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  1. INVESTMENT TERMS DEALING WITH PORTFOLIO MANAGEMENT Asset Allocation Asset allocation is an approach to managing capital that involves setting parameters for different asset classes such as equities (ownership, or stocks), fixed-income (bonds), real estate, cash, or commodities (gold, silver, etc.). Asset classes generally have different characteristics and behavior patterns, getting the right mix for a specific investor's situation can increase the probability of a successful outcome in accordance with the investor's goals and risk tolerance. For example, stocks and bonds play a different role in an investment portfolio beyond the returns they may generate. Investment Mandate An investment mandate is a set of guidelines, rules, and objective used to manage a specific portfolio or pool of capital. For example, a capital preservation investment mandate is meant for a portfolio that cannot risk high volatility even if it means accepting lower returns. Asset Management Company An asset management company is a business that actually invests capital on behalf of clients, shareholders, or partners. The asset management business side of Vanguard is the one buying and selling the underlying holdings of its mutual funds and ETFs. Popular asset management companies in Nigeria are ARM, Stanbic Asset Management Company, Vetiva Capitals etc. Registered Investment Advisor An RIA is a firm that is engaged, for compensation, in the act of providing advice, making recommendations, issuing reports or furnishing analyses on securities, either directly or through publications. RIAs can include asset management companies, investment advisory companies, financial planning companies, and a host of other investment business models. The special thing about RIAs is that they are bound by a fiduciary duty to put the needs of the client above their own rather than the lower suitability standard that applies to taxable brokerage accounts. Stock Broker A stock broker is an institution or individual who or which executes buy or sell orders on behalf of a customer. Stock brokers settle trades -- making sure cash gets to the right party and the security gets to the right party by a certain deadline -- against their client's custody account. There are many different types of stock trades you can submit to your stock broker but be careful about becoming over-reliant upon them. A stop-loss trade, by way of illustration, won't always protect your portfolio. Additionally, it is sometimes possible to buy stock without a broker. Stock Trades There are at least twelve different types of stock trades you can place with a broker to buy or sell ownership in companies including market orders, limit orders, and stop loss orders. INVESTMENT TERMS RELATED TO A COMPANY Board of Directors - A company's board of directors is elected by the stockholders to watch out for their interests, hire and fire the CEO, set the official dividend payout policy, and consider recommending or voting against proposed mergers. Enterprise Value - Enterprise value refers to the total cost of acquiring all of a company's stock and debt. Market Capitalization - Market capitalization refers to the value of all outstanding shares of a company's stock if you could buy them at the current stock price. Income Statement - An income statement shows a company's revenues,expenses, taxes, and net income. Essentially, it shows the company's profit/loss standing. Balance Sheet - A balance sheet shows a company's assets, liabilities, and shareholders' equity. Annual & Financial Statements - An annual disclosure document certain firms are required to file with the SEC, it contains in-depth information about a business including its finances, business model, and much more. OTHER INVESTMENT TERMS TO BE KNOWN Stock Exchange - A stock exchange is an institution, organization, or association which hosts a market for buyers and sellers of equities to come together during certain business hours and trade with one another. Price-to-Earnings Ratio - Also known as the p/e ratio, it tells you how many years it would take for a company to pay back its purchase price per share from after-tax profits alone at current profits with no growth. Dividend Yield - The current yield of a common stock at its present dividend rate. If a stock is trading at N100 per share and pays out N5 in annual dividends, the dividend yield would be 5%. Volatility - Volatility refers to the degree to which a traded security fluctuates in price. Derivative - A derivative is an asset that derives its value from another source.
  2. You can register on MIT Opencourseware for Designing and Leading the Entrepreneurial Organization at https://ocw.mit.edu/courses/sloan-school-of-management/15-394-designing-and-leading-the-entrepreneurial-organization-spring-2003/ About the course This course is about the building, running, and growing an organization. This course has four central themes: (1) How to think analytically about designing organizational systems, (2) How leaders, especially founders, play a critical role in shaping an organization's culture, (3) What really needs to be done to build a successful organization for the long-term; and (4) What you can do to improve your personal likelihood of success. This is not a survey course in entrepreneurship or in leadership. Instead, this course addresses the principles of organizational architecture, group