*ffi'#g#tff'm#"$$qf,#ni

'ts'ff*r
g;tl'ffii*
g*ffiffi
ff.ir
iil]fifl:;lffii*
rugp;ffiffi

i;hi

:ti!1ti
];ri'llil

'::l:-;:i

,|it;tti,

'

'
''l- :,:'"i"
" ,t':
i''",,:'i
, " . i . - ' i l . , ,,..i,
,,
n
'
,
i
,:i:ii,ir
.

'.:.::-;'',;-,:'

' 1,,";'
''
., '',,,, ,., i,.!: ,.;,

KLH, an organizationwhich was renownedfor its

veryhigh quality,slightlyoddballelectronicproducts.
',,lrll rir:i
He lelt KLH in 1961after10 yearsaspresident.
r'lir:i;'I i:ili.i r i'i ii i l,i,i
i,.:i
The formationof AR hadoriginatedduringthe KoR. S, Rosenbloom
reancrisis.While stationedin New Jersey,Mr. Kloss
wasableto attendtheCity Collegeof NewYork,where
i:.rrlv in November 1970,Henry Kloss was reviewing
he wasa studentof EdgarVilchur.He andVilchurhad
'ri progressAclventCorporation
had made in the premutnalinterestsin an acousticsuspension
speakerbe- -'Jins months. The Scptcmberprol'it and loss statecauseof its immensereproductiveadvantages
over
.'nt had rcgistered a net profit of almost $30,000,
conventional
mechanicalspeakersystemsandits small
-.rinsta cumulative
lossof nearly$165,000in the
size. With Mr. Kloss providing some capital and a
-';cding | 0 months.The new Advent cassette
"garage,"AcousticResearch,
Inc.,wasformed.Finan--(rrder,Model M200, had just completedits third
cial guidanceof the businesswas providedby Anton
lth on the market.The M200 recorder,with its so(Tony)Hof-mann,who was later to becomea principal
':.ricatedcircuitry,wasfelt to represent
realpotenof KLH, andthentreasurerof Advent.
-. rs a rcplacemenl
for thephonographasthecentral
Mr. Kloss and otheractivemanagement
sold their
-::cnt in any homeentertainment
systelx.With the
share
of AR, Inc.,afterirreparable
disagreements
with
-.,:rcialturnaround,
Mr. Klossf-eltconfident that a
Vilchur over companypolicies. KLH was initiated
.' lcvclof $40 million to XB50
million was achievshortly thereafterwith $60,000 in capital and Mr.
' . bv Advent within five years.His problem
was
Klossaspresident,MalcolmLow asmanagerof sales,
:1)or'ganize
for continuing
innovation.
and Mr. Hofmann as financial manager.After seven
yearsand a seriesof innovativeaudio productsthat
TIiTRODUGTION
wereproducinga $4 million level of sales,KLH was
rloss was a well-known ligure in consumer elecsold becauseof sheertirednessof the managersand
- product design and manufacturing. Prior to Aduncertaintiesassociatedwith KLH's growing size.
. . re hadparticipatedinthefoundingandoperation With the sale,Mr. Klossagreedto remainaspresident
-.- r-rsticResearch,Inc. (AR), and later, KLH Corfor threeyears,andhe left in 1961.
" .: ,-)u.He had been the mind behind the products at
Advent Corporationwasincorporatedby Mr. Kloss
in May 1961 for the purposeof manufacturingspecializedelectronicproductsfor home entertainment
O 1973 by The Presidentand Fellows of Harvard College.
ieserved.HarvardBusinessSchool Case9-614-021.
use.The actualjustificationfor forming the company

49

5O

pnnr rwo: DESTGN

ANDEVoLUTToN
oF TECHNolocy sTRATEGy

wasto do work in television,especiallyto createanorganizationwhich would support the R&D and marketingof a largescreen(4' x 6') color televisionsystem. Formal development work on the television
systemhadbeensuspended
in 1970.
With the formation of Advent Corporation, Mr.
Klossembarkedon a plan to seewhat a big company
could do. He felt that growth was always a primary
goal, always desirable,but that one had to think in
terms of what was realizablewithout beatingone's
head againstthe wall. Mr. Kloss sought to retain
strong financial control of the company,having sold
his shareof AcousticResearch.
Inc.. underduressand
his shareof KLH Corporationwith mixedfeelings.He
had this to sayto the caseresearchers
aboutfinancial
policies:
The size one desiresis really only limited by the dollars
available for working capital. There's a firm intention to
reachthe middle tens of millions of dollarscertair.rlyin Iess
than frve years; one anticipatesa faster accumulationof
staff, faster than the 30 percentone might be able to do liom
profits, so the questionbecomeshow fast does one dribble
out equity if you're not staff limited?

Mr, Klosscontinued:
Eighteenmonths ago, there was a small private ofl'eringof
12 percentof the company in which we ofl'ered20 units consisting of $10,000in 8 percentconvertibledebentures,and
300 sharesof equity comlnon at $7.50 per share, l0 cents
par value. I retained75 percentcontrol; companydirectors
andothershave 13percent.It was simply that circumstances
warrantedour doing that. In addition,we have a $ 1. 15 million line of credit, of which $600,000 is revolving and
$550,000open, securedby the directorsand peggedto 80
percent of the accountsreceivable. I will not ofl'er any further equity until a really big push (for which the salesare
guaranteed)requiresit, and when a price severaltimes the
$7.50 price per share is attainable.Beyond that, we are
working hard to slashoverheadand to build profits.

Financial data regarding the operations of Advent

Corporation are given in Exhibits 1 and 2.

CURRENT OPERATIONS
In the fall of 1910, Advent Corporation manufactured
and sold five products for home entertainmentuse: the
Advent loudspeaker; the Advent Frequency Balance
Control, which allowed the listener to alter the relative
musical balance in any audible octave; two models of
the Advent Noise Reduction Unit, which allowed virtually hiss-fiee tape recording and playback; and the

newAdventTapeDeck, which alsofeaturednoise-free

recordingand playback.Theseproducts,as well as a
specialrecordingtapethat Advent sold underlicense
from Du Pont,aredescribedin detailin Exhibit 3, in a
pieceof Advent promotionalliterature.
Several specific policies of Advent Corporation
servedto interlock the company with the consumer
electronicsmarket.Most important,perhaps,wasproduct policy.Mr. Klossfelt that therewereseveralrepugnant aspectsto directcompetitionwith the industrygiantssuchas Zenith,Magnavox,and Motorola.Advent
soughtto turn to specializedareasof the audiomarket,
the5 percentor sowhereno competitionexisted,where
whole new classesof productsmight be developed.
Quality was an importantAdvent byword: to makethe
mostefficientpieceof equipmentat thelowestpossible
price to the consumerwas the primary objective.Such
productsanctitywas not protectedby patentbut rather
by the product itself, which had a real name, which
gatheredequity asit was seenandbecameknown, and
which hopefullyrepresented
theperfectlow-priceprodEven
entry
fee
uct.
thoughthe
was low, Advent anticipatedspecializingupon a baseproduct alreadydeterminedby the majorsuppliers(e.g.,tapedecks),which
had an appealto a broadspectrumof the market.
Productionoperationsof Advent Corporationwere
closelysupervisedby Mr. Kloss, althoughtherewas a
productionmanagerfor all but the M200 line. Speakers
were manufacturedin a separate12,000-square-foot
plantin Cambridge,Massachusetts.
Major operationsof
the companytook placein a 20,000-square-foot,
threestory building also in Cambridge,which Mr. Kloss
leasedupon forming the company.A move was being
plannedto consolidatetheoperationsof thecompanyin
the springof l91l into a 64,000-square-foot
building
alsoin Cambridge,
whichhadalreadybeenleased.
Productionitself wastypicalof the smallmanufacturersin the industry.Approximately130production
workersformedthe productsin a specifiedsequence
of assemblystepsthat wasusuallydeterminedby Mr.
Kloss.He alsocarriedout "time and motion" studies
to determinean appropriateproduction rate. No significanteconomies
of scaleexistedin theindustry.Mr.
Kloss felt very strongly that higher overheadwould
to be gainedby mechanizadestroyany advantages
tion. In addition,it seemedthat after a quantity order
of 100per weekmore,no importantsavingscouldbe
gainedfrom higher quantity parts orders.It had been
found that direct labor ran about one half of material
cost over a wide rangeof products.With manufacturing overheadbeing determinedas a percentof direct

