Indian School of Business

Operations Strategy (OSTR)

Academic Year & Term: 2019-20 Term: 8

Instructor: Professor Glen Schmidt
Affiliation: David Eccles School of Business, University of
Office
Utah Hours: By
Email: ISB id: NOT IN USE Appointment
Home School id: glen.schmidt@utah.edu

Instructor: Professor Vinod Singhal

Affiliation: Scheller College of Business, Georgia Institute
of Technology Office
Email: ISB id: NOT IN USE Hours: By
Home School id: Appointment
vinod.singhal@scheller.gatech.edu

Course Overview and Description

This course provides a framework to describe and formulate an operations strategy and understand
and evaluate the key decisions in operations that have a substantial impact on a firm's competitive
position. The word strategy has two connotations: formulating an operational strategy (long-term
plan) and making strategic (important) operational decisions. We will study articles, and cases in a
variety of settings using a variety of tools to achieve these two goals. The course will also examine
today’s critical strategic issues such as outsourcing and globalization.

Operations strategy consists of the strategic use of functions such as manufacturing, supply chain, or
service provision. Traditionally, these areas have been viewed as narrow, functional areas, and
management of them was based on some simple criterion such as cost minimization. More recently,
managers and business observers have understood that manufacturing and operations have to be
managed in the broader context of business strategy. In this sense, decisions on manufacturing and
operations capabilities must fit and be consistent with the business strategy and also take into
account the competitive environment. Furthermore, decisions about different areas of
manufacturing and operations must be consistent with each other. Choices about facilities, capacity,
sourcing, technology, control and information systems, quality management, human resources,
organization and other areas are all strategic choices that significantly affect what the business
brings to the marketplace. The course will examine how decisions in these areas can be made in a
coherent manner.

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Beyond integration of manufacturing decisions with business strategy, manufacturing and
operations strategy emphasize the concept of operations as a source of competitive advantage.
Using the broad notion of manufacturing, a company's strength in manufacturing and operations can
be the basis of competitive position. A competitive advantage can accrue through better
performance on cost, quality, responsiveness, and flexibility etc.

Business Strategy suggests that a firm derives competitive advantage either by achieving a cost
advantage, or through product differentiation (Michael Porter, Competitive Advantage, Free Press,
NY, NY, 1985). That is, either the firm must be able to produce its goods at a lower cost (through
process innovation), or it must offer features that customers desire and competitors lack (through
product innovation). We explore specific operational strategies that the firm might pursue to
achieve this superior process or product innovation. While the course is not strictly divided into
topics of process innovation versus product innovation (these two pursuits are not always as
separable as they might initially seem), the first half of the course focuses more on strategies that
yield a cost advantage (e.g., topics of competitive cost analysis, investments in production
technology and capacity, and risk management) while the second half of the course focuses more on
strategies that yield a product advantage (e.g., virtuous new product development cycles,
encroachment strategies, mass customization, and outsourcing of product design).

Learning Goals

Ability to Comprehend and Assess an Organization’s Operations Strategy

Each student shall be able to describe an organization’s operations strategy, understand its
components and intent, and assess its strengths and weaknesses.

Effective Oral Communication

Each student shall be able to communicate verbally in an organized, clear, and persuasive manner,
and be a responsive listener.

Critical and Integrative Thinking

Each student shall be able to identify key issues in a business setting, develop a perspective that is
supported with relevant information and integrative thinking, to draw and assess conclusions.
Interpersonal

Awareness and Working in Teams

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Each student shall demonstrate an ability to work effectively in a team, exhibiting behavior that
reflects an understanding of the importance of individual roles and tasks, and the ability to manage
conflict and compromise, so that team goals are achieved.

Awareness of Global Issues Affecting Business

Each student shall be able to identify key relevant global factors, and be able to analyse the impact
of the global environment on business issues, as compared with domestic factors.

Course Prerequisite

Operations Management core course.

Required Text Book

None

Other Required Materials:

1. Course case pack

2. Course home page: This page will guide you to all the downloadable files related to the
course.
3. Handouts: To be distributed in class as needed.

Supplementary Text Books (optional, for additional reading)

1. Operations Strategy, Competing in the 21st Century, by Beckman and Rosenfield
Irwin/McGraw Hill, 2007
2. Designing and Managing the Supply Chain, by Simchi-Levi, Kaminsky, & Simchi-Levi.

