Abstract
Introduction
This case addresses the early development of a U.S. start–up dedicated to introducing a licensed Japanese puzzle called KenKen. The case reveals some of the underlying challenges associated with launching an imitable idea into a dynamic and potentially huge market about which little is known. The case emphasizes some central “liabilities of newness” (Stinchcombe, 1965), including the need for legitimation and resources. It further emphasizes the distinction between generating business awareness and generating business results.
Key Issues and Discussion Points
The case tells the story of a licensed product with (1) multiple potential distribution channels in (2) a market whose size is very challenging to estimate. It also tells the story of a business that has secured, with only limited effort and investment, broad–scale consumer awareness—without determining how to monetize that investment. The case can be used to explore:
The sources through which ideas are generated and opportunities recognized The difficulty in assessing a business's potential given a fragmented industry and market, with only limited available data The challenges and trade–offs associated with being an independent inventor and choosing to out–license a product The challenge in adopting a focused and profit–generating business model during a venture's earliest stages The difficulty in protecting simple ideas in a competitive market
Potential Audience and Uses
The case is designed for use in undergraduate or MBA courses in entrepreneurship, managing growing ventures, small business management, or the equivalent. Whether used in an introductory or advanced context, the case is best placed during a session near the term's start—when students are discussing general issues of opportunity identification and exploitation. The case allows discussion of qualitative issues (e.g., business model selection, business goals specification) and quantitative issues (e.g., market size and profit estimation) surrounding the management of entrepreneurial uncertainty.
Suggested Teaching Approach
As class begins, consider having students vote for their preferred end–of–case option. Instructors can thus gain early awareness of class preferences and identify potential student representatives for later discussion. After the vote, shift the focus by having the students solve a simple KenKen puzzle and provide feedback. This approach allows instructors to (1) engage students in the mechanics of the puzzle (an engagement that might not take place when the students read the case for the first time) and (2) focus students on the product rather than the company.
This approach also facilitates an easy and comfortable entry into active classroom discussion—with some students eager to highlight perceived positives (signaling potential market demand) and others emphasizing perceived negatives (signaling potential market limitations). The raised contradictions set the stage for later discussion of the uncertainty inherent to new product introductions. It also provides a clean segue into substantive business consideration of Fuhrer's approach to industry assessment, opportunity validation, and, subsequently, opportunity exploitation.
Specific questions for students include the following
Imagine that it is 2007, and a Gakken representative has just presented you with the KenKen opportunity. Based solely on what you have learned about the puzzle industry, is KenKen an attractive opportunity? Why or why not? Assess Fuhrer's actions in validating KenKen as an opportunity. Did he conduct enough market research? Assess Fuhrer's and the company's performance to date. How big is the KenKen opportunity? Is it an attractive opportunity in potential revenue terms? Assess Miyamoto's decision to license his KenKen rights to Gakken. Do you agree with this decision? Why or why not? Which option should Fuhrer and Shamus pursue at the end of the case? Why? What resources and/or skills are needed to put this option into action? Which are currently unavailable, and how will the team acquire them? How much time will it take to implement your chosen option? At what point, if any, does it make sense for Fuhrer to consider shelving KenKen and turning to other ideas? Outline a step–by–step plan of action for implementing your selected option.
Outside or Supplementary Readings
Eisenhardt, K.M. & Sull, D.N. (2001). Strategy as simple rules. Harvard Business Review, June: 106–116. [This article addresses ways in which companies can win through the entrepreneurial pursuit of opportunity, particularly in uncertain or chaotic markets.]
Hamermesh, R., Marshall, P.W., & Pirmohamed, T. (2002). A note on business model analysis. Harvard Business School Note 802048. [This article provides students with a clear, effective, and generalizable discussion of the “business model” construct, with accompanying examples.]
Porter, M. (2007). The five competitive forces that shape strategy. Harvard Business Review. Reprint R0801E. [This article provides students with an updated summary of the Five Forces framework and its usefulness in industry analysis.]
Sull, D.N. (2004). Disciplined entrepreneurship. MIT Sloan Management Review, 46(1), 71–77. [This article provides a thoughtful approach to entrepreneurial market research, emphasizing the potential power of small–scale experimentation over more traditional, costly, and large–scale approaches.]
Wasserman, N. (2008). The founder's dilemma. Harvard Business Review. Reprint R0802G. [This article outlines some of the trade–offs facing those who first found a new venture and then must decide what ongoing role is appropriate for them—emphasizing the conflict between ongoing organizational control and personal wealth acquisition.]
Yoffie, D. (2005). Intellectual property and strategy. Harvard Business School note 9–704–493. [This article provides a brief and effective description of (1) the main types of intellectual property protections available today and (2) licensing strategies.]
Role of the Author
The author is a professor of management and a puzzle fan. In 2009, while attending the American Crossword Puzzle Tournament in New York, she heard a talk by KenKen creator Tetsuya Miyamoto and had the chance to solve a few sample puzzles. KenKen received a mixed response at the tournament, with word puzzle enthusiasts questioning the appeal of a new number puzzle. This mixed response—driven by specific target audience preferences, product loyalty issues, and concerns about automated puzzle creation—sparked the author's exploration of puzzles as businesses. The author also directs an annual, regional crossword puzzle tournament, with the support (and puzzles) of New York Times puzzle editor Will Shortz. When approached about the possibility of a KenKen case, Mr. Shortz provided an introduction to the founder of KenKen LLC, Bob Fuhrer.
Footnotes
Supporting Information
Additional Supporting Information may be found in the online version of this article at the publisher's web-site:
Appendix S1 Teaching Note