DIS:TINCTIVETECH'NSLOGiICALOOM,PETENCESAND CAPABI]LITIES

5l

EXHIBIT t
Adyent Corporation(G)
BalanceSheet
As of September26, 1970

Currentassets:
Cash
Accounts
receivable
Less:Reservefor baddebts
Advanceto employees
Inventory:
Material
Labor
Manufacturing
overhead
Prepaidinsurance
andotherassets

$ 37s,486.13
37,076.97
38,189.91

Totalcurrentassets
plant,andequipment
Property,
Less:Accumulated
depreciation
Deferred
financing
expense
Adventtelevisionsystem

64,488.34
650,226.68
(10,000.00)
(650.00)

450,753.01
10,958.21
1,165,770.24

221,030.07
(57,524.71)

Totalassets

163,505.36
5,450,00
205,085.92

$u39,811.5r_
Llablllties

Curentliabillties:
Accountspayable
Nolespayable,bank
Dueotficers
Loans,.other
Aerued debenture
interbst
Accruedpayroll
Royaltiespayable
Aocruedroyaltyexpense
Aocruedauditand legalfees
Aocruedtaxesandfringebenefits
Aocruedpromotion
anddiscount
allowances
Miscellaneous
accounts
Totalcurrentliabilities
l-ong-term
debt:
?
896convertible
debentures
Sbd<holders'equity:
parvalue)
Commonstock(10@
paid-incapital
Additional
Retained
earnings
deficitto 10/31/69
Ileficit11/1/69to date
Totalstockholder's
equity
Ttal liabilitiesandstockholders'
equity

hbor, cost of salescould easily be forecastfor any

given product, and a price determinedon the basis of
etlpical margih percentage.Pricing policy, therefore,
ras also dependentupon the emphasison making an
rrellent low-costproduct,andnot on sellingproducts
I a what-the:market-mav-bearlevel.

$347,449.36
666,714.00
0.00
.
50,000.00
4,002.65
17,441.39
(2,000.00)
7,584.80
20,628.38
37,083.67
65,312.20
17,471.29
1,231,687.74
200,000.00
$ 45,925.10
821,866.29
108,123.78
$1,539,811.52

Marketing manaementat Advent was a relatively

autonomousactivity. Vice president of saleswas Nk
Stan Pressman,who had performed similar duties at
KLH beforecoming to Advent. Nationwide distribution
was maintainedthrough 150 dealersacrossthe couqtry,
who were carefirlly selectedon their ability to sell and

52

pnnr rwo: DESTGN

ANDEVoLUTToN
oF TEcHNoLocySTRATEGY

EXlilBrr

AdventCorporation(C)
Statementof Profitand Loss
As of September26,197O
Current Month

Grosssales:
Regularspeakers
Utilityspeakers
FB.C.
M 100
M 101
M 101 Advocate
M200

wc-1
Parts
Crolyntape

Units

Amount

N o v e m b e r1 , 1 9 6 9 ,
to Date Amount

1,561
278

$115,222.44
17,838.58
23,148.34
50,481.83
24,139.50
11,826.00
170,718.00
100.02
1,603.12
605.00
3,997.44

$ 685,003.10
46,653.19
182,995.73
260,995.63
68,485.25
13,284.O0
245,960.30
363.40
3,371.03
2,757.16
11 , 1 0 8 . 2 0

t3l
JUJ

295
146
988
6
138
1,824

Total
Less:Provisionfor promotionaland quantitydiscounts
Net sales
Cost of sales:
Material
Labor
Manufacluringoverhead
Royalties

419,680.27
21,489.78
398,190.49 (100%)

Totalcost of sales
Gross Profit
Operatingexpenses:
Sales
Generaland administrative
Researchand development

286,889.80 (72%)
1 1 1 , 3 0 0 . 6 9 (28%)

Totaloperaiingexpenses
Operatingprofit (loss)
Otherincome(expense)
of AdventTVsystem(includedin R&D above)
Capitalization
Net proJit

serviceAdvent productsintensively.Shelf spacewas

originally attainedby contactingeachdealerpersonally
of useful and high-quality
and promisinga succession
products,with which it would be valuablefor the dealer
The reputationof Mr. Kloss was also
to be associated.
Finally, exposureto the tradepressand to
emphasized.
the public had beenattainedthroughpressconferences
designedto placetheAdvent audioproductsin sink-orswim competitionwith similar offerings then on the
hadbeenoverwhelminglyfavorable.
market.Response
Under pressureto reachthe marketplacewith successfulproductsand to improve profitability, Advent

1 9 6 , 4 3.18 2
41,366.25
45,908.85
3,182.88

47,517.13
iE

7trQ AQ

14,371.13
75,641.94 ( 1 e . 0 % )

(e.0%)
(6,428.79)( - 1 . 6 % )
$ 29,229.96

1,520,976.99
86,385.59
1,434,591.40
663,770.47
199,930.01
232,392.33
13,222.26
1,109,314.67
325,276.73
242,799.78
91,570.51
195,877.20
530,247.49
(204,970.76)
(34,652.11)
75,085.92
$ (164,536.95)

hadexpandedon a day-to-dayfunctionalbasis.Emphasis on "continuallyoptimizingits position" ratherthan

respondingto a long-rangeplan had placedsubstantial
importanceupon productioneffrciencyand rapid responseto daily marketingproblems.As a result,culrent
operatingmanagerswereexpectedto monitorthe funcin fine detail.
tionsof their departments
INNOVATIONAT ADVENT
Both Acoustic Researchand KLH had demonstrated
the ability to recognize changing product and con-

D I S T I N C T I VTEE C H N O L O G I C ACLO M P E T E N C EA
SN D C A P A B I L I T I E S5 3

EXHIBIT 3

ii{lin:ltrr:rtl

"i,fil
., ;irl'*l.I {"ij,lirl'lrli'!!riiftrri :::l':i+
l;,irr

After more than a year in business,we (AdventCorporation)

thinkit'stime for an accounting
of wherewe are and wny"
We began,you may remember,
withthe inlentionof making
productsthat would differsignificanily
from other people'sproductsthat wouldfillspecialneedsothersweren,tfilling,exploregenuinelynewwaysof doingthings,and keeptestingacceptedlimitsof performance
and value..
Oneof the productswe had in mindwas a new kindof color
televisionset, a high-performance
systemwith a screensize
severaltimesthe presentlimitfor home use.We are happyto
reportthat it'scomingalongnicely(andslowly,as suchthings
do),and that the presentprospectsfor prerecprded
videomaterialmakeit lookmoreappealingthanever.
Audio,however,
waswherewe coulddo the mostthe ouickest,and our firstproductwas:

