also consider the use of scenario planning and options as frameworks for managing the uncertainty of emerging technologies in an entrepreneurial setting. Illustrative cases include EMI, Iridium, and Nanosys.

• Capturing Value is illustrated with cases in which firms make distinctive choices regarding types of markets, position in the value chain and their interaction with established firms. They include eInk, Surface Logix, and live cases. We will also look at the role of corporate venturing. The capturing value theme then moves to strategies associated with setting industry standards, as illustrated by Nintendo and Netscape.

Technology Briefs: These include an introductory one-hour primer on key nanotechnology firms, challenges and opportunities. This is followed by one brief on nanotechnology and brief student discussion of market applications of nanotechnology. This is to get you acquainted with the technologies. There are then three briefs on applications of nanotechnology to i) chips and logic; ii) biomedical and iii) communications. The purpose of these sessions is to give broad technical content and to explore the technical and business challenges in this application.

Course INFORMATION

Class Times: Monday 3:00 – 6:00pm

Class Location: Sloan E51-xxx 345

Reading Packets: Assigned readings are available from Copy Tech (basement of E52), with the exception of those cases, which are noted in the syllabus as being distributed in class. When you pick up your course packet, please check to be sure that it is complete – you will find a few readings out of order. Please use the syllabus as your guide to what to read when.

World Wide Web: Course materials will be available through the course Web site and Sloanspace. The web site is: http://courses.media.mit.edu/mas967. The course list will be tes@media.mit.edu. The web site will include lecture material, links to points of interest & critical course information.

Course Norms and Expectations

Professional conduct is built upon the idea of mutual respect. Such conduct entails (but is not necessarily limited to):

• Name cards: Please obtain a name card for yourself that contains your first and last names. There are over 80 students in the two sections of this class. We will eventually get to know all of your names but it will take time. The name cards are very helpful to us in this regard. Also they are important for us in keeping track of your class participation.
• Arriving on time: Class starts 5 minutes after the hour or half hour. Late arrivals are disruptive to both lectures and class discussion. Please try hard to be on time. If you know you are going to be late or will need to leave class early, please let us know in advance, if possible.
• Minimizing disruptions: All cell phones and pagers should be turned off during class. Please try to avoid engaging in side conversations after the class has begun. Finally, please try to avoid leaving and re-entering class repeatedly.

COURSE SCHEDULE

		Session I 3:00 - 4:20	Session II 4:40 – 6:00
1	09/09	Strategy Brief: Introduction & Industry Lifecycle	Technology Brief (1hr): Primer on key nanotechnology entrepreneurial firms
2	09/16	Case: EMI-CT scanner	Strategy Brief: Technology dynamics, S-curves & technology mapping
3	09/30	Strategy Brief: Market dynamics, mapping technology to markets	Technology Brief: Introduction to nanotech
4	10/07	Strategy Brief: Experimentation, options and scenario analysis	Case: Iridium
5	10/21	Live Case	Strategy Brief: Basic introduction to value capture.
6	10/28	Strategy Brief: Commercialization strategies & competing with incumbents.	Case: eInk
7	11/04	Case: Rambus	Technology Brief: Applications of nanotech to chips and logic w/ Live Case
8	11/18	Case: Surface Logix Strategy Brief: Building partnerships	Technology Brief (1hr): Biomedical apps of nanotechnology
9	11/25	Case: Lucent NVG	Strategy Brief: Creating Value thru standards
10	12/02	Technology Brief: Apps of nanotech in communications w/ Live Case	Case: Nintendo
11	12/09	Case: Browser Wars - Netscape vs. Microsoft	Wrap-Up
12	tba	Final Presentations	Final Presentations

Course Requirements & Grading

Grades will be determined by three factors: class participation, Technology Strategy Briefs throughout the course (mainly in the first half of the semester), and a final Technology Strategy Analysis (written & presented at the end of the semester). Both the Briefs and the final Analysis must be undertaken in groups that include both Sloan and non-Sloan students. Details are provided below and on the Course Website.

