II.

Case Study - Infinity & Beyond, Inc

Infinity & Beyond, Inc. is a producer of high-tech fashion merchandise. The company’s marketing
department has identified a new product concept through discussions with potential customers
conducted in three focus groups. The marketing department is excited about the new “concept” and
presents it to top management who gives its approval for further study. Lisa Denney, senior director of
new product and Web site development, is asked to create a plan and cost breakdown for the
development, manufacture, and distribution of the product. Despite the enthusiasm of top management
and the marketing department, Lisa is unsure about the product’s market potential and the company’s
ability to develop it at a reasonable cost. To Lisa’s way of thinking, the market seems ill-defined, the
product goals unclear, and the product and its production technology uncertain. Lisa asks her chief
designer to create some product requirements, a rough design that would meet the requirements and
marketing concept, and to propose how the product might be manufactured and marketed.
After a few weeks the designer reports back with requirements that seem to satisfy the marketing
concept. She tells Lisa that because of the newness of the technology and the complexity of the product
design, the company does not have the experience to develop the product on its own, let alone
manufacture it. Lisa checks out several design/development firms, asking one, Margo-Spinner Works
Company, to review the product concept. Margo-Spinner Works assures Lisa that although the
technology is new to them, it is well within their capability. Lisa reports everything to top management
who tells her to ignore any misgivings and go ahead with the development.
Lisa sets a fixed-price contract with Margo-Spinner and gives them primary responsibility for the entire
development offer. Margo-Spinner management had argued for a cost-plus contract, but when Lisa
stipulated that the agreement had to be fixed price, Margo-Spinner said okay, only under the condition
that it be given complete control of the development work. Lisa, who has never worked with Margo-
Spinner, feels uncomfortable with the proposal, but knows of no other design company qualified to do
the work, so she agrees. Several people from Infinity & Beyond, Inc. will be assigned to work at Margo-
Spinner during the development effort, and during that time they will determine whether Infinity &
Beyond, Inc. will be able to make the product or will have to outsource production.