THEADVENTFREQUENCY
BALANCECONTROL
Oneof thethingsto be learnedin thedesignof speakersysrems
is that"flat"f requencyresponseis in the ear of the beholderand
virtuallynowhereelse.True,thereareampljfiersandtunerswith
straight-linef requency response, but practicallyeverything
else-recordings,ltsteningrooms,cartridges,loudspeakers-is
anythingbutflat.Differentthingssounddifferent,not becauseof
basicdifferences
in qualityor performance
in manyinsrances,
butbecausea recording
engineer,
or speakerdesigner,
or room
plasterer
had a slightlyspecialviewof the world"
Thereis nothingwrongwiththosedifferences,
in our vrew.
And one of the challenges
for a speakerdesigneris to accepl
and cope with them by designingfor an octave-to-octave
musical balancethat sounds"right"withthe wildestvarietyof present recordingtechniques.But there is no singleperfectbalance,and that lack is a sourceof discomfortto a numberof
THEADVENTLOUDSPEAKER
criticallisteners.lt causesmany listenerswith reallysuperb
Anybodywho knew us might have predictedthat we wouto
(andreallyexpensive)
soundequipment
to keeptradingfor new
makea loudspeaker
systemprettyearlyin the game,but few
and more expensiveequipmentin the hope that it will sound
wouldhavepredictedthat we'd makejust one, callit simplyThe
"perfect"for everythingfrom DeutscheGrammophon,s
concepAdvent Loudspeaker,and say flatly that it was the best we
tion of the BerlinPhilharmonic's
soundto Columbia,s
notions
couldofferfor a longway intothe future.
about Blood,Sweat,and Tears.
The reasonfor that was, and is, that it had becomepossible
Anyonewho keeps pursuingthal ideal, and many wno
to design a speaker system as good as anyone wouto ever
don't,wouldbe welladvisedto investigate
our FrequencyBalneedfor homelistening-oneas goodin everymeasurable
and anceControl,
a uniquedevicethatenableslisteners
to alterthe
audibly useful way as any speaker system of any size or
price-at a cost slightlybelowwhat most peopleconsiderthe relativemusicalbalanceof any octavein the audiblef requency
spectrum.lt is uniquelyflexibleand uniquelyeffectivern dealmediumprice"category.Our prior experiencein designand
ingwithsonicdifferences
betweenrecordings,
equipment,
and
r-nanufacturing
techniquesconvincedus that this coujd be
even the placementof speakersin a room-and in making
Cone,and we did it.
thingssoundsubjectively
"right"more consistenlly
than could
We will be happyto send you full particularson The Advent
be accomplishedany other way.
-oudspeaker,
includingitsrevrews.
Butwe believeitssoundwill
The FBC,designedaroundour own experiencewith sub:ellyou quicklyenoughwhy it has become,in jts firstyear,one
jectivejudging of sound quality,is worth investigationby any3f our industry's
all-trmebestsellers.
one who can'tjust sit backand listen,acceptingthe bad with
(Toavoidsurprisesin a showroom,
we shouldnotethat our
the wonderful.
At $225+,it is a far better,morepertinentinvest:ne speakersystemcomesin two stylesof cabinet:the origimentthan mostchangesof components.
^al walnutmodel,pricedat
9125r,and a "utility,,version
that is
One of the specialabilitiesof the FBC is the reclaimingof
?ctuallyin a ratherhandsomevinylfinishthat lookslikewalnut,
manyrecordings
froman unlistenable
state.Theneedfor another
:'rced at $105.1Bothsoundthe same.)
kindof recordingreclamation
led to anotherkindof producr.
All of the f irstyeals reviewsof The AdventLoudspeakerf insred by sayingthat it was an auspicious
UNITS(MODELS
1OO
AND101)
beginningfor a com- THEADVENTNOISEREDUCTION
:any.But it represented
only one of our immediatedirections. Backgroundnoisein tape recording-specifically,
tape
hiss-is
-1e
nextwas:
a far biggerenemyof soundqualitythan mostiistenersrealize.
One reasonit isn'tproperlyidentified(and vilified)is that few
peoplehaveheardtape recordings
withoutit.Lackingthe slandard of blessedsilenceis somethinglike neverhavingseen a
televisionpicturewithout"snow."lf you don'tknow it isn'tsup'-av
ng helpedfoundtwo successfulcompaniespreviously,and
posedto be there,youjust lookor listenpastit and acceptit as
- . . ' i n g p r i o rc r e d i tf o r
s o m eo { a u d i o ' sm o s ts i g n i f i c a nptr o d u c t s
partof the medium.But onceyou see-or hear-thingsfreeof
- : u d i n gs o m e t h i n gl i k e
h a l fo f t h e l o u d s p e a k e ri n
s u s ei n m u s i c
interference.life is different
:, siemsand seriousradiosand phonographsin this country),our
: ' : s i d e n t ,H e n r yK l o s s ,h a d s o m ep r e t t yt i r mn o t i o n sa b o u lw h a th e
'S: - t e d t o d o n o w .
ghtlylowerin some partsof the country.