behavior and performance, interpersonal influence, leadership and motivation in entrepreneurial settings. A primary goal is to develop your competencies in organizational design, human resources management, leadership and organizational behavior in the context of a new, small firm. For many entrepreneurs, the most pressing questions (aside from those about financing) are about how to locate and recruit talented people, and how to manage and keep them, and how to build a high-growth, long-term, sustainable firm. This course will address these questions and will provide you with a number of critical concepts and competencies that will be useful to you in both the short and long term. Throughout the course there will be a dual emphasis on thinking systematically and strategically about aspects of managing a rapidly growing organization, and on the actual implementation challenges associated with management and leadership. The primary course material will be a series of cases illustrating both successes and failures. You will also be provided with supplementary readings and lectures that will supply concepts and frameworks. It is important that we take advantage of the experience of class members. So, where relevant, please feel free to bring your own experiences and illustrations into class discussion. Throughout the course--virtually in every session--we will consider how what we are discussing differs across settings. Students with global experiences are especially encouraged to bring this knowledge into the classroom. The employment relationship in the U.S. is different in many respects from many other countries, so it is important that as managers we appreciate these differences in how human resources might be framed differently in other cultures. If we are to meet our goal of increasing your effectiveness in leading and managing, it is important to explore how, why, and under what circumstances various approaches work. Your previous experience, both positive and negative, is a valuable source of data for this learning. The course is organized into three main modules: Setting Direction, Building Skills & Capabilities, and Sustaining Momentum. In each module there will be a series of cases and readings. The course opens with a two-day case series that will foreshadow each of the topics covered in the course. Similarly, the course ends with a two-day capstone case-series that will allow students to apply the lessons learned. Syllabus Module 1: Setting Direction Session 1: Introduction Cases: Erik Peterson (A) HBS # 494-005. Erik Peterson (B) HBS # 494-006 (to be distributed). Study Questions: What are the problems facing Erik Peterson? What are the underlying causes of these problems? How effective has Peterson been in taking charge of the Hanover start-up? What actions should he take now? Please be specific. Session 2: Introduction Cases: (to be distributed). Erik Peterson (C), HBS # 494-007. Erik Peterson (D), HBS # 494-008. Erik Peterson (E), HBS # 494-009. Richard Jenkins, HBS # 494-113. Study Questions: What is your assessment of the events described in the Erik Peterson (C), (D), and (E) cases? What if anything, should Peterson have done differently? Could you have succeeded in Erik Peterson's situation? Why or why not? What should Peterson do next? Why? What lessons, if any, do you take away from Peterson's experience? Reading: Tushman, Michael L., and Charles O'Reilly III. "Managerial Problem Solving: A Congruence Approach." Chap. 4 in Winning through Innovation. Harvard Business School Press, 1997. Session 3: Leaders and Advisors Case: Zaplet, Inc. (A), HBS #601-165. Study Questions: What did Alan Baratz face upon joining Zaplet? What were his key challenges? What were the firm's key assets? Evaluate Vinod Khosla's role in building Zaplet. What has he done? Are his actions appropriate for this firm? Are they appropriate for any firm? Does Baratz have the right organizational structure in mind for the future? What are the advantages and limits of this new organizational structure? Should Zaplet be building an application platform or individual products? What are the implications of this strategic choice for the organization? Reading: Baker, Wayne. "What is Social Capital and Why Should You Care About It?" Chap. 1 in Achieving Success Through Social Capital. Jossey-Bass, 2001. Begin HUMAX ASSESSMENT after class. Assessment must be completed by session 4. Session 4: Entrepreneurial Networks Case: Jerry Sanders, HBS # 498-021. Study Questions: How effective has Jerry Sanders been? Is San Francisco Science a viable business? Reading: Baker, Wayne. "Evaluating Your Social Capital." Chap. 2 in Achieving Success Through Social Capital. Jossey-Bass, 2001. Session 5: Social Networks & Social Capital Case: Heidi Roizen, HBS # 800-228. Study Questions: What steps did Roizen take, over the various jobs she held, to develop her network? To maintain it? What are the strengths of Roizen's network as we see it at the end of thecase? The weaknesses? What suggestions would you give Roizen for adjusting and maintaining her network as she becomes more involved as an Internet venture capitalist? Reading: Baker, Wayne. "Building Entrepreneurial Networks" (Chap. 3), and "Using Your Social Capital" (Chap. 4). In Achieving Success Through Social Capital. Jossey-Bass, 2001. Module 2: Building Organizational Capabilities Session 6: Employment Models in Entrepreneurial Companies Reading: Baron, James