Lucky Alva

Case Study

Lucky Alva By Vladmir Haensel A fanciful account of a company’s high level research committee meeting. President “Gentlemen, today we are discussing our research programmes –as you know the procedure involves the presentation from research, finance, and corporate planning concerning the proposed research programmes. However, before we begin, I would like to emphasize that according to our established policy, these research programmes have to be appraised intensively in terms of their potential value to the company’s growth and profit objectives, and I trust that in the preparation for the meeting you have kept this uppermost in your mind. Also please remember that through our aggressive marketing, acquisitions and mergers we have become one of the leading companies in the kerosene lamp business and our research is here to extend our business in this very important field. Let us now here about our research programmes.” VP Research “We have on the agenda three research programmes and I wish to tackle the one involving a smaller expenditure first. We have on our research staff a Mr T A Edison who has come up with a rather unorthodox idea. He believes that broadly speaking our kerosene lamps are used primarily as a source of light and he has been thinking of other possible sources of light. I admit that his experiments, although quite crude and preliminary, do indicate that a light can be produced for short periods of time from electricity. I have examined his proposal from the standpoint of technical feasibility and research cost and I find that although the technical feasibility is far-fetched and the research cost for the next fiscal period is reasonably low and our risk is therefore quite limited, not to exceed $3001 for the next two years. Mr Edison believes that he can shorten the research time appreciably if he is allowed to work at night –but you know our safety and security rules won’t allow this. I have discussed this research programme with our finance and planning VPs and would like to hear their report.” President “Before we hear from finance and corporate planning, I would like to know more about this man and his research.” VP Research “Edison appears to be a very ingenious fellow –not much education –and our main trouble with him is that we have difficulty in keeping him on the track of our business. Nevertheless, in line with our policy of allowing our research people some experimentation on their own, he has built a battery which provides a source of electricity to a very thin carbonized cotton thread housed in an evacuated glass bulb. The connection between the carbonized cotton thread to the outside connection to the battery is accomplished by means of a platinum wire which has about the same expansion as the glass. As you might expect, so far he has had a great deal of trouble with connections and burning out of the thread and breaking of bulbs. Nevertheless, there have been moments where the thread does glow inside of the bulb and with luck you can almost read by that light” President “Thank you –now let us proceed to the report from finance” VP Finance “We have discussed this programme at great length with our market research and sales people and I must say that, although our research investment risk is not substantial, our people take a very dim view of the proposal. We are speaking of putting out a product in competition with our major product. This new product as the VP Research has pointed out, requires a battery to make it operative. I also understand the battery is a rather large and bulky piece of equipment and wires have to run to the so called electric lamp. Compare this with our latest Compact Kerosene Lamp –streamlined, portable and so easy to light. In

defense of Mr Edison’s proposal, I must admit that he thinks that one large battery might serve an entire house, but putting wires all over the house seems rather impractical. In fact, Mr Edison has even suggested that a giant battery could serve a whole village –but think of all the wires that would have to be strung. I also note that Mr Edison proposes to use platinum wires as a part of the lamp. Now you all know that platinum is not only a scarce and expensive metal but, it is often of foreign origin, and whwere would we be if the source of supply is cut off? I do not wish to transmit some of the language that some of our most qualified market research and sales people have used in impartially evaluating this programme, but it appears to me that it has no place in our industry. However, if the research team wishes to indulge in such work, we could allow the sum of $1500 for the next two years to reduce our risk still further.” President “Thank you –now for the report from corporate planning.” VP Corporate Planning “We too have given a great deal of thought to this segment of the total research programme. Please remember that we in corporate planning must gaze into the future in line with our corporate aims and render judgments on these matters. This is a most difficult task, but our procedure is well worked out. Our main question is, “How does Mr Edison’s programme fit into our corporate plans?” I must emphasize that our corporate plans are so well prepared and organized that we must by all means try to fit research programmes into our corporate plans and certainly not the reverse. Let us now consider the question on hand. As you know, we have recently made two very important acquisitions. One is a small but vigorous company specializing in wick-knitting. As you know, our research has not been able to develop a good method for wick-knitting and we decided to buy a company which has succeeded in this difficult area. Without appearing critical, I might say that if our ingenious Mr. Edison had concentrated on wick-knitting, we would not have had to purchase this important development. In any event, this new acquisition should strengthen our position, since I do not need to remind you that in the most recent public acceptance test we did not do well with “Corplight” because of poor wick performance. Our other acquisition should further enhance our strong business position. As you know, we have acquired an interest in an oil treating company. Their kerosene is far superior to the kerosene that we are now purchasing for distribution to our sales centres. This provides us with a substantial potential profit many years to come. You should also know that we are negotiating with a small glass company which has a new type of glass to fit our lamps. This glass is particularly effective with respect to better light transmission and we are hopeful to complete our negotiations shortly. Before this meeting our President told me that he did not object to my disclosing to you these negotiations, but please keep them in strictest confidence. “Now, you might wonder about the connection between these acquisitions and Mr. Edison’s programme. I can tell you that it has most important connection. Just consider, gentlemen what would happen to our acquisitions if Mr. Edison’s programme should be successful? What are we going to do with our acquisitions? What about all of our other corporate plans?” “Fortunately, for us the chances of success are very small and we should proceed as per our well-worked plan of increasing our profits. My recommendation is to abandon this particular research programme. Could we go on to other programme and I am particularly interested in the automatic wick height regulator that our research has so ably worked out.” President “Before we go on to the next programme, interesting as it may sound, we should reach a decision about Edison’s programme. I would like to suggest to our VP Research that in view of the excellent comments that have been expressed we decide to provide Mr. Edison with a sort of token expenditure for this programme, amounting to $750 over a two year period. This will show our continued interest and encourage him to take this on as a type of supplemental programme to his other more important work” V P Research “I shall do my best to convey this to Mr. Edison –thank you for your most encouraging comments. Now for the automatic wick height regulator research programme ……….” (Source: Research Technology Management, Vol. 38, Issue 4, 1995)