rSlightlyhigherjn some partsof the country

54

STRATEGY
OF TECHNOLOGY
D E S I G NA N D E V O L U T I O N

EXHIBIT 3

*.iq:*tntc**#
Whiledesigningthe NoiseReductionUnits,we becameinGetting rid of tape noise is a prime function of the nowin what the Dolby Systemand other factorsmight do
profesterested
its
in
which
reduction,
famousDolby@Systemof noise
studio for a kind of tape recordingthat no one was taking seriously
sionalversionis in use in virtuallyeverymajorrecording
in the world.sWe became interestedin the Dolby System not enough.The resultwas:
only because it helps rid even the best conventionaltape THEADVENTTAPE
DECK(MODEL2OO)
recordingsof backgroundnoise, but because it had even We had knownbefore,and confirmedin our work on the Model
when appliedto low-speedhome tape 100, that tape hiss was the underlyingreasonfor the comprogreaterpossibilities
recording.Home recordingat 3 3/4 and 1 7/B ips has been mised,AM-radiokind of soundqualitythat peoplehad come to
plaguedby the problemof really excessivetape hiss-which
associatewith cassetterecording.Becausethe hiss was presmanufacturershavechoseneitherto tolerateor to "reduce"by ent in a quantitythat madewide-rangerecordingunpleasantto
givingup lrequencyand dynamicrangein recordingat those listento on cassettes,it had effectivelyset an upper limit on
speeds.The Dolby System makes it possibleto removethat quality-giving manufacturers
littleincentiveto optimizeanyasproblemand get first-classperformanceat the low speedsbest pect of cassetterecording,includingmechanicalpedormance.
suited,from the standpointboth of economydnd convenience,
We realizedthat once you usedthe DolbySystemto get rid
to homerecording.
of the noise,you wouldthen have reasonto go on to improve
So we designeda productthat would make the DolbySys- all the performanceareasthat nobodywas reallyattendingto'
tem available-in a versiondesignedby DolbyLaboratoriesex- So,to show just how good cassetterecordingcould be, we opclusivelyfor home recordingand prerecordedtapes-for use timrzedeverythingwe could arounda good cassettetransport,
with any good tape recorder.The productwas our Model 100 addedour NoiseReductionUnit,and helda demonstration
for
NoiseReductionUnit,a flexibleand effectivepieceof equip- the press.The reaction,eventhoughwe couldn'tdemonstrate
mentthat can makeany recordersoundbetterand can do won- everythingwe wantedto in a rigged{ogetherunit,was that we
ders in openingup the world of low-speedrecordingto the had provedthat cassetteperformancecould be as good as,
nomeuser.
and in some ways betterthan, the standardfor records.
The Model100 combinesthe DolbySystemwith a recordIn the meantime,we workedon our own cassetterecordering controlsystemthat supersedesa recorder'sown and pro- whichwas to includenot onlythe DolbySystemand the necesseldomseenin home
accuracyand simplicity
videsa recording
sary improvementsin all areas of performance,but also the
One crucialadvantageof thatcontrolsystem, means,not givento our knowledgewith any previouscassette
tape equipment.
whichprovidesseparateinputlevelcontrols(withinput-mixing) recorder,to makereallysuperbrecordings.That
meanteffective
anda masterrecord-levelcontrol,is that it gets stereorecord- and precisecontrolsfor settingbalanceand recordinglevels,ining balancerightand doesso easily.lmproperbalance,almost cludinga VU meterthat read both stereochannelssimultaneguaranteedwith many tape recorders,is the chief reasonfor ouslyand indicatedthe louderof the two at a givenmoment.
recordings(on even the best recorders)that don't sound like
We feli that callingthe resultingtape machinea cassette
lt is, in otherwords,the chiefreasonfor manypeo- recorderwouldn'tfully indicateour convictionthat it was
the original.
with their recorders.
ple'sdissatisfaction
probablythe singlebest choiceamong ail kindsof recorders
The Model100,at $250,is a requiredinvestmentfor any- for most serious listenerswho want to tape records and
one who takes recordingvery seriouslyand measuresthe broadcasts.So we called it The AdventTape Deck (Model
results critically.But since some people won't need iis 200) and let its beinga cassettemachinespeakfor itself'At
tremendousflexibility,we also decided to offer the Model $260.it is a new kindof tape machinethat we hopewill prove
101-which, at $125, providesidenticalperformanceat half the key,given"Dolbyized"commercialcassettereleases,to
the prrce.To makethat possible,we omittedthe input-mixing makingcassettesthe mediummost seriouslistenersprefer
providedwith the Model 100, suppliedslightlyless flexible for most listening"
recordingcontrols(it takes a bit longerto get stereobalance
About midway in our developmentof The Advent Tape
just right),and providedone Dolby circuit per channel in- Deck,we becameconvincedthat the DolbySystem'scontribustead of two. (As in the professionalstudio Dolby System, tion to performancewouldbecomeevengreaterif it were comyou switchthe Model 101'siwo circuitsto functionfirst for binedwith the use of DuPont'schromium-dioxide
tape in casstereo recordingand then for stereo playback,but not for settes.Lotsof peoplehad beentalkingaboutDuPont's"Crolyni'
both at the same time.)The result,again,was per{ormance but nobody had hard facts on what it could do in cassette
identicalto ihe more elaborateunit, at a price that makes recordings.s
So we got samples,experimentedwith its characsense for seriousrecordistson tight budgets'
teristics,and were convincedthat we had to supplya meansto
use it on our recorder.That meanta specialswitchon The Advent Tape Deck to provide the right recordingand playback
(a good bit differentfrom thoseof othertape forcharacteristics
s"Dolby"is a trademarkof DolbyLaboratories.
"Crolyn"is a trademark
mulations)for its use. lt also meantanotherproduct:
of Du Pont.

D I S T I N C T I VTEE C H N O L O G I C ACLO M P E T E N C EA
SN D C A P A B I L I T I E S5 5

E X H I B I T3
'. ;.. '":. . " , ; " " . " f " " . i
t : : r " ; lt r . : ; " . ,: .

ADVOCATE
CROLYN
TAPE
AlthoughDuPont'sCrolyntape was beingusedextensivelyin criticalvideorecording
applications,
andjustifying
itsadvancepressnotices,no one had madethe leapto marketingit for audiopurposes
for homeuse.Wedecidedto do so becausewe feltthat Crolynwas
necessaryfor the very best in potentialcassettepeformance.
We are, then, marketingCrolyntape underthe "Advocate,'
brandin cassettes.
One of our hopesin doingso is to get others to marketchromium-dioxide
tape as well.
There is no doubt in our mind that it's worth the trouble.
Chromiumdioxidehas the abilityto put greaterhigh{requency
energyon tape than otheroxideformulations,
and is also increasingly
sensitive
as frequency
goesup"Thoseare idealcharacteristicsfor cassetterecording,makingposslblea stillgreater
signal{o-noise
ratioin conjunction
withthe DolbySystemand
betteroverallhighJrequencypedormancethan any othertape
we knowof.

ilrurer trcnds and to respond quickly in a dynamic

narkctplace. Henry Kloss had been able to achieve
.irnilar successduring the initial life of Advent. Mr.
Kltiss was unable to explain why Advent had suc;eededin accomplishingresponsesto market needsin
.,dvanceof other companies in the industry. He dis-Llssedthis phenomenonat some length during con.clsationswith the caseresearchers
in his president's
,I'tlce.a room that was bewilderinglyclutteredwith all
., )rt\ of electronic gear.His desk was laden with trade
\Lrrnalsand other papers reporting the current develrnrents in home electronics.Only a few feet fiom his
r;':k was the door that led to the R&D section. which
.i r\ nevel'SeenClosed.
\lr Kloss
Pelhaps
a recentexamplewill highlightwhatI mean.Du
PontCornpany.
whichis reallynotconcerned
with products
.,t all, I rrcan,theirbasicformulations
areraw materials
or
rrocesses
to makeraw materials,
recentlydeveloped
a way
,i makinga materialwhich is simply a processkind of
:ring.Thatwaschromiumdioxide,whichcanbeusedin the
::anuf'acture
of magnetictapeandwhichresultsin a really
,uite importantproduct.But Du Pontstoppedshortvery
r'irlv in theprocess.
They'11
sellyoual1thechromiumdiox:le vor"L
want.But theirinvolvement
with theresultingprod,..-t(Crolyntape)wasabsolutely
nil. A lot of time waslost
.rtil Advent recognizedthe productand did something
They (Du Pont) had no market lbr it at all. And they
..:e extremely grateful to us tbr it now. I really didn't think
., :i_ucompanycould be so pleasantto work with.

THEADVENTPACKET
At thiswriting,we can'tpredictexactlywhatproductis goingto followAdvocateCrolyntape.As you probablyhavenoled by now,we
developproductsin whatmightbe thoughtof as organicstyle,letting eachproductstandon its own.We don'tsit downand decide
to manufacture
a "line"of speakersor amplifiersor tape recorders.
We are intootherthingsat thispoint,and hopethattheywill
be firm enoughto talk aboutsoon"In the meantime,we invite
you to write us at the address below for any informationyou
wouldlike,includinga listof Adventdealers.
lf you like,ask for "The Advent Packe|'That will brrngyou
everything
we haveon allof our products,
andwillalso-unless
you specifyotherwise-put you in jeopardyof gettingfutureinformational
mailingsfrom us.
So much for the first year.
rAdventCorporalion,377 PutnamAve., Cambridge,
Mass.02139.