Additional Optional Readings

Additional references that may be useful as background:

1. Pursuing the Competitive Edge, by Hayes, Pisano, Upton, and Wheelwright

2. Operations Strategy, by Slack and Lewis
3. Manufacturing Strategy, by Hill
4. Operations Strategy, Principles and Practice, by Van Mieghem
5. The Machine the Changed the World, by Womack, Jones, and Roos
6. Dynamic Manufacturing, by Hayes, Wheelwright, and Clark
7. Lean Thinking, by Womack and Jones
8. The Productive Edge, by Lester
9. The World is Flat, by Friedman (Globalization)
10. Collapse, by Diamond (Sustainability)

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Grading
The grade you receive for the course is intended to certify your demonstrated proficiency in the
course material. You will be required to do four case write-ups, two individually and two in groups.
Overall proficiency will be estimated by measuring your performance in:

1. Class participation: 20% Coding Scheme 1N

2. Three group case submissions: 50% (20% in class session 3, 15% in session 8, and 15% in
session 9). Coding Scheme 3N-a (discussion restricted to within the group).
3. Two individual case submissions: Class sessions 5 and 6 (15% of grade each). Coding
Scheme 4N

Each group may have a maximum of five people, all from the same section. No cross section
groups allowed.

Individual Contribution
Your class participation contributions are expected to create and enhance a positive learning
environment for this course. This includes enhancing the atmosphere and quality of classroom
discussions, as well as interactions outside the classroom. To support this environment, please
leave laptops, cell phones and PDA’s turned OFF during class. Grading will be based on the
quality and impact of your contributions, not primarily on quantity (although a minimum amount of
the latter is necessary to deliver on the former).

Class Discussion
In a typical class session, one or more students will be asked to begin the discussion by addressing
specific questions. If you have thoroughly prepared the case or reading, you should have no
difficulty in handling such a leadoff request. After the leadoff initial analysis and
recommendations, the discussion will be opened to the rest of the class, sometimes with cold calling
mixed in. Some of the criteria for judging effective class participation include
1. Relevance,
2. Insightfulness (in analysis, observation, or questions),
3. Constructiveness in the context of the class discussion flow,
4. Depth of analysis,
5. Clarity and brevity.

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 Attendance & Punctuality

Learning is an interactive process. ISB students are admitted partly based on the experiences they bring to the
learning community and what they can add to class discussions. Therefore attendance is an important aspect of
studying here.

The ISB expects students to attend all class sessions in every module. However, if due to completely
unavoidable reasons a student is forced to miss a class session. The school policy is below:
If a student misses 20% of sessions in a course; there will be no grade penalty.
If a student misses 30% of sessions in a course, s/he will obtain a letter grade lower than that awarded by the
faculty for that course.
If a student misses 40% of sessions in a course, the student will receive a letter grade that is two levels lower.
If a student misses 50% of sessions or more in a course, the student will receive an ‘F’ grade for that course.
Note: For half credit courses, 30% may not be applicable given it will equate to one and a half sessions.

CASE WRITE-UPS

Each student must write up five cases (two individually and three in groups).

First group assignment will be to write up the American Connector Case for Class #3. Coding
Scheme 3N-a (discussion restricted to within the group). This is worth 20% of your grade.

First individual assignment will be to write up The Auto Industry: Flexible Networks Case for
Class #5. Coding Scheme 4N. This is worth 15% of your grade.

Second individual assignment will be to write up the Genentech – Capacity Planning Case for
Class #6. Coding Scheme 4N. This is worth 15% of your grade.

The second group assignment will be to write up the Intel case for session #8. This is worth
15% of your grade. Coding Scheme 3N-a (discussion restricted to within the group).

The third group assignment will be to write up the Seagate case for session #9. This is worth
15% of your grade. Coding Scheme 3N-a (discussion restricted to within the group).

For the first three cases, the write-up should be a two-to-three page analysis of the case while the
latter two cases require a set of up to 16 PowerPoint slides. Submissions should be guided by the
assignment questions, any readings for the session, and any ideas discussed previously in the course.
Please see the guidelines for case write-ups later in this syllabus.