N., and Michael T. Hannan. "Organizational Blueprints for Success in High-Tech Start-Ups: Lessons from the Stanford Project on Emerging Companies." California Management Review 44 (30) (Fall 1991): 8-36. Session 7: Organizational Design: Consistency Case: Human Resources at Hewlett-Packard, HBS# 495-051. Study Questions: What is the HP Way? How is it facilitated by HP's values, culture, human resource policies and management practices? Why does the task force believe that HP is losing its human touch? Are they justified in this conclusion? What should Lew Platt do about the task forces concerns? Reading: Collins, James C., and Jerry I. Porras. "Organizational Vision and Visionary Organizations." California Management Review. Fall 1991. Session 8: Organizational Design: Alignment Case: Apple Computer (A) (Abridged): Corporate Strategy and Culture, HBS# 495-044. Study Questions: Is Apple an effective organization in 1990? Come to class with a rating on a five point scale [ 1 2 3 4 5] with 1=very ineffective and 5=highly effective. What is the nature of Apple's competitive environment in 1990 and the challenges it faces? What strategy should Apple adopt in 1990 to deal with its environment? To what extent does Apple possess the organizational characteristics needed to compete? What changes are needed? John Scully has been CEO of Apple since 1983. Has he done a good job in leading Apple? If yes, why; if no, what would you have done differently? Reading: Schein, Edgar H. "The Role of the Founder in Creating Organizational Culture." Organizational Dynamics. Summer 1983. Session 9: Organizational Design: Motivation Case: The Soul of a New Machine. Study Questions: Why are these people working so hard? In what ways, if any, is Tom West contributing to his group's performance? What theory of "human motivation" can you infer? Session 10: Organizational Design: Managerial Systems I Case: Cypress Semiconductor (A): Vision, Values, and Killer Software, Stanford HR-8A. Study Questions: How would you describe T. J. Rodgers approach to achieving results? Are his policies and practices at Cypress aligned with the strategy? Are they a source of competitive advantage? Why or why not? How is the culture being developed and maintained? What are the specific mechanisms being used to manage the culture? At the end of the case (in 1994), T. J. Rodgers is wondering whether he should make any changes. What are your recommendations? Reading: Rodgers, T. J. "No Excuses Management." Harvard Business Review. July 1990, Reprint #90409. Session 11: Organizational Design: Managerial Systems II Case: Sun Microsystems: Realizing the Potential of Web Technologies, HBS #198-007. Study Questions: Web technology made its way into Sun in 1993 and eventually became the centerpiece of Sun's business strategy. What were the critical events that occurred between the first discovery and the company wide embrace of this new technology? How effective was the technology adoption process? What are the advantages and disadvantages of the way Sun manages itself? Readings: Adler, Paul. "Building Better Bureaucracies." Academy of Management Executive 13, no. 4. (1999). Session 12: Leadership, Rhetoric, and Persuasion Case: Jan Carlzon, HBS #392-149. Study Questions: Why was SAS having problems? What did Carlzon do to address those problems? Of all of his actions, which were most important? Why? Reading: Kotter, John P. "What Leaders Really Do." Harvard Business Review (May/June 1990). Reprint #R0111F. Session 13: Recruiting Executives Case: Vermeer (A): A Company is Born, HBS #397-078. Vermeer (A-1), HBS #397-079 (to be distributed). Study Questions: What did Charles Ferguson do from late 1993 to January 1995 to build an enterprise that attracted an offer from a group of venture capital firms to invest $4 million at a $4 million pre-money valuation? As Charles Ferguson, would you agree to the proposed deal? In January 1995, what are the major risks and opportunities that lie ahead for Vermeer? As Charles Ferguson, what would you do to seize the opportunities and mitigate the risks? What are the characteristics of the ideal CEO for Vermeer in 1995? How well does Charles Ferguson meet those requirements? Session 14: Recruitment and Selection Case: Mark Pitts, HBS #801-414. Study Questions: How well do Mark Pitts' credentials and accomplishments fit the Peoplestreet job description? What do you learn from his resume? What questions would you want to ask Mark in the interview in order to decide whether or not he is right for the job? Readings: Mornell, Pierre, Inc. Zero Defect Hiring. March 1998. Chambers, Elizabeth G., Mark Foulon, Helen Handfield-Jones, Steven M. Hankin, and Edward G. Michaels III. "The War for Talent." The McKinsey Quarterly, no. 3, 1998. Session 15: Working Environments Study Questions: Does physical space/layout matter? Do you personally work better in some environments than others? Why or why not? Would you design different space for a professional service firm than for a software engineering firm? Why or why not? Readings: Gladwell, Malcolm. "Designs for Working." The New Yorker, 11 Dec. 2000, pp. 60-69.Session 16: Managing Performance Case: Wolfgang Keller at Konigsbrau-Hellas A. E. (A), HBS # 498-045. Study Questions: What is your analysis of the situation facing Keller as he returns to Athens? What is your assessment of Petrou's performance? Please be specific. How effective has Keller been as a coach to