Casewriter
Are you suggestingthat product innovationis primarily
characterizedby observationthat a need or a market exists
for that product and then going after it, after that specific
product?
Mr. Kktss
Yes. And from the processinnovation,which is a new
way of making sorrething, or some new combination of
things.Often a new processcould havea connectionwith a
new product,but it doesn't tell.
All of oar working hasbeenbackwardsfrom the person.
Otherswork hard to find a physicalphenomenon,or to develop a new bearing, and then work hard to find a market.
This is to work completelyin isolation,with no connection
to the product at all.
Nobody asked at Du Pont, "In what way can this new
processmake a higher quality result?" At the sametime, we
were asking, "In what way can this be used irrespectiveof
presentlyestablishedsystemsof using tape-what arethe limitationsinherentwithin this tapeon its ability to producemusic
for the listener at home?" And we found that it had a distinct
and strong advantage,and this has not even beendone by the
Du Pont people.You know, it's really hard to believe! I'm not
flying to boostAdvent, or knock Du Pont,but their detachment
from this thing in terms of peoplewas absolutelycomplete!
Exemplifying

the kind of reasoning that went on at

Advent prior to a productdecision,Mr. Kloss mentionedthe following incident:

Somebody came around the other day with a way of making
a very high powered amplifier that requires only a very

56

pnnr rwo: DESIGN

oF TEcHNoLocYSTRATEGY
ANDEVoLUTToN
small size and bulk. Any normal amplifier wastesup to half
its power at any one moment in heat loss. There is a way of
making an amplifier, which we've known fbr some time,
that is 97 percent efficient-you waste almost no power in
the amplifier itself. Now since the size of the amplifier is
largely determined by the need to dissipate power, clearly
the size here could be reduced. One has known it can be
done;it's calledClassD circuitry.This sizemight makepossible a whole new class of things; whether we do this in a
year or so is uncertain.But it's a possiblekind of thing,
which we didn't go to invent,and which hasbeenaroundfor
years and years and years, but which might become practical to do, if you do the rest of the things to get all the merit
out of it, such as creating a small power supply and all,
which calls for minor invention on our pafi. We've had a
feeling that exceedingly small kinds of things were worthwhile; when something like this comes up, you notice it
more sharply than somebodyelse, who looks atit only as
just a cheaperway of getting a high-power amplifier.

Formalmarketresearchat AdventCorporationwas
nevermentioned.Mr. Klosshadthefollowingremarks
askedhim aboutit:
to offer whenthe caseresearchers
Mr. Kloss
Oh ! One neverdoesmarketresearch! The only testof the
marketthat therewill everbe is to fully commit to a product
itself; one is nevergoing to make any test marketingor any
asking of anything.And it will be done wheneverit's the
productthat will most certainly,most quickly, give a certain
amountof money here.lt's just a matterof priority of prodncts; one could, within a couple of months' time, make a
noise reduction unit and turn it into a product and sell it.
That had to be done first.
Casewriter
But with all due respect,you must feel that it will go, that
when peopleseeit, they're going to buy it?
Mr. Kloss
Well, yes. But there'sno way of proving this beforeyou
spend the money to produce it, that I know of.
Casewriter
Experience and intuition tell you that it will go?
Mr. Kloss
This is about,yes, all that one has.Experiencethat my intuition hasbeenright givesme a Iittle more confidence,maybe.

THE DOLBYIZED

CASSETTE

RECORDER

Critical to Advent's recovery from unprofitable

devel-

opment operationswas the successfulmanufacture

andmarketingof the Dolbyizedcassetterecorder(AdventTapeDeckM200), describedbriefly in Exhibit 3.
The way theideaof noisereductionrecordingbecame

a productfor Advent, and at just the right time, is indicativeof the wholeAdventinnovationprocess.
Mr. Kloss had notedvery early in the company's
historythatit waspossible,in theory,to do something
like noisereduction.That is, he notedthat at any moment in the recordingprocess,the normal recording
methods from basic information theory resulted in
greatwaste.He notedthat thereoughtto be someway
of continuouslyoptimizingthe recordingtechnique.
However,his investigationstoppedthere.He knew it
was possible,but he did not embarkthen and there
upon a processof invention.Instead,Mr. Kloss becamesensitizedto noticingif somebodyelsehad really done it. A11of the Advent productsbeganin familiar fashion.Mr. Klosscommented,
The things that I have done have never started from
noticing something was important and then working backwards to the fundamental way to do it. You know, "Gee, it
would really be desirableto have instantphotographs,"and
then work hard to do it. I don't know if that's what Land did
or not. But that has neverbeen our particularway of doing
things.A11of the work has been to think about things that
would be desirableto do, and then be continuouslylooking
around to seewhat things are possibleto do, perhapswith
minor invention on our part, which would satisfy a perceived need in the market and begin to define a product.
Only when the need in the marketplacesimultaneously
matchesthe knowledgeof the technologydoes one spend
more than a f'ew minutes thinking about it.
. . . So any product I think of for longer than a f'ew minutes is already one that I know can be made. . . . You want to
constantlyhavein mind, storedwith very short accesstime,
the different technologies.You sort of somehow keep aware
of what kind of things can be done.When severalof these
come togetherto folm a product,that can result in your deciding to make that product.You have to have, at any moment, a moderate-sizednumber of floating possibilitiesof
things that you can do.
But there's a cost to this floating processof having all
these pieces of information available which makes it very
hard to expandto a large group ofpeople.

In 1967,Mr. KlossheardaboutRay Dolby, a man

who had been making professionalnoise reduction
systemsin Englandand wasjust startingto sell them
in theUnitedStates.Thatwasjust at theconclusionof
Mr. Kloss's presidencyat KLH. He negotiatedan
agreementbetweenDolby and KLH for KLH to have
the rightsto incorporatethat systemin a tapedeck.Mr.
Kloss agreedto manufacturethat tape deck for KLH,
to help KLH introducethe Dolby systemto the world.
For many reasons,the product,which was envisionedas a $600reel-to-reelmachinewith Dolby cir-

D I S T I N C T I VTEE C H N O L O G I C ACLO M P E T E N C EA
SN D C A P A B I L I T I E S5 7

EXHIBIT 4

How the Dolby System Works.

Very loud
srgnal
(0 vu)

l\,4oderate
signal
(-20 vu)

Very soft
signal
(-40 vu)

1.The slgnalberngrecordedpassesthroughthe recordDolby

circuittlfsf.The Dolbycircuitoperateson the higher(,,hiss,,)
frequencies
in a predetermined
manner,dependingon their
oudnesslevel.The loudestsignals(Ovu)passunaffected
:hroughthe circuit.Signalsof moderateintensity(_20vu)are
coostedmoderately,
whilethe verysoftsignals(-40vu) receive
-naximumboost.
2 Afterbeingthus"Dolbyized
j,the signalis recordedontothe tape.
: is at thispointthattapehissmakesitsappearance.
you can see
rn the diagramhowthe recordDolbycircuit,s
actionhas madethe
cr,v-level
signallouderthanusual,relativeto the tape hiss.