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Format for Case Write-up
Assume you are writing to someone who knows the facts; keep it succinct because nobody likes
reading long reports. The write-up is not to exceed three single-spaced pages of typed text (not
smaller than 12 pt. font, please), with up to five supporting exhibits.

The latter two cases reports are to be structured as PowerPoint presentations instead of being written
in paragraph form. However the other principles described above continue to apply; for example
you do not need to restate facts except as to show how you derive your conclusions and
recommendations. Your slides should be formatted to print 4 per page in landscape mode, and must
be readable when printed at this resolution (what is not easily readable cannot be graded).

Structure of Case Write-up

A good paper should clearly and succinctly state recommendations in the first paragraph (or slide).
The remaining paragraphs (or slides) should present the rationale for the recommendations,
including expected consequences (both desirable and undesirable). Each case has a set of questions,

which are a guide to help you with the analysis – however, you should not limit your analysis to
narrowly answering these questions. A good report is not a chronology of analysis, but a clearly
articulated statement of recommendation and support. If there are options under consideration in the
case that you reject, a clear rationale for your decision should be provided. Facts stated in the case
need not be restated unless used to make a point.

Grading of Case Write-up

Write-ups will be graded with the following items considered:
1. Broad discussion of relevant strategic, operational and environmental issues.
2. Analysis
a. Qualitative analysis of all factors relevant to the problem.
b. Quantitative analysis (if appropriate) and explanation of approach.
3. Explicit recommendations, reasoning, and implications of such, including discussion of
implementation and expected consequences of the recommendations.

Paper versions of the write-ups are due by 8:00 am of the day of class. Please submit your papers
electronically (one per team for the team assignments) per instructions of the AA for the course.

Class #1: Lecture on developing a framework for designing and evaluating operations
strategy

Read before class

- Einhorn, B. “India Vs China, India aims to be the next manufacturing power”. Bloomberg
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Business Week November 10, 2014.
-
- Watt, V. “Amazon Invades India”. Fortune.com. January 1, 2016.

- Boyler, M. “Best Buys giant gamble Brad Anderson’s consumer electronics superstores rules the
market. So why is he messing with his business Model?” Fortune April 3, 2006.

- Lutz, Ashley. “How Talbots grew-and lost its customers”. Bloomberg Business Week June 20-26,
2011.

Class #2: Competitive Cost Analyses and Operations Strategy

Case: Tork Corporation: The Competitive Cost Analyses (Harvard Business Press UV3549-
PDF-ENG)

The Tork Corporation case provides an opportunity to utilize cost modeling tools to assess the
validity of a pricing strategy. Tork is faced with the opportunity to purchase low-end air
conditioners from an overseas competitor (LG) in order to achieve some cost savings. Based on the
quoted price, Tork suspects that LG might be guilty of dumping, an illegal and anti-competitive
practice.

To assess the validity of the price quote, the case explores competitive cost analysis by using a
process called product teardown, which analyzes the costs by each subcomponent of the product and
by each process associated with the production. Additionally, operational factors such as facility
scale and utilization are considered to enhance the analysis. All these factors considered together
enable the student to develop a competitive cost analysis between Tork and LG low-end air
conditioners.

Questions:

1. What are the primary cost drivers for room air conditioning? How do the drivers differ
between LG and Tork?
2. Is LG’s cost advantage in the small room air conditioning unit sustainable? What are
the key risks?
3. Does LG’s advantage extend to the larger range of room air conditioning products?
Note: Use case data from the small units to extrapolate across the product line making
reasonable assumptions. Hard numbers expected, not solely opinions.
4. How should Tork respond to the LG offer? Why?

Lecture: Competitive cost analyses

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 Background Reading

A note on competitive cost analyses. Darden Business Publishing, University of Virginia,

(Harvard Business Press UV3557-PDF-ENG)

Class #3: Competitive Cost Analyses and Operations Strategy, and Investment in New
Technology

Case: American Connector Company (Harvard Business School Case 693035-PDF-ENG)

(Group Write-up due)

American Connector Company and DJC Corp. are two companies in the electrical connector
market, which have chosen different competitive and operating strategies. Historically, the two
firms have not been head to head rivals. In 1992, there were rumors that DJC was planning to build
a plant in the United States. The case focuses on American Connector’s decision about if and how it
should respond to the potential threat posed by DJC entry in the U.S. market. The issue requires
comparing the competitive and operating strategies of both firms and identifying and evaluating the
sources of cost differentials at their plants.

