Management 14th Edition by Leslie Rue,Lloyd Byars ,Nabil Ibrahim

Exercise 29

First in the Market
Juan Peron is a process engineer employed by Vantage Engineering, Inc., and assigned to the research laboratory in the Advanced Products Division (APD). Vantage is a well-established manufacturer of military hardware. APD's general purpose is to conduct research to improve the company's military hardware products. However, the laboratory director was recently given permission to develop spin-off products for possible sale on the open market.
Juan spent his first year in APD assisting on various project assignments. At the end of that year, he was put in charge of a special project to research a chemically processed wood for specialty applications. During the initial stages of the project, Juan spent most of his time in the laboratory becoming familiar with the basic aspects of the treatment process. However, he soon tired of the long, tedious experimental work and became more and more eager to move quickly into the promotion and marketing of the product. This desire was soon realized. An article in a recent national trade publication had generated keen interest in a similar wood product, and as a result, Vantage immediately allocated several thousand dollars to the development and marketing of the chemically processed wood. Simultaneously, a minor reorganization occurred, placing Juan and his project under the direction of Greg Waites, a close friend of Juan's. Thus, Juan had an opportunity to get out of the lab and become more involved in the promotion and marketing aspects.
Juan and Greg soon began traveling nationally, discussing the new product with potential customers. Traveling enabled Juan to spend less and less time in the lab, and as a result many of the experiments required to determine the performance characteristics of the new product were left unfinished. As the number of companies demonstrating an interest in purchasing small quantities for trial applications grew, Juan suggested to Greg that a small pilot plant be constructed. In response to Greg's concerns regarding the performance characteristics of the wood, Juan assured him the preliminary tests indicated the wood could be successfully produced. Juan contended that Vantage had to get a head start on the newly created market before everyone else got into the game, that they should build the pilot plant immediately to fill the sudden influx of orders, and then worry about completing the performance tests. Greg, seeing the advantages of getting into the market first, finally agreed, and construction of the pilot plant began shortly thereafter.
During construction, Juan and Greg continued traveling to promote the wood. When the pilot plant was near completion, Juan went to Vantage's human resource department and requested that three employees be hired to operate the plant. Juan intended to personally direct the technical operations and thus saw no need to establish elaborate job descriptions for the positions.
A week later, Juan had his three employees. Due to a workload reduction in the Electronics Division of Vantage, the employees filling these positions had taken these jobs to avoid being laid off. One had previously been a purchasing agent, and the others had been electronics technicians. At the beginning of the workday, Juan would drop by the plant and give directions to the crew for the entire day before departing to make sales calls. No formal leader had been appointed, and the three employees, knowing little about the chemical process involved, were instructed to "use common sense and ingenuity."
A month after the plant operations had gotten under way, a major producer of archery bows requested an order for 70,000 bow handles to be delivered in time to be sold for the upcoming hunting season. It was too good to be true! Juan knew that if they accepted the order, the first year of operations would be guaranteed to be in the black. On receiving the product specifications, Juan persuaded Greg to sign the contract, arguing that they would be throwing all their hard work down the drain if they didn't. Subsequently, a crash program was established at the plant to get the order out on time.
One month after the final shipment of handles had been made, Juan hired a junior engineer, Libby Adams, to conduct the performance experiments that had been disbanded while the plant was getting the rush order out. Libby examined some of the experimental handles and discovered hairline cracks at various stress points that had not appeared during the initial examination. She immediately went to Juan's office to inform him of the problem and found Juan and Greg sitting there with a telegram from the archery company. It stated that several retail merchants had returned bows with hairline cracks in the handles and that the archery company would seek a settlement for its entire investment in the handles.
Vantage paid the settlement and subsequently canceled the wood project.
What general observations can be made to prevent such a situation from occurring again?
Source: From Patricia Buhler, "Managing in the 90s," Supervision , May 1997. Reprinted by permission of © National Research Bureau, 320 Valley Street, Burlington, Iowa 52601.