Juitry,nevergot made.By May 1969,Mr. Klossper_

.onally had suffereda loss of $265,000,largely
:hroughdesignandproducrionproblems.At thattime.
\dvent beganmanufacturing
the Advent loudspeaker
.tr supportfurther developmentwork on the large_
..reen television.Simultaneously,
KLH hadrenegoti_
-:teda manufacturingcontractwith a Japanese
firm,
\akamichi, to build a $250reel_to,reel
machinewith
Dolbycircuitry.Sucha productwason_lineby thefall
: 1969,whenNakamichiofferedKLH a similardeal
:r a cassette
recorderwith Dolby circuitry.Mr. Kloss
::scribedthe eventsthat followed:
Even though KLH had a selling reel_to_reelmachine
tt ith Dolby, they decided not to make the cassettemachine.
Therewere many reasonsfor this; they were having trouble
\\ ith the Nakamichi machine they had, they had had gross
rroublewith my deck, and they had just gotten a new presrJent who was against expansionistmoves. So they just
backedoff the whole thing,just when the right productwas
:here. Advent's contribution to the process was really a
rloating knowledge of the benefits of chromium dioxide

3- On playback,
the signalfromthe tape is passedthroughthe
playbackDolbycircuit,whichis an exact,,mirror_imaqe',
of the
recordDolbycircuit.The playbackDolbylowersthe reviously
f
boostedpartsof the signal,by preciselythe sameamountthey
had been boosted.The tape hiss-which made its appearance
betweenthe recordand playbackhalvesof the DolbySystem_
is automaticallyloweredat the same time by a very iubstantial
amount,effectively
100 db, or 90 percent.At the sametime,
becauseof the precise,,mirror-image',
playbackaction,the
DolbySystemcausesno otherchangein the signalrelativeto
the originalsourcethatwas recorded.

tape, the Dolby circuit, and a manufacturerof headswho

knew about Dolby. It was gathering thesethings together
rnto a product and bringing them to people,sattentionthat
Advent accomplished.

Within hours, before the Nakamichi representatives

had returned to Japan, Mr. Kloss had negotiated an
agreementgranting Advent the productive capacity to
employ Nakamichi heads in an Advent deck. The
Dolby system it uses is described in Exhibit 4. While
the new product received numerous adulations in the
press,by October 1970 Mr. Kloss felt that rhe primary
shift toward central cassetterecording that he had ex_
pected with the marketing of the Advent Tape Deck
was not occurring as fast as he had hoped. He felt that
the primary reasonfor this deficiency was the inherent
difficulty of depending on a dealer orsanization to
push Advent products that incorporatediophisticated
innovations, featuresthat had to be understoodby the
consumer before he made the logical choice of an Advent product. Consequently, he and Mr. pressman

58

pnnr rwo: DESTGN

oF TEcHNoLocySTRATEGY
ANDEVoLUTToN

were spendingconsiderabletime in attemptingto find

a solutionto this problem,the final stepin completing
the innovationof the Dolbyized recorder.
TELEVISION
formal developAlthough Mr. Kloss had suspended
color television
ment work on Advent'slarge-screen
to it
minor
modifications
to
make
he
continued
set,
sets
experimental
available.
Several
time
was
when
problems
Advent
in
the
major
without
functioned
but decisionsremained
plantandhomesof employees,
haveandthe mardesign
the
set
would
asto the exact
Kloss
estimatedthat
used.
Mr.
keting approachto be
for sale
production
would
be
available
models
the first
made,
was
six to nine monthsafterthe "go" decision
"whenever
it's
and that the decisionwould be made
give
quickly,
can
the productthatmostcertainly,most
the right amountof moneyhere."
Describingthe product'sorigins,Klosssaid:
I was vaguely interestedin TV as an important medium.
One readsa magazinearticle that points out a way to make
projectiontelevision,All you had to do was read that article
and seethat it could apply to a screenthis size [fbur and onehalf feet by six f'eetl.And then you quickly ask the question,
Is this worthwhile? You make a guess that it might be
worthwhileilt the right price.

In 1964, Kodak announcedthe developmentof a

increasethe amountof
screenwhich couldeff'ectively
perceivedreflectedlight by a factorof five over ordithat it
This developmentsuggested
nary mat screens.
projection
possible
light
from
a
to
diffuse
might be
tube over aTargerscreenof this type and still retain
satisfactorybrightness.However,Mr. Kloss saidthat
he would havebuilt a high-qualitytelevisionseteven
if the largescreenhad not beenpossible.
Ifthere neverwas a big screen,we'd be in televisionanyway
becauseyou can do a high-quality small set.So our interest
in TV is not restrictedto the big screen,though it's much
more fun becausethere'sno comparisonavailable.

Mr. Klossbelievedhe could discemin color TV the

typicalproductlife cycleof consumerelectronicsproducts working to the advantageof new producerswith
sufficient marketingskill. During the late 1950sand
early 1960s,color TV quality improvedas bugs were
workedout of it, but by 1966short-cutproductionmethodswerereducingoverallquality.Mr. Klossobserved:
NTSC [National Television Standards Committee] standards permit a very high quality to be broadcast which is

usually badly degradedby a set at home. What you seeon a

regular picture is not what you would see on a really high
quality set.

Evaluationof demand,thoughnot verbalized,sugTV was an ingestedto Mr. Kloss that larger-screen

herently desirablething. The evaluationwas not, he
said, an extrapolation of the popularity of larger
screensin ordinarytelevisionsets.Nor could he isolate any one otherfactor which dominatedhis evaluation exceptthat it was the kind of thing he would like
to havein his home.There was no way to extrapolate
sets.He said:
from salesof expensivelarge-screen
There is absolutely no experienceon large-screentelevision
for consumeruse. . . . Yes, I feel that large-screenTV will be
popular but there's no way to prove this until you spendthe
money to produce it, that I know of.
A lot of peoplego to the flicks. The whole businessis to
bring things up close,large,and important.. . . This is doing
that and there's that kind of rightness about it. That's about
the only defenseone has.Itjust doesn'thaveany connection
with televisionas one thinks about it. Once you say television, somebodybrings to mind almost repugnantkinds of
images.They don't do it for books though.You talk about
books and they think about great books and the University
of Chicago,and this kind of thing. They don't think about
the kinds of things they sell down on Washington Street.
. . . And for big screens,there'sno expresseddesirefor
anybodyto want a big screen.. . .
Exactly what's happening out in the store, where people
are expressingwhat they want, sureI get someinformation
on that from somebodyelse.But this sort of shapesthe end
features of products. People are not out there expressing a
new kind of thing that they would Iike to have-a compacter
for kitchen garbage:I've never heard anybody say that they
ever wanted something like this. I think maybe some people
do; we'll see. . . . The kinds of productsthat peoplemight
want are not limited to what people have said they want or
what people, when you knock on their door, say that they
will want. In the first case,it's too late if peopleexpressthe
desire for what they want. In the second case, the answers
are invalid when you ask about it.
Development

Shortly after organizingAdvent Corporationin May

196l,Ml Klossbeganworking on the televisionset.
Thoughhe wasconfidentthat the idea wastechnically
feasible, there were many questionsyet to be answeredregardingdesign.For example:
The way of finishing mirrors at a very low cost-it's been
usedin the eyeglassindustry;it's not usedin making lenses;
it's not used in telescopicwork. But the technology to make
verv low cost kinds of mirrors exists in the trade. And we

D I S T I N C T I VTEE C H N O L O G I C ACLO M P E T E N C EA
SN D C A P A B I T I T I E S5 9

EXHIBIT 5

ProjectionTelevisionTube.

Projected
image

Sphericalcorrectorlens

sort of know that technologyis there and go and use it. If it

had required oLrrfincling a very low cost way of making a
lens which hadn't beendevelopedyet, I woLrldhavecut out
fiom any of our considerationthe making of a low-costprojection television.. . . It maybewould havebeena very iir,ritful investigation,but it would havebeenthe kinclof thing for
which you couldn't be absolutelyccrtain of finding an answer.We've alwaysavoidedthe kind of investigationwhere
the answerhad somereasonablechanceof being negative.
The major cost in operating the Advent large\.reen TV was expected to be cathode-ray tube rerlacement. Phosphor life (and therefbre tube life) was

i\pected to lie between 700 to 2,500 playing hours.