Questions and group assignment:

Each group must submit a write-up for this case. Consider both quantitative analysis and qualitative
factors in making your recommendations. Also, your write-up should at least address the following
issues:
1. How serious is the threat of DJC to American Connector Company? Would you be
worried about DJC? And why?
2. How big are the cost differences between DJC’s plant and American Connector’s
Sunnyvale Plant? Consider both DJC’s performance in Kawasaki and its potential in the
United States.
3. What accounts for these differences? How much of the differences are inherent in the
way each of the two firms compete? How much is due strictly to differences in the
efficiency of the operations? How much of the differences are due to the market
conditions (currently the demand is soft/sluggish/low in the USA)? Focus your analyses
on material, labor, and depreciation (capital) components of the total difference that you
have identified in the answer to #2. Some quantitative analyses must be provided to
support your answers.
4. What should American Connector’s Management at the Sunnyvale plant do?

Lecture: Justifying investment in new technology

Reading:
1. Business Technology -- 3-D Printing: Barbies, Auto Parts Hot Off the
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 Press
http://search.proquest.com/docview/1365001391/fulltext/142F9E57659
4EBD1822/1?accountid=26511

2. Ford's Trade-In: Truck to Use Aluminum in Place of Steel

http://search.proquest.com/docview/1027967932/fulltext/142F9E7937
B23B1AFC2/1?accountid=26511

3. Kaplan, R. S. “Must CIM be justified by faith alone”, Harvard Business

Review, March-April 1986, 87-95. (Harvard Business Review 86204-
PDF-ENG)

Class #4: Investment in New Technology and Capacity Management

Case: Microlite S. A.: The Pan-Orient Decision (Harvard Business School Case 694055-HCB-
ENG)

In 1992 Brazilian companies such as Microlite were beginning to prepare for a future in which
tariffs on imported manufactured goods would be reduced from an average of 80% to 20% by 1995.
To become more internationally competitive, Microlite, the largest producer of Batteries in South
America, had dramatically reduced its overhead costs. Management was now in the process of
reducing manufacturing costs through moving production of zinc-carbon batteries from a plant near
Sao Paulo to Recife, a region with lower labor costs and tax advantages. The decision facing
managers of Microlite was whether to simply move several existing final assembly machines from
Sao Paulo to add the required capacity or to invest in a faster fully automated assembly line.

Questions:
1. Prepare a financial analysis of Luis Pinto’s alternatives for increasing capacity
in the Jaboatao plant? Please focus your financial analysis on the two options
indicated in the case – the Pan-orient line and transfer equipment from
Guarulhos to Jaboatao.
2. Are there other options that you can think of that could result in increase in
capacity and comment on the feasibility of these? I am looking for two or three
other options.
3. As Luis Pinto, what factors would you consider in making the decision?
4. What do you recommend and why?
Note:

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In the Microlite case the Pan Orient Line replaces 6 operations: These operations are:
Install Paper Cup
Add Paste to Cup
Install Paper Top
Insert Carbon Rod
Place Cap
Place into Cardboard Shell, Jacket, and Seal unit
It may be possible that the case version that you have Place Cap is not listed as one of the
operations replaced by the Pan-Orient line. This is an omission in the case. Please note this.

Lecture: Capacity Management

Reading

1. In Europe, Idle Car Factories Live On

http://search.proquest.com/docview/1021441592/fulltext/142F9E35E063FA486
D0/1?accountid=26511

2. Chinese industry: Ambitions in excess

http://search.proquest.com/docview/1368075539/fulltext/142F9E4499065D059
2B/1?accountid=26511

Class #5: Investment in Flexibility Capacity and Supply Chain Risk Management

Case: The Auto Industry: Flexible Networks. Individual write-up due. (Copyright Trustees
of Dartmouth College - Permission to use approved by Brian Tomlin at the Tuck school of
Business, Dartmouth College)

Flexibility is a critical operations priority in many industries. In this session, we will discuss various
categories of operational flexibility and do a deep dive on one very important type of flexibility:
mix flexibility – whereby a plant can produce more than one kind of product. Using the automotive
industry as a motivating example, we will explore and answer two key questions that operations
executives must answer. How do we create flexible plants? How do we go from flexible plants to a
cost-effective flexible network?

