DEFENSEWEB EVALUATES A STRATEGIC EXPANSION DefenseWeb Technologies was on a roll. By 2002 profit margins were strong and clients happy. But founder Paul Cavanaugh was restless. Annual revenue had flattened at about $2 million, and he worried that his company was hitting a slump. The company’s key product is a Web-based software platform used by the U.S. armed forces. One such project is MyArmyLifeToo web portal. MyArmyLifeToo is an online information clearinghouse to support Army soldiers and their families. If the military was so impressed with DefenseWeb’s performance, Cavanaugh wondered, could the company target the much larger, and more lucrative, corporate market? The potential new private clients could spur revenue growth and increase the company’s value. On the other hand, the Pentagon never bounced a check. The company had flirted with this expansion strategy for some time. Every time engineers updated the company’s flagship software, they were asked to make sure the new version had the potential to work for private sector clients, keeping the option open. In early 2003, Cavanaugh decided to determine once and for all whether such a move made sense. To handle the strategic analysis, Cavanaugh hired a new CEO, Doug Burke, a technology industry veteran. Together the two men began exploring DefenseWeb’s options. They decided to split the company into two ‘‘zones.’’ Cavanaugh would run the government operations, and Burke would investigate a new private-sector strategy. Burke gave himself a six-month timetable. At the end of that time, he would take his findings—good or bad—to the company’s board to make the decision. Burke assigned two full-time technicians to modify DefenseWeb’s application for commercial use. He contacted twenty potential clients in the technology sector about adopting the company’s software. Six signed on for the pilot program. While the initial reviews were positive, Burke uncovered roadblocks. The initial six clients were very technology-oriented, but the software would have to be further modified for more mainstream customers. Also, a new marketing and sales force would have to be built to sell to the more cutthroat private sector.i discussion questions Show how the 7-step decision process could be used in this case. 1. Define the situation: - Approach more clients by expanding into private sector - Recognize the software could have to be further modified for more mainstream customers. 2. Describe and collect needed information: - New private cilents could prompt revenue growth and company’s value - Seek skillful techinicians. - Reseacrch the demand, market need 3. Develop alternatives: - Run the government operation - Other applications for commercial use for different kinds of people. - Contact twenty potential clients in the technology sector about adopting the company’s software and six signed on for the pilot program. 1. 4. Develop agreement among those involved. 5. Decide which alternative is best. 6. Do what is indicated: - Handle the strategic analysis, Cavanaugh hired a new CEO, Doug Burke, a technology industry veteran - Decide to split the company into two ‘‘zones”. 7. Determine whether the decision was a good one and follow up. 2. If DefenseWeb expands into the private sector, how would it affect the various stakeholders, such as employees, customers, community, investors, and suppliers? - Stakeholders like consumers and this company receive a positive impact. Company can increase the value of the company and revenue over the period and employees may receive a higher salary. - The government didn’t give support for the company, therefore, when DenfenseWeb step into the private sector it can push the revenue growth and enrich the value of company. 3. - - What are the benefits and drawbacks of having a technical person as CEO? Benefits : His background is in information technology so he can select staff with extensive experience. In addition, he can also help the company change many of his company's planned products for commercial purposes. A technical person might not know a lot about the business environment like the demand of consumers. Also, the other skills that people needed in different fields such as a new marketing and sales force were limited. Kiều Gia Hưng-BABAIU21 Vưu Hoàng Long-BABAIU21 Nguyễn Thế An-BABAIU21186 Võ Hoàng Phúc-BABAIU21 i Sources: Rod Kurtz, “The Problem: DefenseWeb’s Technology Was a Big Hit with the U.S. Military. Was It Time to Target Corporate America?’’ Inc. magazine, October 2004, pp. 56-58.; “Defense Web Awarded Follow-on Contract to Enhance MyArmyLifeToo Web Portal, Business Wire, December 14, 2005; and “DefenseWeb Celebrates 7th Anniversary,” Federal Computer Market Report, February 14, 2005.