The projection tube had been used in some of the ear,iesttelevisionsets,but the large screendesiredwould
rut new demandson it fbr maximizing total light out:ut. Thus, an RCA commercialprojectionsystemwith
::le mirror and corrector lens outside the tube was re':cted as too inefficient
and troublesome.
Rights to produce the Kodak screenhad been given
. r Advent with no guaranteeof the practicality of do:ig so in a large size. It was concave toward the audi:1.e and leanedforward slightly. These two factors re- lired that the screen extend about a foot out from a
: ,rmal wall. Brightness fell off rapidly as the viewer
-.oved about
70' off an axis perpendicular to the
'-:e en. While satisfactory viewing required the room
be no brighter than would be required to read a
- r'.\ spaperwith
strain, a bright light could be situated
. rhe side of the screen without seriously degrading
-.: image. Mr.
Kloss believed the Kodak screen was
: best presently available, but hoped to develop a
:- 'prietary flat screen which could be patented. It
uld be composed of many elements which would
---h direct light in the optical direction.

In a conventional color receiver,the electronics assembly feeds information to a single picture tube
which contains three electron guns. The Advent system was based on similar electronic circuitry, but the
video image was projected on the screenby three separate cathode-ray tubes, one each for the red, green,
and blue color constituents.The Advent tube is diagramed in Exhibit 5. Within each tube, a stream of
electrons of varying intensity was beamed toward the
positively charged internal anode,coated with a phosphor that generatedone of the three colors to be projected. This beam was accelerated,focused, and deflectedin a rapid horizontalscanof l5', with the U.S.
standard 525 sweeps for each vertical transit. This
stream of electrons hitting the anode recreated the
transmitted picture for that color. The internal spherical mirror reflected this image and focused it through
the corrector lens on the external screen where the
three colors were superimposed.
Tests of experimental models had shown that this
system, based on three projection tubes with internal
optics, could produce large images of amazingly high
quality. Internal optics (mirror and corrector lens
within the tube) were superiorto external optics which
required exact positioning of mirrors, greater light
wastage,and attendantproblems in keeping the optics
clean. Internal optics had been used by the U.S. Navy
many years previously and were not patentable.Mr.
Kloss commented,"We may very well have been in error in the past in not getting some nominal patents to
make it easier to sit down with somebody and sell
some of this technology." He did not feel that protection was the primary value in patents "becausethe reluctance of manufacturersto get into any new field is
really quite surprising. It's unfamiliar, sort of strange;

60

pnnrrwo: DESTGN
ANDEVoLUTToN
oFTEcHNoLocysTRATEGv

they would like to buy it. We wouldn't mind, but it's

for someoneelse."
alwaysa messto do manufacturing
Competition
There were no large-screenTV sets on the market
which would competedirectly with the Advent set in
the homemarket.The Eidophoresystem,developedin
Switzerlandin the early 1950s,usedan electronbeam
physicallyto changethe surfaceof an oil film. A light
projectedthroughthisfilm andontoa screenprovided
a muchbrighterandlargerpicture.The Eidophoreset,
however,requiredan operatingtechnicianand cost
about 1i40,000for a monochromeversion and over
$100,000for color.GeneralElectrichad produceda
modifiedversionwhich wasmoreeasilyoperatedand
cost about $29,000in monochromeand $38,000in
color. Peoplewho had seenthis set r6portedto Mr.
Kloss that its brightnessand resolutionwere inferior
to Advent's,thoughhe f'eltthartimprovementmightbe
obttiinedby usinga highergain screen.
in tradejournals
Verylittle ofthe currentdiscussion
about future trends in television centeredon large
More wasaimedat miniaturizedTV or at descreens.
velopmentof a flat screenwhich couldbe installedin
a wall. Mr. Kloss commentedthert"theremight be a
messagethere.You talk aboutdesirablethingsof the
future;nobodytalks erboutlargerscreentelevisionat
an
all." During 1968,SonyCorporationdemonstrated
experimentalset which was flat and large(eightfeet
diagonally).This setwasessentiallya boardof 26,000
elementsof one red, one blue, and one green light
each.This comparedwith 350,000elementsof phosphorin thetypicalshadowmasktubeandresultedin a
pictureof noticeablypoorresolution.The problemsto
thesizeof individuallights
be solvedwereto decrease
and obtainmore rapid switchingof the lights.While
work remainedbeforethis
manyyearsof development
set could be competitive,Mr. Kloss felt that the ultimate and best TV of the future would in someway
generatelight on the screenitself.
Althoughprojectiontelevisionwaswell recognized
in theindustryasa meansof obtainingbotha largeand
flat screen,the immediateobjectionwas that it could
not be madebright enoughfor viewing in a lighted
room. Severallargecompanieshad experimentedwith
it, nonetheless.
Mr. Klossdescribedone sucheffort in
explainingwhy the large manufacturerswere unlikely
to providecompetitionsoonafterhe beganproduction.
A large military and consumerelectronicsfirm had
shownhim a cathode-raytube underdevelopmentfor
projectionuse.A configurationof opticsvery similarto

Advent's had beenadopted,but a maximum falloff in

at theedgesofthe screenof 10percentto 20
brightness
percenthad beenspecifiedby someone.Conventional
knowledgeof humaneyesensitivitywould suggestthat
humanswould be insensitiveto falloffs of 200 percent
to 300percent.However,this errorcausedengineersto
designan asphericalcorrectorlens which would disperselight nearlyperfectlyon the screenandcostmany
thousands of dollars. Similar mistakes eventually
causedthe systemto reacha height of nearly six feet
and to require a sealedrefrigerationunit for cooling.
RCA hadestimatedabouta yearearlierthatit could develop a large-screenTV within severalyearsfor from
$5 million to $50 million (theexactfigurewasnot recalled).Mr. Kloss believedthat a radicallyimproved
systemcouldnot be designedandbuilt within 5 years
andmorelikely 10 years.Competitiveprojectionsystemswould probablyrequiretwo yearsminimum after
the Advent setwas introduced.
Production and Gosts
Productionwasexpectedto be carriedout in Advent's
plant.Receiverunitswerethe
new64,000-square-foot
sameasthoserequiredin ordinarysetsexceptthatless
dedeflectionpowerwasneededdueto the decreased
flectionangle.No decisionhadyet beenmadewhether
to make or buy the receiverunits. Projectiontubes
were expectedto cost about$50 eachproducedon a
Some
smallscaleandinvolvedno unusualtechnology.
produce
purchased
to
test
been
equipmenthadalready
probably
to
reduced
be
models.The cost could
$100
for a setof threetubeson an automatedline. Production of the screeninvolvedhandworkto sketchand
mold a thin aluminumfoil, apply backing,and constructa frame and stand.
line.
Mr. Klossdid not envisiona highly automated
Acoustics
He believedfrom experienceat KLH and
Research
thatcostpenaltieswould be only 10 percent
to 20 percentif as few as 100 setsa week were prowerepricedthe sameto
duced.Electroniccomponents
all buyersif orderedin quantitiesover approximately
1,000,and the inflexibility andhigh fixed costsof an
automatedline would prevent great economiesof
for 100setsper
scale.Toolingcostsfor a line adequate
"many
tens of thousandsof dollars."
week would be
Productioncostswereexpectedto be similarto those
for other Advent products,with direct labor costing
about one half as much as materials.Mr. Kloss believed that production costs of shadow mask tubes
were about$100 and far outweighedcabinetand recosts.
ceivingequipment