Petrou? Why? Could you have done better? Why? How? What are the underlying causes of his performance problems? What actions should Keller take upon returning to Athens? Be specific. What are the implications for Keller's development as a leader? Session 17: Incentives and Rewards Case: Cambridge Technology Partners (A), HBS # 496-005. Study Questions: What are the top three issues which Sims must address now to create the CTP that he hopes to create by 1997? What is the goal, the implementation plan, and the measurement process that Sims should put in place for each issue identified in (1) above? How have the external environment, internal culture, and business strategy of CTP changed from 1990 to 1993 (post-Sims' arrival)? How do you expect these to change from 1993 to 1997? How do CTP's processes and culture differentiate it from its competitors? Create value for its customers? Create value for its employees? Assuming Sims is successful in transforming CTP, what new problems are likely to emerge? How would you deduct these problems? How would you, at least, lessen their impact? Session 18: Professionalizing Case: Iggy's Bread of the World, HBS #801-282. Study Questions: What actions do the Ivanovics take to create a unique culture at Iggy's? What are the costs and benefits of this culture as the organization grows? Which roles should the Ivanovics hand over to their professional management team? Which should they retain? What should they do about Matthew McRae? Module 3: Sustaining Momentum Session 19: Managing Change Case: Meg Whitman at e-Bay Inc. (A), HBS # 401-024. Study Questions: What have been the key success factors for eBay? What will they be in the future? If you were Whitman, what would be your change objectives and time frame? What would be your action plan? What can we learn from this case about leadership in the "new economy?" Reading: Greiner, Larry E. "Evolution and Revolution as Organizations Grow." Harvard Business Review (May/June 1998). Reprint # 98308. Session 20: Managing Growth Case: Shouldice Hospital Limited, HBS # 683-068. Study Questions: How do you account for the performance of this organization? Specifically, what decisions would you make concerning a) the possible addition to the hospital of rooms for 45; b) the addition of a Saturday operating schedule to the clinic; c) the development of a new self-contained "branch" of Shouldice; and d) the development of a new specialty medical service? Why? Session 21: Organizational Learning Exercise Reading: Senge, Peter M. "The Leader's New Work: Building Learning Organizations." Sloan Management Review (Fall 1990): 7-23. Session 22: Putting it all Together Case: SCORE! Educational Centers (A), HBS # 499-056. SCORE! Educational Centers (B), HBS # 499-057 (to be distributed). SCORE! Educational Centers (C), HBS # 499-058 (to be distributed). Study Questions: How did Alan Tripp bring the SCORE! concept to life? Please assess the critical choices he made in building the company. What are the challenges facing Tripp and SCORE! at the end of the case? What should Alan Tripp do? Session 23: Putting it all Together Case: SCORE! Educational Centers (D), HBS # 499-059 (to be distributed). Study Questions: To be distributed. Session 24: Final Lecture Summary of Class Sessions and Assignment Due Dates (PDF)
  3. You can register on MIT Opencourseware for Managing Innovation and Entrepreneurship at https://ocw.mit.edu/courses/sloan-school-of-management/15-351-managing-innovation-and-entrepreneurship-spring-2008/ About the course Technological innovation is increasingly the source of sustainable competitive advantage for firms around the world. However, building an organization to successfully and repeatedly bring technological innovations to market is a daunting managerial challenge. In this course we focus on the practices and processes that managers use to manage innovation effectively. Over the semester we will examine four aspects of technological innovation: exploring, executing, leveraging and renewing innovation. Our focus will be on entrepreneurial firms (new and established) and on firms that have been successful and unsuccessful in their innovation. 15.351 is designed to provide both a deep grounding in the field of technological innovation for managers and entrepreneurs whose goal is to play a leading role in innovation-driven firms. The course combines lectures, case analyses, visiting experts and student presentations. The readings are drawn from research in the management of technological innovation and technology-based entrepreneurship as well as from economics and organizational theory. The cases provide an extensive opportunity to integrate and apply these tools in a practical, business context, and draw from a wide variety of firms and industries: established and entrepreneurial, mainly from high technology and many originating at MIT. The material moves deliberately between strategic issues (what should you do?) and organizational and managerial issues (how should you get it done?), though the focus of the course is more on examples of process and implementation. The course design is grounded in the belief is that it is particularly dangerous to separate strategy from implementation (the "why" from the "how") when innovation is the issue because having a great idea is worth little or nothing if a firm cannot figure out how to commercialize or monetize that idea. Innovation management can include a