Case Study I: Hendrick's Way

When Hendrick Harding started his consumer products firm, he was convinced he had a winning product. His small, compact industrial drill was easier to use than any other on the market and cost 30 percent less than any of the competitors' drills. The orders began to pour in, and within six months Hendrick's sales surpassed his first year's estimate. At the end of the first 12 months of operation his firm was grossing more than $50,000 a month, and he had a six-week backlog in filling orders.

The rapid growth of the firm continued for two years. Beginning about four months ago, however, Hendrick began to notice a dip in sales. The major reason appeared to be a competitive product that cost 10 percent less than Hendrick's drill and offered all the same benefits and features. Hendrick believes that with a couple of minor adjustments he can improve his product and continue to dominate the market.

On the other hand, Hendrick is somewhat disturbed by the comments of one of his salespeople, George Simonds. George spends most of his time on the road and gets to talk to a great many customers. Here is what he had to say to Hendrick: "Your industrial drill has really set the market on its ear. And we should be able to sell a modified version of it for at least another 36 months before making any additional changes. However, you need to start thinking about adding other products to the line. Let's face it; we are a one-product company. That's not good. We have to expand our product line if we are to grow. Otherwise, I can't see much future for us."

The problem with this advice is that Hendrick does not want to grow larger. He is happy selling just the industrial drill. He believes that if he continues to modify and change the drill, he can maintain a large market share and the company will continue to be profitable. As he explained to George, "I see the future as more of the past. I really don't think there will be a great many changes in this product. There will be modifications, sure, but nothing other than that. I think this form can live off the industrial drill for at least the next 25 years. We've got a great thing going. I don't see any reason for change. And I certainly don't want to come out with a second product. There's no need for it."

1. What, if anything, is the danger in Hendrick's thinking? Why would some be concerned about his line of thought and the potential outcomes? Explain in detail.

2. Could the concept of understanding managerial versus entrepreneurial as described in the chapter be of any value to Hendrick? Why or why not? In your answer, be sure to compare and contrast the two concepts and give at least two examples of each.

3. Using Table 13.3 as your point of reference, how would you describe Hendrick's focus? Based on your evaluation, what recommendations would you make to him?

Case Study II: Keeping Things Going

The Clayton Company has grown 115 percent in the past year and 600-plus percent in the past three years. A large portion of this growth is attributable to Jan Clayton's philosophy of hiring the best possible computer systems people and giving them the freedom they need to do their jobs. Most of Jan's personnel operate as part of work teams that analyze, design, and implement computer systems for clients. The process works as follows: First, the company will get a call from a potential client indicating that it needs to have a computer system installed or special software written for its operations. Jan will send over one of her people to talk to the client and analyze the situation. If it turns out that the Clayton Company has the expertise and personnel to handle the job, the client will be quoted a price. If this price is acceptable, a Clayton group will be assigned the project.

An example of a typical project is the client who called three weeks ago and wanted to purchase five personal computers for the firm's engineering staff. The company wanted these machines hooked up to the main computer. Additionally, the firm wanted its computer-aided design software to be modified so the engineers could see their computer-generated drawings in a variety of colors, not just in monochrome.

The Clayton group installed the entire system and modified the software in ten working days. Jan realizes that the growth of her enterprise will be determined by two factors. One is the creativity and ingenuity of her workforce. The other is the ability to attract talented personnel. "This business is heavily labor intensive," she explained. "If someone wants a computer system installation, that may take 100 labor hours. If I don't have the people to handle the project, I have to turn it down. My expansion is heavily dependent on hiring and training talented people. Additionally, I need more than just hard workers. I need creative people who can figure out new approaches to handling complex problems. If I can do these two things, I can stay a jump ahead of the competition. Otherwise, I won't be able to survive."

To try to achieve these key factors for success, Jan has initiated three changes. First, she has instituted a bonus system tied to sales; these bonuses are shared by all of the personnel. Second, she gives quarterly salary increases, with the greatest percentages going to employees who are most active in developing new programs and procedures for handling client problems. Third, she has retreats every six months in which the entire staff goes for a long weekend to a mountain area, where they spend three days discussing current work-related problems and ways to deal with them. Time is also devoted to social events and to working on developing an esprit de corps among the personnel.

1. In what phase of the venture life cycle is Jan's firm currently operating? Defend your answer. Compare and contrast the phases of the life cycles of firms. Identify at least one company within each phase and explain why you selected it.

2. How are Jan's actions helping to build an adaptive firm? Give three specific examples. Be sure to describe and define adaptive firm in your answer.

3. If Jan's firm continues to grow, what recommendations would you make for future action? What else should Jan be thinking about doing in order to keep things going along smoothly? Be specific in your answer. Assuming the role of a consultant, identify areas that Jan should be concerned about or keep a watchful eye on as she moves forward.