MicroE Systems

Babson Professor Ed Marram, Case Director

Carl Hedberg, Case Writer

Arthur M. Blank Center for Entrepreneurship

© Babson College, 2004 (revised 2005).

Abstract

In the summer of 2002, MicroE Systems, a world-renowned innovator of precision industrial micro-encoders and motion control positioning systems, had reached a critical point regarding its product line and assembly capabilities. The Internet bust in 2000 had wiped out a number of key component suppliers, forcing MicroE to search for stable and reliable subcontractors. Among the potential subcontractors was a large Canadian optical manufacturer that clearly wanted to be a major supplier for MicroE. As founder Don Mitchell traveled to Canada for a crucial meeting with them, he was facing a hard choice: stay in the entrepreneurial game and risk losing everything, or harvest his beloved business venture to one of several suitors. MicroE was facing the imminent obsolescence of proprietary devices that had once given the company a substantial edge. Its engineering team had spent the previous three years developing a state-of-the-art optical encoding technique that surely would sustain the company for the foreseeable future. The challenge was that this new encoding sensor would put the company, for the first time, into the realm of high-volume, low-priced system assembly and sales. This strategy would not only require a stable of top quality, low-cost manufacturing subcontractors, but it also would put them into direct competition with established multinational companies. That night in Ottawa, Don and other MicroE executives who had traveled with him enjoyed a summer festival of lights and fine cuisine. The Canadian company paid for dinner and left the team with the assured impression that MicroE had located a solid “high-tech tiger.” A week later, however, the trade press reported that the “tiger” was headed for bankruptcy.

Teaching Objective: To present an example of a high-technology venture that must either sell or reinvent itself on the fly in the face of changing market opportunities and emerging technologies.

Key Words: Entrepreneurial technology, Economic downturn, Growth and harvest scenarios, Licensing/Commercializing advanced technologies, Precision micro-encoders and motion control positioning systems, Opportunity recognition, Patents, Research & Development, Value chain, Component suppliers, Strategic partnerships

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