variety of topics; here are three clarifications about the approach we will take in this course: First, we will approach innovation issues from the entrepreneur and manager's perspective. While most firms have specialized R&D, other functions must all interface with R&D. Indeed, building an organization that can continuously generate and commercialize innovations is one of the core concerns of top management. Thus any leader should be conversant with the leading thinking on innovation and should not leave this challenge to the R&D function alone. Second, this course will approach the management of innovation from a strategic perspective. As such, we will consider the relationship between processes and structures for innovation in firms, the strategies for exploitation and the environment in which these must be designed e.g., competition, rate of technological change, sources of innovation. Readings, assignments, and cases will be used to highlight issues and problems that face leaders as they create and implement processes, structures and strategies to strategically manage their technological innovation. By completion of the course, you will have: A familiarity with current topics in strategic innovation management, such as innovation networks, idea brokering, open innovation; A familiarity with innovation processes and structures such as R&D team and incentive design, R&D portfolio management, idea generation processes, the pros and cons of various R&D organizational structures, and the challenges of innovation in large and small firms; An understanding of the strategies most effective for exploiting innovations; The ability to apply these concepts directly to real world situations; Skills to identify, evaluate, and resolve a variety of issues relating to poor innovative performance in large firms as well as entrepreneurial firms. To achieve these goals the course is divided into four modules. The first three modules cover the following three areas: exploring, executing and exploiting innovations. The fourth module is renewing innovation and examines how established firms re-energize their exploration, execution and exploitation practices to renew the innovation base of their firm: Module 1 - Exploring innovations — the processes used to explore innovations along the technology, market and strategy dimensions as the innovation moves from idea to market. Module 2 - Executing innovations — the structures and incentives organizations must put into place to effectively allow talented individuals (from different functions) to execute innovation processes. Module 3 - Exploiting innovations — the strategies that a firm must consider to most effectively exploit the value of their innovation, including innovation platforms that incorporate multiple product options, portfolios and standards. Module 4 - Renewing innovations — the processes, structures and strategies for exploring, executing and exploiting innovations that established firms can use to renew their innovation foundations in the face of potentially disruptive innovations. Syllabus SES # TOPICS DISCUSSION QUESTIONS Introduction 1 Dynamics of technological innovation (PDF 1) (PDF 2) 1. Make a list of those factors which you believe are most important in determining the rate at which technology improves. 2. In what ways are radical and incremental technological change really different? 3. What are the managerial implications of the technology dynamic described by Foster as the S curve? 4. How did diaper technology evolve? Does it fit the models outlined by Foster? 2 Industrial implications of technological innovation (PDF) Dynamics of markets for technological innovation 1. How do markets evolve? 2. How does technological change shape and connect to market evolution? 3 Competitive implications of market and technology dynamics (PDF) 1. How do market and technology evolution provide opportunities for entrepreneurs? 2. What types of changes in competition are driven by technological and market dynamics? 3. Is disruption a useful way to think about these dynamics? What does it really mean – what is the definition that Christensen uses? How is it different from the idea of radical innovation? 4. Why do some of these opportunities lead to a wave of successful start-ups, for example the hard disk drive industry analyzed by Christensen, while others, such as the TV opportunity that Gladwell describes (The Televisionary) lead to failed entrepreneurship? Exploring innovations: experimentation and iteration 4 Systematizing innovation; "What's the Big Idea;" IDEO (PDF) 1. Is innovation about individuals or groups? 2. Do you think it is possible to build an organization to systematically come up with new innovations? What processes would it need to have? 3. Referring to the case, why does BIG seem better able to identify and bring to market innovative toy concepts, whereas the major toy companies feel they are in a period of a "lack of innovation" (p. 3)? 4. How proprietary or defensible is BIG's system? Could one of the major toy companies replicate it? Why or why not? 5. Can BIG replicate its system in other industries such as your own? 5 Scoping technology: Advanced Inhalation Research (PDF) 1. When a new idea is generated what are the actions required to turn it into an innovation? 2. How can experiments help with this refinement of an idea into an innovation? 3. What does it mean to have an experimentation strategy? What did this mean for Advanced Inhalation Research and for Bank of America? 