Background Reading
- Linebaugh, K. “Honda's Flexible Plants Provide Edge - Company Can Rejigger Vehicle
Output to Match Consumer Demand Faster Than Its Rivals”. The Wall Street Journal
September 23, 2008, B1.

Discussion Questions Individual write-up due.

1. What is the Expected Sales (in 000's of units) for the existing network?

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2. Assuming that the variable contribution margin is $5000 per unit for all products and that each
link costs $75 million to create, which specific links would you recommend the company add to the
existing network? (Please clearly specify how many links you add and identify the new links by the
plant number and product letter: e.g. Link 1-C would mean the company creates a link between
Plant 1 and Model C.) What is the Expected Sales (in 000’s of units) of your recommended
network?
3. Briefly articulate the key principles of your strategy, i.e., why (qualitatively) did you choose the
links you recommended.
4. What are the risks in pursuing a platform strategy?
Important Notes for the Case Write-up: Preparation of this case requires the use of the web-
based software “FlexCap” that can be accessed at http://www.bizsimz.com/flexcap/flexcap.html .
The software is quite intuitive. User instructions (and a short demo video) can be obtained by
clicking on the “getting started” icon (? on blue background) in the upper right corner.
Bring laptop to class.
Each student must turn in answers to discussion questions 1, 2, and 3: Additional instructions for
answering questions 1 and 2 are given on the last page of the case. Questions in the case are the
same as above but provide some guidance on using the software. A few paragraphs (maximum two

pages) that answer the questions will be sufficient. Take a screen shot of the initial configuration
and the final configuration that you recommend and attach it to the write-up (this does not count as
part of the maximum two pages write-up).

Lecture: Supply Chain Risk Management

Reading
1. Jet Blues: Boeing Scrambles to Repair Problems With New Plane
http://search.proquest.com/docview/399080708/fulltext/142F9E278AA76B07E
32/1?accountid=26511

Class #6: Investment in Capacity, and Supply Chain Risk Management

Case: Genentech – Capacity Planning: Individual write-up due. (Harvard Business School
Case 606052-PDF-ENG)

In November 2004, David Ebersman was preparing to meet with his team to discuss whether they
should recommend that Genentech begin construction of a $600M US cell culture production plant
(CCP3) to produce Avastin, a new cancer product and other related products. The decision was
complicated by long construction lead times and by the uncertainty about future demand for Avastin
and yields in the production process. A number of FDA trials involving Avastin were underway
and the outcomes of those trials would not be known for some time. In addition, Genentech would
have to estimate the size of the patient population that would choose Avastin if the FDA approved
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its use for additional types of cancers. In addition, yields related to existing production facilities
made process calculations regarding available production capacity uncertain as well. Finally, if
Genentech decided to proceed with construction, it would have to decide where to build the new
plant- close to the company’s current operation in Northern California, or elsewhere, possibly
abroad.

Assignment - Each student must submit the filled out excel spread sheet (Genentech
worksheet.xls (e-copy)) as described below. You only need to submit the filled out excel
spreadsheet – no write-up is required on your recommendations. Please be prepared to
discuss your recommendations in the class when we discuss the case.

The excel file (Genentech_ISB.xls) that has templates for estimating the demand and capacity for
Genentech’s products. I would like you to use the data given in the text and particularly exhibits 11
and 12 to fill out the spreadsheet. Note that some of the potential market size information on pages
8 and 9 in the text are different from that in Exhibit 12. Please use the numbers in exhibit 12.
In the spreadsheet some cells have been pre-defined in the sense that once you enter numbers
in some cells the values in other cells will be automatically computed. You might want to save the
original under another name before you start working just in case you want to start fresh as you
become familiar with the spreadsheet.
There are three sheets in the spreadsheet and they are all linked in the sense that as you add
data in one sheet the other sheets will get updated. The three sheets are as follows:
• First Sheet: Weighted Avastin demand – I would begin working on this first and create a
demand forecast for Avastin – a blockbuster drug for Genentech. Use the data in exhibit 11
and 12 and some information given in the case to estimate the expected demand for
Avastin. Make assumptions as you need. Note on page 8 of the case the prescribed dosage
is indicated as 0.375 KG. This is a typo - it should be 0.375 grams and not 0.375 KG.

