BONUS CASE
BONUS CASE 4-1
DefenseWeb Evaluates a Strategic Expansion
DefenseWeb Technologies was on a roll. Profit margins were strong and clients were
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 the
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. Now
Cavanaugh wanted 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 FOR BONUS CASE 4-1
1.
Show how the six-step optimizing model for decision process could be used in this case.
(See page 84 in the text.)
2.
If DefenseWeb expands into the private sector, how would it affect the various
stakeholders, such as employees, customers, community, investors, and suppliers?
3.
What are the benefits and drawbacks of having a technical person as CEO?
ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 4-1
1.
2.
Show how the six-step optimizing model for decision process could be used in this case.
(See page 84 in the text.)
(1)
Recognition. Realizing that the software could be adapted to the civilian market.
(2)
Establish, rank, and weigh the decision criteria. Carefully state the opportunity at
hand. Find the most important criteria on which to base the decision.
(3)
Gather available information and data. Collect information on potential revenue
and expenses then analyze what resources would be needed.
(4)
Identify possible alternatives. A six-company pilot program is used.
(5)
Solution finding. Identify the decision criteria and evaluate the potential ideas.
(6)
Select the best alternative. Finally, a joint decision was made.
If DefenseWeb expands into the private sector, how would it affect the various
stakeholders, such as employees, customers, community, investors, and suppliers?
Almost all the stakeholders would be affected positively. The stockholders would make
more money and so would the employees. The only negative result may be from the government
customers who might not get the total, undivided attention they once had.
3.
What are the benefits and drawbacks of having a technical person as CEO?
A technical person might not spot the difficulties that customers might have using the
product. In fact, that happened. Furthermore, a technical person might not have the people skills
needed. But that is easily discovered from past management duties. There is no reason why a
technical person couldn’t be a wonderful manager.
Update: The board decided against moving into the private sector. According to
Cavanaugh, “It just didn’t add up.” The private-sector clients that were part of DefenseWeb’s
pilot program were given the option of continuing to use the software, but most opted to let the
trial end. Burke is now courting potential clients like the Army Reserve and scouting out
subcontracting opportunities. Neither Burke nor Cavanaugh feel the six-month evaluation was
wasted time. The company had been talking about going commercial for a long time. Now that
the decision had been made, the company became more focused on its original mission.
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.
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