4. What experiments did they undertake at AIR and what was the purpose of each one? As an investor in AIR, are these the experiments you would have wanted the firm to do with your money? If not why not? 6 No class; teams work on assignment #1 7 Iterating design: team New Zealand 1. How would you evaluate Team New Zealand's use of simulation technology in its development process? What are its advantages and disadvantages? How did Team New Zealand's approach differ from that used by other syndicates? 2. Decision point: Which of the three yacht construction strategies should Team New Zealand follow? (a) One boat now, one boat later? (b) Two identical boats now? (c) Or two different boats now? Why? How much improvement would you expect from each strategy? 3. When you cannot build prototypes can you still experiment and iterate with design? If so how? 8 Experimenting with markets: innovation at 3M 1. How does the Lead User research process differ from and complement other traditional market research methods? What about prediction markets? 2. How has 3M's innovation process evolved since the company was founded? Why, if at all, does 3M, known as a "hothouse" of innovation, need to regain its historic closeness to the customer? 3. Has the Medical-Surgical team applied the Lead User research process successfully? Why or why not? 4. Decision Point: What should the Medical-Surgical Lead User team recommend to Dunlop: the three new product concepts or a new business strategy? What are the risks to the new Lead User process at 3M? What are the risks to the Medical-Surgical business unit? 9 Capstone: Iridium 1. Who was to blame for Iridium's failure? At what point could you have known Iridium would fail? 2. 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? 3. What is your evaluation of Iridium's organizational design? What changes would you have made to increase the probability of a successful outcome? 4. What general lessons does Iridium provide for ventures seeking to develop technology intensive products or services? Executing innovations: organizing to execute 10 Organizing innovation teams: 'The Bakeoff' (PDF) 1. How does team organization impact the innovation process? 2. How did the groups in the Bakeoff differ their approach to innovation and development? 3. Under what circumstances would you prefer each type of team? 4. How do the different modes of organizing innovation map to Wheelwright and Clark's typology for project teams? When are their teams more likely to be effective? 11 Organizing flexible processes; 'Internet Time' exercise 1. What are the similarities and differences in the four approaches to organizing innovation described in "Living on Internet Time?" What drives these differences? 2. Which process is superior? Which company would you prefer to work for? Which processes have you experienced? What are their pros and cons? 3. What lessons from the Internet environment can be applied to other industries (e.g. cars, fashion, consumer goods)? 12 Incentivizing and organizing innovators: GSK (PDF) 1. What are the challenges that pharmaceutical drug developers face providing incentives for their employees (especially scientists)? 2. How does Yamada's proposed Center of Excellence for Drug Discovery (CEDD) structure different from the traditional organizational arrangements found in the pharmaceutical industry? 3. Does this structure provide greater incentives for innovation? Are the incentives similar or different from those found in a biotech firm? If you were a talented scientist where would you prefer to work? 13 Organizing innovation between firms and communities; One Laptop Per Child, innovation communities (Visitor: Mako Hill) (PDF) 1. Innovation seems to be moving into the hands of communities. Please find and come prepared to describe one such community. Who are they? How do they coordinate their innovation activities? Who can make money in the community (if anyone)? Why do people participate? 2. What are the challenges for One Laptop Per Child in getting the open source community to collaborate? 3. Can they learn anything from IBM's experience with the open source community developing Linux? 14 Incentivizing and organizing external innovators: D-Wave (PDF) 1. What is D-Wave/P&G trying to achieve through the use of its 'distributed' innovation network? Under what conditions would you use each of the models proposed by P&G, D-Wave etc.? 2. Are incentives important for innovators and innovation? What types of people are driven by what types of incentives? Why do public scientists choose to work with D-Wave, handing over their IP rights? Should D-Wave offer equity to the scientists? 3. Under what circumstances should D-Wave consider bringing at least some of the scientific talent in house? 15 Negotiation innovation work between firms and academia (SpudSpy & negotiation exercise) (PDF) 1. What went wrong at SpudSpy? Why are Anderson and Huang so upset? Should they be? Can this project be salvaged? 2. Does it make sense to you that there is "Gold in the Ivory Tower?" Should this be encouraged? Exploiting innovations: options, portfolios and platforms 16 No class; time for project work 17 Dynamics of the market for ideas; designing the value chain (PDF) 1. Effective commercialization strategy must be based on a clear understanding of the drivers of commercialization. What are these drivers? 