Managing Innovation

Question 1:

‘Line 2’ is a revolutionary application that allows any iPhone user to benefit from a second phone number and to make and receive unlimited calls using either wireless hot spot or a 3G network. For that reason, the introduction of ‘Line 2’ in the app store represents a big threat to AT&T. AT&T is likely to see its operating income shrinking, at least from its customers who are subscribed to the iPhone and are those who are tempted to downgrade their plans in order to save money.

‘Line 2’ is a start-up that capitalized on the opportunity to make it possible making or receiving calls using a wireless hot spot or a 3G network. This company jumped on this disruptive technology and is ready to lead this new market by focusing on its innovation that improves the cell phone industry.

Although, the US telecommunication leader had invested huge amount of money in order to develop the infrastructure needed to provide phone services all across the US and has enough resources to invest in such innovations; AT&T did not see or focus on this opportunity and was only interested in developing and maintaining its core competencies. For that reason, AT&T was not able to exploit or explore new alternatives (Robert A. Burgelman) and because it focused on its sustaining technologies (Clayton M. Christensen and Joseph L. Bower).

AT&T has different alternatives to adopt in order to respond to the current situation. It can allocate enough resources to counter attack Toktumi by imitating ‘Line 2’ invention and by offering additional features to offset the cons of the existing innovation: “Line 2 generally is wonderful. But there is room for improvement”. By doing so, AT&T will push out Taktumi out of the market, since it has the necessary assets and the access to a new innovation without spending the same amount of money in research and development (David J. Teece 1986). Thus, AT&T needs to set barriers and try to keep a tight appropriability...