• Second sheet: Capacity and demand – the top half of the sheet lists the various locations
where Genentech has capacity including outsourced capacity – fill this part out. The bottom
half of the sheet attempts to estimate the total demand including Avastin (which you have
estimated in the first sheet). Also fill out the demand for Other Drug Demand (row 29) and
Omnitrag (row 30)
• Third sheet – Capacity and demand chart – this chart is automatically generated as you fill
data in the first and second sheets. You don’t have to change this – it will give you an idea
of how close demand and capacity are.
Please submit your assignment electronically and change the name of the excel spreadsheet to
Lastname_Firstname_Genentech_ISB.xls. I may show some of the numbers generated by the
class during the class.

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Questions:

1. What is your evaluation of Genentech’s production capacity requirements given expected

demand in 2010 and 2015 for Avastin and Genentech’s other products? Does your
evaluation change if Genentech wants to cover the 85th percentile level of demand?
2. Given your demand and capacity analyses in #1 above, what options besides CCP3 would
you consider to bridge the gap, if any, between demand and capacity?
3. Assuming Genentech decides to proceed with CCP3, what size production lines (tank sizes)
and how many lines would you recommend and why? What criteria should Ebersman use in
selecting a location? Would you recommend moving away from California?
4. What should Genentech do?

Lecture: Supply Chain Risk Management

Class #7: The Product Development Supply Chain

Read Before Class:

1. Intel’s 2001 Annual Report, Letter to our Stockholders, pp. 1-11, available here:
http://www.intel.com/content/dam/doc/report/history-2001-annual-report.pdf
2. The Genius Behind [Apple’s] Steve [Jobs], available here:
http://archive.fortune.com/2008/11/09/technology/cook_apple.fortune/index.htm
3. Explore the “Renaissance Innovator” site http://renaissanceinnovator.com/what-is-this/,
including some of the links at the right-hand side of the page – for example,
http://renaissanceinnovator.com/2012/03/04/what-is-the-best-way-to-innovate/#more-639
4. Watch the “shopping cart video” at https://www.youtube.com/watch?v=M66ZU2PCIcM
As you watch the video, jot down a list of the “process steps” that IDEO uses to develop
new products. A further optional video is the one “How to Design Breakthrough
Inventions”
http://www.cbsnews.com/videos/how-to-design-breakthrough-inventions-50138327/
5. Take an initial look at the Intel and Seagate-Quantum case studies listed for classes #8 and
#9. You need not be prepared to discuss these readings; they are simply mentioned so that
you can begin to familiarize yourself with these future assignments.
6. Skim the article “Product Fundamentals” by Ken Homa. (Permission for distribution given
by Ken Homa.).

Discussion Questions:

1. Think about what has happened with regard to the internet. What phase of the innovation

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 cycle has the industry gone through? Has what we have seen been predictable in any way?
2. There are two basic strategies for creating competitive advantage – either you sell
something that nobody else sells (we call this product innovation) or you can sell it at a
lower cost (we call this process innovation – we will also include in process innovation the
prospect of distributing your product differently, for example Amazon has innovated the
way products are sold and delivered). The links that you explored on the “Renaissance
Innovator” site are describing process innovation – what those authors are calling “Business
Model Innovation” are effectively what I have called “Process Innovation.” Please come to
class with 2 examples of “Business Model Innovation”, either from the web site or from
your own experience.

Class #8: Virtuous Cycles of Product Innovation

Case: 1. “The Growth of Intel, and the Learning Curve,” Stanford University Case S-
OIT-17 by Glen Schmidt and Sam Wood. Product OIT27-PDF-ENG

Assignment (Group write-up, 15% of grade): Your team’s deliverable for this assignment is a
PowerPoint presentation. Your team may be asked to deliver your PowerPoint presentation to
your fellow students during the class time; all team members must be prepared to participate in
the presentation. Your slides should be formatted to print 4 per page in landscape mode, and
must be readable when printed at this resolution (what is not easily readable not be graded). The
full slide deck (including both items below) should be no more than 16 slides (anything beyond
16 will not be graded).