2. How do different industries and sectors differ in terms of commercialization environment and strategy? 18 Leveraging portfolio development: A123 (Visitor: Ric Fulop, Founder A123 Systems) (PDF) 1. The technology developed by Professor Chiang allows A123 to develop a wide portfolio of products. Which products should they develop? 2. What is the right business model for A123; which markets and customers will be the initial focus; which portfolio of projects will be provide early success and a platform for the future? 3. Should they develop a new technology platform or build a portfolio on the basis of their core portfolio? 19 Capstone: leveraging platforms in online video gaming (Visitor: Cyrus Beagly, Sloan '02) 1. What is a technology platform? How can it form the basis of a successful innovation strategy? 2. What is the role of platforms in on-line gaming? What are the different choices that firms face when using their platform as the basis for their commercialization strategy? 3. Can you sustain a platform approach when you use external innovators, particularly on-line game developers? 4. Find one example of an on-line gaming company – what is their commercialization approach and how do they use external developers? 20 Portfolio management processes: le Petit Chef 1. What are the particular challenges of managing platforms and portfolios? What in your experience are the organizational issues? 2. Does the Aggregate Project Plan presented by Wheelwright and Clark address your concerns? 3. What is wrong with the current portfolio at le Petit Chef? What should Gagne do? Specifically, which projects should she fund and why? How should she handle the executive meeting? Please be sure to do your own calculations for this analysis. 4. What factors explain le Petit Chef's poor performance? What actions would you recommend to remedy the situation? Renewing innovations: organizing disruption 21 Internal vs. external sources of renewal: Intel 1. Should firms try and renew their foundational innovations? Should they try and develop radical and incremental innovations? 2. Does Tennenhouse's approach to designing an exploratory research organization solve the problem of disruption? How is it better than the traditional R&D laboratory approach pioneered by Xerox, IBM and AT&T? 3. What are its main elements of the Intel Lablet program? How do these elements work together? How could its design be improved? 4. Should Intel fund projects like PlanetLab and Sensor Networks? How do they generate value? 22 Renewing innovation; corporate venturing; IBM Alphaworks 1. What are the different models of corporate entrepreneurship that have been used? What are they elements and under what conditions would each be most effective? 2. Does the Xerox model of Inxight seem appropriate? 23 Renewing innovation; internal venturing; GE imagination breakthroughs 1. One alternative to corporate venturing is to attempt to reinvent the corporate from within, as Immelt has attempted in the GE Imagination initiative. Is this likely to succeed? Under what conditions would you use this model rather than a venturing/entrepreneurship model? 2. Decision point: Should the leadership of the Transportation division support the hybrid Locomotive initiative? 24 Wrap-up (PDF)
  4. You can register on MIT Opencourseware for Game Theory for Managers at https://ocw.mit.edu/courses/sloan-school-of-management/15-040-game-theory-for-managers-spring-2004/ About the course People rarely make decisions in a vacuum. The choices we make affect others, and their choices impact us. Such situations are known as "games" and game-playing, while sounding whimsical, is serious business. Managers frequently play "games" both within the firm with other divisions and subordinates, etc. as well as outside the firm with competitors, customers, regulators, and even capital markets! The goal of this course is to enhance your ability to think strategically in complex, interactive environments. Knowledge of game theory will give you an advantage in such strategic settings. The course is structured around three "themes for acquiring advantage in games": Commitment / Strategic Moves: Credibility, threats, and promises as ways to change the game being played. Exploiting Hidden Information: When to reveal information or not, including when to surprise an opponent. Adverse selection as a strategic force. Limited Rationality: How to play when others may not be fully rational, and when others are uncertain about your rationality. Specific issues that arise in business strategy will act as motivation, but this is not a course about business tactics. For instance, you will not necessarily become a better trader or a better negotiator. Rather the goal is to provide you with a deeper understanding of key issues that arise in a wide variety of strategic situations. As a core discipline of economics, game theory is applied in many other courses offered at Sloan. These applications are wide-ranging: games played between competing firms in 15.013 (Industrial Economics for Strategic Decisions); games played between firms and their suppliers and between managers and their employees in 15.903 (Corporate Strategy and Extended Enterprises); not to mention applications in negotiations, international macroeconomics, corporate finance, etc… A half-semester could never suffice to study even a fraction of these particular applications in any depth. Rather this course is designed to provide students with deeper