Grading Schema

a) Class attendance and participation 30%

b) Four Technology Strategy Briefs 30%

c) Final project/presentation 40%

a) Attendance & Class Preparation

This is not an easy course, since it provides an in-depth introduction to an extraordinarily complex subject that includes technical and managerial material. Cutting class will affect your grade - and, more importantly, - your own and your classmates' experience in the class. If you do miss a session, it will be your responsibility to find out what materials were covered, what assignments were made, and what handouts you missed. If you miss more than one session without warning us in advance it will severely impact your class participation grade.

b) Technology Strategy Briefs

During the first half of the semester you will be asked to prepare four Technology Strategy Briefs. They will each focus on the application of one of the tools of technology strategy to an emerging (nano)technology. The briefs will be completed as a team of 3 or 4 people. For Brief #1 the teams will be assigned. In subsequent Briefs you can form your own team but it must include non-Sloan student(s).

c) Final Project

The final project is an extended Technology Strategy Analysis which includes a written analysis of no more than 10 pages, a product or service prototype, and a presentation as the deliverables. It is due December 9th. Under general Institute Policy, we may not give extensions to this deadline. It should be completed in groups three to six. You do not have to write your final project with the same people with whom you wrote your “Technology Strategy Briefs”, but you may if you wish. There will be a project presentation class scheduled to take place during the Examination Period.

More detailed information and some guidance for all the homework assignments and the final project will be available on the Course Website.

SYLLABUS: READINGS & ASSIGNMENTS

Class 1 Session I

Intro: Emerging Technologies & Opportunities September 9

Whitesides, G. and J. Love (2001) “The Art of Building Small”, Scientific American, pp. 38-47

Questions for Discussion

• What are the key trends in nanotechnology that are emerging? What are their most interesting business implications?

Class 1: Session II

Intro: Industry Life Cycle & Entrepreneurial Opportunities September 9

Aldrich, H. (1999) “Emergence of New Populations of Organizations”, chapter 9 in Organizations Emerging, Sage, pp. 223-258

Henderson, R. (2001) Lecture Note: The Industry Life Cycle

Questions for Discussion

• How does the industry lifecycle provide a useful model for thinking about the evolution of e.g. PDAs, cell phones?
• Sketch out as an industry evolves, i) the number of firms in an industry, ii) relative investment in product and process innovation, iii) average margins in the industry as an industry evolves over time.

What are the factors that lead to the emergence of a new population of organizations? Is a firm likely to be successful if it is an early member of new population?

Class 2: Session I

Case: EMI & the CT Scanner September 16

EMI & the CT Scanner Case (A) (HBS #9-383-194)

EMI & the CT Scanner Case (B) to be handed out in class

Questions for Discussion

• Where is the technology headed, and why? Forecast the future demand for the CT scanner.
• Why was the scanner initially so profitable? Is this likely to continue?
• What strategy would you recommend EMI pursue, and why?

Class 2: Session II

Strategy Brief: Technology Dynamics & S-Curves September 16

Foster, R. (1986) "The S‑curve: A New Forecasting Tool", Chapter 4 in Innovation, The Attacker's Advantage, Summit Books, Simon and Schuster, New York, pp. 88-111

Rosenberg, N. (1969). "Directions of Technological Change: Inducement mechanisms and Focusing Devices." Economic Development and Cultural Change.

Questions for Discussion

• What determines the limits of an S curve? Can such limits be determined ex post? How would one determine what to map on the vertical axis of an S curve?
• Rosenberg singles out three "inducement mechanisms and focusing devices" that he suggests are important in shaping technological change. What are they? Can you think of others?

Class 3: Session I

Strategy Brief: Market Dynamics September 30

Rodgers, E. (1983) "Innovativeness and Adopter Categories", chapter 7 in Diffusion of Innovations (3rd edition), The Free Press, pp. 241-270

Moore, G. (1999). “High-Tech Marketing Illusion” Chapter 1 and “High-Tech Marketing Enlightenment Chapter 2” pp 9-62. Crossing the Chasm. NY: Harper Collins.

Clayton M. Christensen, Mark W. Johnson and Darrell K. Rigby, Foundations for Growth: How To Identify and Build Disruptive New Businesses SMR Spring 2002, Volume 43, Number 3

(And recommended)

Christensen, C. (1997). "How can great firms fail? Insights from the hard disk industry", Chapter 1 pp 3-28 in The Innovator's Dilemma, Harvard Business School Press.

Questions for Discussion

• What do Rodgers and Moore have to say about the way markets evolve?
• How does the phenomenon Christensen describes relate to entry in uncertain markets?
• What problems does a new enterprise encounter in why trying to manage market dynamics?

Class 3: Session II

Technology Brief: Introduction to nanotechnology September 30

Please read: http://pubs.acs.org/cen/nanotechnology/7842/7842nanotechnology.html

Questions for Discussion

• How do you expect markets for nanotechnology to evolve?
• Please come to class prepared to discuss one nanotechnology firm: its inventor(s), their research & your ideas about applications & their challenges.

