EE8061 INNOVATION AND TECHNOLOGY MANAGEMENT

CLASS DISCUSISON 1

1. As the global spread of the Covid-19 is significantly affecting organizations as

well as individuals, knowing how to reduce the accompanying risks is key. As
an expert in Risk management explain to your client:

a. What Is Risk?

Risk is “the possibility of loss or injury”, there is a likelihood and impact

on the business. It is an event that there is a negative impact on the
scope, time, cost, quality or resources.

People who are risk-averse have low utility or risk tolerance while
people who are risk-seeking have higher tolerance for risk and their
satisfaction increases when more payoff is at stake. Risk-neutral
approach achieves a balance between risk and potential payoff.

b. How one can identify risk?

Brainstorming, interviews, SWOT analysis (Strength, weakness,

opportunity, threats)

2. Describe Risk Management Planning and Best Practices. YouTube is a video

sharing website on which users can upload and share videos. Three former
PayPal employees created YouTube in February 2005 . In November 2006,
YouTube was bought by Google for $1.65 billion, and is now operated as a
subsidiary of Google. For YouTube to remain successful, it must find and
manage its risk factors and sources of uncertainties. Discuss key risk areas
(Market Uncertainty – customer, market sales and growth, channels,
competitors) for YouTube in the immediate future.

Risk Management Planning is deciding on how to approach and plan the risk
management activities for the project. There is qualitative and quantitative risk
analysis. Qualitative requires characterising and analysing the risks and
prioritizing their effects on the project objectives, whereas quantitative
measures the probability and consequences of risks.
 Some key best practices include

a. managing projects by managing their risks

b. creating and maintaining a census of risks for each project

c. tracking the causal risks, not just the ultimate undesirable outcomes

d. assessing each risk for probability and likely cost

e. predicts for each risk the earliest symptoms that might indicate
materialization

f. appointing a risk officer to look at the risk of bad information not getting
communicated.

g. establishing easy channels for bad news to be communicated up the

hierarchy (prevent cover ups by employees who are afraid of consequences).

Since YouTube has generated a significant amount of content viewers, they

can exhibit networking effect by allowing other websites to embed their video
into other websites. However, there are several other video sharing
platforms that are focused of selling of renting videos whereas YouTube
allows free sharing of videos and only capturing revenues via purely
advertising. Other factors that YouTube can consider is their Organization
and Management Uncertainties (capabilities, financial strength, talent,
learning skills and strategies), Product and Processes Uncertainties (cost,
technology, material, suppliers, design), Regulation and Legal Uncertainties
(copyright), Financial Uncertainty (cos and availability of capital, expected
return on investment).

3. Network economies are an important element for new ventures. Describe how
social networking sites have leveraged network effects to expand.

Social networking sites provide users the tools to create personalized web
sites to blog about one’s life and to link to other interesting sites and friends.
As more of your friends join the social network, you benefit from sharing links,
web site updates and connectivity options. Leveraging network effects can
greatly increase the size of your user base, your company’s market share and
your product’s or service’s value.
4. What is the difference between economy of scale and economy of scope?

Economy of scale focuses on the cost advantage that arises when there is a
higher level of production of one good. Whereas economy of scope focuses
on the average total cost of production of a variety of goods.

Economy of scope: average total cost of a company’s production

decreases when there is an increasing variety of goods produced. There
is a cost advantage when the company produces a complementary range of
products while focusing on its core competencies. It is cheaper for 2 products
to share the same resources inputs than for each of them to have separate
inputs.

Economy of scale: cost advantage a company has with the increasing output
of a good of service. The average cost per unit of a company’s production
decreases when there is an increasing volume of output of goods and
services. When the fixed cost for “raw materials” (labor, capital, infrastructure)
is covered, the marginal cost of production for each additional unit of goods
and services decreases. Hence, at lower marginal costs, additional units
represent increasing profit margins. It offers the company the ability to drop
prices if need be, improving the competitiveness of their products. Eg. 1 unit of
processor = $100, 500 processors = $37, 500. Profits = $12, 500.