intuitions and a framework for thinking about interactive strategic settings. While the course is designed to complement Sloan's other economics and strategy offerings, it is self-contained. There are no prerequisites beyond the Core economics course 15.010. My view is that the important ideas of game theory are best mastered not at the level of some abstract theory but through the flesh and blood of real examples. For this reason, we will discuss numerous real-world examples and analyze games that arise in business settings. Indeed, an important element of the course is a team project in which students will identify a real-world game of interest, analyze it using the tools of the course, and offer concrete strategic advice to some player in the game. In the same spirit, my goal is to teach game theory, not mathematics. Actually, students will discover a fascinating paradox: the more transparent the mathematics, the more interesting and challenging the issues that can arise. For example, in 15.010 we spent our time methodically calculating equilibrium in the Cournot oligopoly game by deriving reaction curves and so on, but there was nothing truly interesting at the superficial – though mathematical – level of that treatment. We will of course use reaction curves and such as tools but only ultimately to get to ideas that are mathematics-free. So when someone asks you a simple question without all of the equations and curves (say "Should we pursue a cost-reducing innovation that will ultimately lower both our costs and our competitors?") you will have a ready understanding of the key strategic issues involved. Syllabus LEC # TOPICS 1 Introduction (PDF) Introduction to the course with examples. 2 Rationality? (PDF) Irrational play by individuals and groups. Implications of (ir)rationality on behavior in games, with and without dominant strategies. 3 Equilibrium I (PDF) Some prototypical games. Nash equilibrium in simultaneous-move games. Mixed vs. pure strategies. Equilibrium arising from evolution. 4 Equilibrium II (PDF) More on evolution. Games with sequential moves and subgame-perfect equilibria. 5 Commitment (PDF) Strategic value of credible commitments. 6 Strategic Substitutes and Strategic Complements (PDF) Moving first vs. moving last, when to capitalize on the element of surprise, and other applications of the ideas of strategic substitutes and strategic complements. 7 Application: Entering a Market (PDF) Entry as commitment, and establishing barriers to entry. Strategic exercise of real options. 8 Application: Brinksmanship (PDF) Strategic escalation of threats. Wars of attrition. 9 Auctions (PDF) Variety of real-world phenomena that can be interpreted as auctions. Auction theory: Winner's Curse given common values and Revenue Equivalence given independent private values. 10 Uncertainty and Information (PDF) Strategic manipulation of risk. Adverse selection and signaling/screening devices. Agency and moral hazard. 11 Reputation and Strategic Irrationality (PDF) Making threats and promises credible through reputation in repeated games. Applications to entry deterrence and cooperation in the Prisoner's Dilemma.
  5. You can register on MIT Opencourseware for Applied Economics for Managers at https://ocw.mit.edu/courses/sloan-school-of-management/15-024-applied-economics-for-managers-summer-2004/ About the course The fact of scarcity forces individuals, firms, and societies to choose among alternative uses – or allocations – of its limited resources. Accordingly, the first part of this summer course seeks to understand how economists model the choice process of individual consumers and firms, and how markets work to coordinate these choices. It also examines how well markets perform this function using the economist's criterion of market efficiency. Overall, this course focuses on microeconomics, with some topics from macroeconomics and international trade. It emphasizes the integration of theory, data, and judgment in the analysis of corporate decisions and public policy, and in the assessment of changing U.S. and international business environments. Syllabus LEC # TOPICS LECTURE NOTES 1 Choice, Efficiency, and the Basic Demand and Supply Model (PDF) 2 Choice, Efficiency, and the Basic Demand and Supply Model (cont.) (PDF) 3 Behind Demand and Supply Curves Consumer and Producer Theory (PDF) 4 Behind Demand and Supply Curves (cont.) Consumer and Producer Theory (cont.) (PDF) 5 Behind Demand and Supply Curves (cont.) Consumer and Producer Theory (cont.) (PDF) 6 Monopoly, Imperfect Competition, Pricing Tactics (PDF) 7 Monopoly, Imperfect Competition, Pricing Tactics (cont.) (PDF) 8 Monopoly, Imperfect Competition, Pricing Tactics (cont.) (PDF) 9 Monopolistic Competition and Oligopoly, Elements of Strategy (PDF) 10 Monopolistic Competition and Oligopoly, Elements of Strategy (cont.) (PDF) 11 Monopolistic Competition and Oligopoly, Elements of Strategy (cont.) (PDF) 12 Externalities and Public Goods (PDF) 13 Externalities and Public Goods (cont.) (PDF) 14 Uncertainty and Information (PDF) 15 Uncertainty and Information (cont.) (PDF) 16 Uncertainty and Information (cont.) (PDF) 17 Market Lessons and Organizational Architecture, Group Decision Making (PDF) 18 Market Lessons and Organizational Architecture, Group Decision Making (cont.) (PDF) 19 International Trade Issues (PDF) 20 Equity and Income Distribution (PDF) Final Exam
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