Class 4: Session I

Strategy Brief: Experimentation, Options & Scenario Planning October 7

Roberts, E. (1991) “Product Strategy and Corporate Success”, Chapter 10 in Entrepreneurs in High Technology, Oxford University Press, pp. 281-309.

Scharwtz, P. (1991) "The Smith & Hawken Story: The Process of Scenario Building", from The Art of the Long View, Doubleday, pp. 17-31.

Luehrman, T. (1998) "Investment Opportunities as Real Options: Getting Started on the Numbers”, Harvard Business Review, July 1, 1998

Questions for Discussion

• What does Roberts have to say about the way technologies and markets evolve?
• What problems does a new enterprise encounter in why trying to manage market dynamics?How might portfolio planning and scenario analysis facilitate start-ups as they manage product and technology uncertainty?
• What are the potential weak points of an established firm that a start-up can challenge?

Class 4: Session II

Case: Iridium October 7

“Rise and Fall of Iridium”, Harvard Business School (9601040)

Questions for Discussion

• Sketch out the nature of technological evolution as described by Foster. Where is Iridium on this curve?
• Who was to blame for Iridium's failure? AT At what point could you have known that Iridium would fail?
• What is your evaluation of Iridium's system design? What impact did the choices that were made have on the subsequent evolution of the venture?
• What is your evaluation of Iridium's organizational design? What changes would you have made to make the probability of success higher?Using scenario analysis, what are the most important uncertainties that Iridium might have planned for?

Class 5: Session I

Live Case October 21

Class 5: Session II

Strategy Brief: Value Capture or Can you profit from your ideas? October 21

Teece, D.J. (1987) “Profiting from Technological Innovation: Implications for Integration, Collaboration, Licensing and Public Policy”, chapter 9 in The Competitive Challenge, pp. 185-219

Bovet and Martha. “Unlocking the Supply Chain”, Harvard Management Update, June 2000.

(Background available on request & recommended for non-Sloan students)

Porter, Michael, “The Structural Analysis of Industries,” Chapter 1, Competitive Strategy, 1980, p. 3.

Questions for Discussion

• How can you make money from a new technical idea? What are the key pieces of information that might shape your choice of strategy?

Class 6: Session I

Strategy Brief: Commercialization Strategy & Competing with Incumbents October 28

J. Gans and S. Stern (20020) “The Product Market and the Market for “Ideas”: Commercialization Strategies for Technology Entrepreneurs”, Mimeo, June 2002.

Chesbrough, H., and D. Teece, (1996) “When is Virtual Virtuous? Organizing for Innovation”, Harvard Business Review, vol.74(1), Jan-Feb 1996, pp. 65-74

Questions for Discussion

• What is the difference between the market for ideas and the product market?
• When does it make sense for a team of entrepreneurs to 1) Enter the market directly 2) Attempt to sell their ideas?
• What types of relationships with incumbents make sense for entrepreneurial firms?

Class 6: Session II

Case: e-Ink October 28

“E-ink”, Harvard Business School (9800252)Wheelwright, S. and K. Clark (1992) "The Concept of a Development Strategy", “The Aggregate Project Plan”, and “Structuring the Development Funnel”, chapter 2, 4, and 5 in Revolutionizing Product Development, The Free Press, New York, pp. 28-56.

Ditlea, S. (2001) “The Electronic Paper Chase”, Scientific American, November 2001, pp. 50-55

Wheelwright, S. and K. Clark (1992) Chapters 2, 4, and 5 in Revolutionizing Product Development, The Free Press, New York.

Questions for Discussion

• Can the tension between creativity and commercialization be managed to creating a win-win situation or will there always be a tradeoff?
• What type of portfolio of projects should e-Ink develop? And how can such a portfolio be financed? When should they shift to the next generation and category of products?

Class 7: Session I

Case: Rambus November 4

“Rambus (A)” Harvard Business School

“Rambus (B) and (C) to be handed out in class

Questions for Discussion

• How does Rambus attempt to create value? How is Rambus attempting to capture value? Could they set a standard alone?
• What would you recommend that Rambus do next?

Class 7: Session II

Technology Brief: Applications of Nano to Chips & Logic November 4

Service, R. (1999) “Chips Go Nano”, Technology Review, March/April 1999, pp. 55-57.

Questions for Discussion

• What are the key trends in chips & logic?
• What bottlenecks do you anticipate in the adoption of new chip architectures? What are the key commercial opportunities?

Class 8 Session I

Case: Surface Logix November 18

“Surface Logix”, Harvard Business School (N9802050, Lassiter & Roberts)

Re-read: Scharwtz, P. (1991) "The Smith & Hawken Story”

(Further recommended reading)

Eisenhardt, K., and C. Schoonhoven (1996) “Resource-based View of Strategic Alliance Formation”, Organization Science, Vol. 7, No. 2, 1996, pp 136-150.

