1. What are the benefits and drawbacks of having a technical person as CEO?
2. If DefenseWeb expands into the private sector, how would it affect the various stakeholders, such as employees, customers, community, investors, and suppliers?
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DefenseWeb Technologies was on a roll. By 2002 profit margins were strong and clients were happy. But founder Paul Cavanaugh was restless. Annual revenue had flattened at about $2 million, and he worried that his company was hitting a slump. The company’s key product is a Web-based software platform used by the U.S. armed forces. One such project is MyArmyLifeToo web portal. MyArmyLifeToo is an online information clearinghouse to support army soldiers and their families.
If the military was so impressed with DefenseWeb’s performance, Cavanaugh wondered, could the company target the much larger, and more lucrative, corporate market? The potential new private clients could spur revenue growth and increase the company’s value. On the other hand, the Pentagon never bounced a check.
The company had flirted with this expansion strategy for some time. Every time engineers updated the company’s flagship software, they were asked to make sure the new version had the potential to work for private-sector clients, keeping the option open. In early 2003, Cavanaugh decided to determine once and for all whether such a move made sense.
To handle the strategic analysis, Cavanaugh hired a new CEO, Doug Burke, a technology industry veteran. Together the two men began exploring DefenseWeb’s options. They decided to split the company into two ‘‘zones.’’ Cavanaugh would run the government operations, and Burke would investigate a new private-sector strategy. Burke gave himself a six-month timetable. At the end of that time, he would take his findings—good or bad—to the company’s board to make the decision.
Burke assigned two full-time technicians to modify DefenseWeb’s application for commercial use. He contacted 20 potential clients in the technology sector about adopting the company’s software. Six signed on for the pilot program.
While the initial reviews were positive, Burke uncovered roadblocks. The initial six clients were very technology-oriented, but the software would have to be further modified for more mainstream customers. Also, a new marketing and sales force would have to be built to sell to the more cutthroat private sector.