Regarding the Intel case (worth 15 points), your task is to provide a rebuttal to Bill Gates, who
reportedly stated: “If automobile companies had only achieved the same level of improvement
as the computer industry, we wouldn’t have the environmental concerns that we have today.
Cars would be getting thousands of miles per gallon, they would travel as fast as airplanes, and
they would weigh only a few pounds. Yet they would be safe, reliable, and affordable.” Your
first reaction may be to say that you can’t compare automobiles and computers; it is like
comparing apples and oranges, or oil and water. However, you DO have a way to compare; you
should compare them using the learning curve framework. In your rebuttal slide deck, discuss
how learning rates and demand growth rates differ between these industries, and how that
impacts each industry’s progress. This means you will have to actually estimate the learning
rate and the (instantaneous) growth rate in demand for transistors (based on the data given in
Table 2 of the case). You will have access to an Excel file to help you make the calculations.

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Class #9: Encroachment Strategies

Case: Seagate-Quantum: Encroachment Strategies”. By Glen Schmidt and Jan Van

Mieghem. Available at http://pubsonline.informs.org/doi/pdf/10.1287/ited.5.2.64cs

Assignment (Group write-up, 15% of grade): Your team’s deliverable for this assignment is a
PowerPoint presentation. Your team may be asked to deliver your PowerPoint presentation to
your fellow students during the class time; all team members must be prepared to participate in
the presentation. Your slides should be formatted to print 4 per page in landscape mode, and
must be readable when printed at this resolution (what is not easily readable not be graded). The
full slide deck (including both items below) should be no more than 16 slides (anything beyond
16 will not be graded).

Regarding the Seagate-Quantum case, your task is to prepare a presentation to be made to

Seagate’s private investors as of the time of the case, giving your assessment of what will
happen in this market (worth 10 of the 15 points). The presentation should show your estimates
for pricing, market share, and profitability of the Seagate and Quantum drives at introduction,
and after 1, 2, 4, 6, and 7 years. At the end of the presentation (worth 5 of the 15 points), you
should briefly (and only qualitatively) pitch another investment idea to these private investors;
an electric car. Choose (and explain your logic to support) either a low-end encroachment
scenario or a high-end encroachment strategy. In your discussion, identify who the first
customers will be, and qualitatively describe how (and why) the diffusion process will progress.

Background “Readings” and Discussion Questions:

1. “How to Position Your Innovation in the Marketplace,” Sloan Management Review, Winter
2014. By Glen Schmidt and Bo Van der Rhee.

Class #10: Product Architecture and Spackling

Background Readings:

1. “Mass Customization”. Teaching note by Glen Schmidt.

2. Case (for discussion only): “Where in the World is Timbuk2.” Wharton Case Study.
3. “Offshoring versus Spackling.” MIT Sloan Management Review. Spring, 2005. Cattani,
Dahan, and Schmidt.
4. “Modularity: An Unfilled Promise? Or Your Company’s Future?” By Kamrad, Schmidt,
and Ulku.
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 5. Video (preponed ice cream) https://www.youtube.com/watch?v=o3D6tYerfNA
6. Watch one of the following two videos (they are alternate presentations of the same
material). As you watch the video, think about how you would use the “MAP principles”
(Mastery, Autonomy, and Purpose) to come up with better products and processes at a firm.
Again, you are only required to watch one or the other of these videos:
a. The YouTube video on “Drive: The Surprising Truth About What Motivates Us.”
https://www.youtube.com/watch?v=M66ZU2PCIcM
b. The TED talk on “The Puzzle of Motivation”
https://www.youtube.com/watch?v=rrkrvAUbU9Y&index=11&list=PL70DEC2B0568B54
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Discussion Questions (not for submission):

1) Timbuk2 sells messenger bags over the internet via its website Timbuk2.com, and must
produce them domestically in make-to-order fashion because it promises delivery within a
couple of days after the order is received, and because thousands of possible bag
combinations may offered. Timbuk2 also sells messenger bags at retail outlets such as REI
and at bike shops. These bags can be produced in make-to-stock fashion in China and held
in inventory for future sale. How should Timbuk2 configure its supply chain and its
production?
2) Do you believe Google’s ARA project will be successful?

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