Questions for Discussion

• How should Surface Logix decide what type of product markets to enter? What are the crucial variables that will determine the future of the firm? Can Surface Logix shape any of them?
• How does the relative importance of appropriability and complementary assets vary with Surface Logix’s options?
• What are the key challenges of the alliances it forms?

Class 8: Session II

Technology Brief: Biomedical Applications of Nano November 18

Stix, G. (2001) “Little Big Science”, Scientific American, September 2001, pp. 32-37

Whitesides, G. (2001) “The Once and Future Nano-machine”, Scientific American, September 2001.

Reed, M., and J. Tour (2000) “Computing With Molecules”, Scientific American, June 2000, pp. 86-93.

Questions for Discussion

• What are the key trends in molecular machines?
• What bottlenecks do you anticipate in the adoption of these concepts?
• What are the key commercial opportunities?

Class 9: Session I

Case: Lucent NVG November 25

“Lucent Technologies New Ventures Group”, Harvard Business School (9300085)

Cusumano, M. and A. Gawer “The Elements of Platform Leadership”. Sloan Management Review Spring 2002, Volume 43, Number 3, pp. 51-58.

Questions for Discussion

• As a start-up, what are the pros and cons of working with a large established firm?
• Would you prefer to take venture capital or corporate venture capital funding? Why?
• For the case of Lucent what, if anything, can Socolof and the NVG do to increase the advantages and minimize the tensions, to ensure speedier and easier development of ventures within Lucent?

Class 9: Session II

Strategy Brief: Capturing Value thru Standards November 25

Varian, H. and R. Shapiro (1999) “Recognizing Lock-In” and “Networks and Positive Feedback”, chapters 5 and 7 in Information Rules, Harvard Business School Press, pp. 103-134, pp. 173-225

Shapiro, C. and H. Varian (1999). “The Art of Standards Wars”, California Management Review, Volume 41, Number 2, Winter 1999, pp. 8-32.

(Recommended Additional Reading)

Cusumano, M., Y. Mylonadis, and R. Rosenbloom (1992) "Strategic Maneuvering and Mass-Market Dynamics: The Triumph of VHS over Beta", The Business History Review, Spring 1992, pp. 51-94.

Questions for Discussion

• In what way do standards and network externalities create value for firms and consumers?
• Why do some markets "tip" to a single standard? What are the elements of a successful strategy in winning a standards war?
• Can you list the sources of the externalities that led to tipping in the case of VHS vs. Beta? Do you think the handheld market will tip to Windows CE or to Palm? Why or why not?

Class 10: Session I:

Technology Brief: Photonics & Communications December 2

Stix, G. (2001) “The Triumph of the Light”, Scientific American, January 2001, pp. 80-86

Stix, G. (1998) “Nothing But Light”, Scientific American, December 1998, pp. 17-20

Corcoran, E. and G. Zorpette (1997) “Diminishing Dimensions”, Scientific American, October 1997

Questions for Discussion

• What are the key trends in photonics?
• What bottlenecks do you anticipate in the adoption of photonics?
• What are the key commercial opportunities?

Class 10: Session II

Case: Nintendo December 2

“Power Play (A): Nintendo in 8-bit Video Games”, Harvard Business School (9795102)

“Power Play (B) and (C)” to be handed out in class

Christensen, C. and Bower, J.L. (1994). "Customer Power, Strategic Investment, and the Failure of Leading Firms," Strategic Management Journal.

Questions for Discussion

• What steps did Nintendo take to establish its standard as the standard in video games? How much money is Nintendo making? How much money are other players in the value chain making?
• If you were attempting to displace Nintendo, what would you do? Why?

Class 11: Session I

Case: The Browser Wars December 9

“The Browser Wars, 1994-1998”, Harvard Business School (5-700-046)Christensen, C. and Bower, J.L. (1994). "Customer Power, Strategic Investment, and the Failure of Leading Firms," Strategic Management Journal

Sebenius, J. “Negotiating Lessons from the Browser Wars”. Sloan Management Review Summer 2002, Volume 43, Number 4, pp. 43-50.

Questions for Discussion

• Why do Christensen and Bower believe that established firms fail in the face of innovation?
• What were the critical drivers of Netscape’s early success?
• Evaluate the strategies of Netscape and Microsoft after the browser wars begin in 1995?
• What can we learn for competing against powerful incumbents – what are their weaknesses?