D I S T I N C T I VTEE C H N O L O G I C ACLO M P E T E N C EA
SN D C A P A B

Concessions were made to simplify design, and

production of the Advent set included replacementof
electrostaticfocusing with the less common and more
expensive static magnetic focusing. This decision
would result in a selling price about $200 higher than
it would otherwise be. Similar concessionswere expected in screendesign.
Distribution and Marketing
Mr. Kloss believed that most of the expectedtechnical
problems which could become customer complaints
had been effectively ironed out of the TV design. He
t'elt that salespersonnelcould causecomplaints, however, by creating or allowing unreasonableexpectations. He said that "the expectedkinds of troubles are
Ihat we just haven't anticipated sorqebody's attitude
toward this or his expectations.This comesfrom rather
recent learning in noise reduction systemswhere you
iravc a difficult time explaining to someone."
Although the set would eventually be designedfbr
installation by the customer, the first installations
i r o r r l dl e q r r i r ca t c c h n i c i a n :
It will beexactlyequivalent
to whattheearlycolorsetshiid
rvithtechnicians
runningaround.. . . The wholethingwas
rnechanically
liagile and fussy.. . . The beginningof any
newkind of thingis troublesome.
Youcan'teventell how
voufinallywantto nakc it r-rntil
yor-r
go throughthrsmanu1lctr.rring
process.
Retail price had originally been estimatedat lBl,500
ro 52,000, but had been revised upward to $2,000 to
:1.500 basedupon estimatedcostsand normal rnargins.
Mr. Kloss expectedto engagein enoughadvertising
.tr iclentifythe prodr,rctin consumerminds as reason-'hlv priced and to lock in a portion of the market. The
,)nly schemehe had which might help lock in the con.unrer was to give the product a simple name and then
r()t changeit. He would "never engagein what might
rreinlerpretedas an annual model change."He felt that
.ri\ strategy had given KLH an advantageover other
-on.)llanieswhich introduced new products and conse,:uentlydestroyedtheir equity in the name.
Mr. Pressman,marketing vice president of Advent,
-.riclhe had purposely avoided having his attention di,:rted by the TV, which was still at least several
:rLrnthsfrom introductions. He did f'eel that video
::'oducts were exciting and had a greater long-range
..'.rtentialfor Advent than audio
did. He thought, as
,.:ll. that 5,000 unit sales a year soundedpossible.
lnough attempts by other video product manufactur::-r to distribute through audio dealershad proven un-

ICS 6I

successful,
he hadnot eliminatedthepossibilityof trying it again.No opinionsregardingadvertisingand
promotionalstrategies
hadbeenformed.
When the Advent large-screen
televisionwas conceived,Mr. Kloss envisionedits usein the home as a
high-qualitydisplay medium and believedthat the increasingquantityof broadcastmaterialswould lead to
proportionallyincreasedquality programsfor which a
large screenwould be preferred.Mdeo taperecording
unitsbeingbroughtout by severalmanufacturers
would
permit quality programsto be recordedor purchased,
which might encouragemoreintensiveviewing of programsat convenienttimeson a unit like theAdventTV.
However,recorderswould haveto havesufficientcapability to reproducemost of the informationcontentof
the signalbroadcastso that playbackon a largescreen
would be of adequatequality.Mr. Kloss had no immediateplansto producecomplementaryproductsexcept
theimprovedscreen,thoughhe did wish to broadenAdvent'sproductline overthelong term.
The possibilityof sellingthe televisionset to anothercompanywasnot considered:
If a productthat I developedand sold to somebodyelsedid
not succeed,I would be free to blarnesomebodyelse.And
that's an unsatislactoryposition.I haveto havethe complete
responsibility.I really, honestly wouldn't know whether it
was their fault or r-nine;so I have no way of knowing
whetherI've doneanythingworthwhile or not if I don't have
completeknowledgeof the total process.So to me it would
be very unsatisfactoryto invent things and sell them to
somebody.If they continLrallyand regulally were successful, I'd, after a period of tiIrre,be satisfied. . . with my contribution.This probablywouldn'thappen.

THE FUTURE

Despite several problems with Advent that were apparent in late 1970, the company's future promised to
be an exciting one. Mr. Kloss especially looked forward toward making the decisions necessaryto reach
his statedsalesgoal, a level of saleswhich he felt confident of reaching. Specifically, Mr. Kloss felt that a
$50 million sales level could be reached within the
$2.25 billion audio equipmentmarket and the $2.5 billion television market, without sacrificing Advent's
policy of operating within a specializedand protected
market niche. Beyond that point, however, it was uncertain whether such a position could be maintained.
Mr. Kloss commented:
If onegrowsin anestablished
marketarea,thentherecanbe
a succession
of products
thatarebasedon a carefulandsen-

62

pnnr rwo: DESTGN

ANDEVoLUTToN
oF TEcHNoLocysTRATEGv
sitive reading of what people in the marketplaceexpressthat
they want, and what competent engineering can produce,
and this may well be an important part of Advent's future. . . . I've no objection to growing in the regular kind of
way, and that's the kind of thing that can be happily delegated to somebody else. In fact, to delegateenough of that
to make a strong, growing company, and yet continue in the
company, would be highly desirable. How strong you have
to be before you can have the luxury of doing "me too"
kinds of products, though, I don't know.
I think a perfectly honorable way is to continue to grow
making products which, on the strength of the market position, are salable.. . . Up until now one has restrictedone's
attention to things which are fundamentally better and different than anything else. But there is nothing wrong with
growing doing ordinary kinds of products.. . . The idea of
making products which continually add to the volume of
Advent may well be completelydone by solReoneelse.I'd
be happy to have that done. That would leave me lncreasingly free to think longer about things which were different
in kind, new kinds ofproducts.
There's an ideological inclination to want to make
kinds ofproducts.The interestis to get back
broad-spectrum
to whereone was at KLH. The cassetterecorderwith Dolby,
I envisionthat as not nearly as broad-spectrumat the present time as it was plannedto be. All the ploductsthat would
grow out of the fact of the cassettebeing the primary music
listeningmedium for a lot of peoplein the home, this isn't
happeningso fast.

One issueof greatconcernto Mr. Kloss was the institutionalizationof the Advent innovationprocess.On
the onehand,Mr. Klossfelt it would be possibleto find
a full-time administratorwho could work closelywith
him in handlingthe company'sgrowing management
responsibilities,while he could continueto devotehis
major effortsto the very enjoyablework of conceiving
newproductsandstayingabreastof consumerelectronics technology.On the otherhand,Mr. Klossfelt that it
was possibleto institutionalizethe productconception
function,but he wasunsurehow bestto proceed.In the
cuffentsituation,he personallyperceivedmarketneeds,
was able to match thoseneedswith the technological
stateof the afi, and was further capableof completing
theproductconceptionthatfulfilled themarket-technology match.As thecompanygrew,Mr. Klossrecognized
that somedivisionof thesefunctionswould haveto take
place.Shouldhe separatethe moreroutineR&D functionsfrom the esoteric,or shouldhe attemptto pool the
effortsof a largenumberof peoplein orderto anive at
an effectiveproductconceptionfunction?In late 1970,
Mr. Klosscouldnot seehow the latterplanmight work.
Concerninghis role as Advent grew, Mr. Kloss
mentionedhis admirationfor the situation Edwin

Land was reputedto haveat Polaroid,namely,the situationof readyaccessto anylevelof R&D. Mr. Kloss
commented:"To contributeto it or directit without interferingwith its normalprocess.That to me is a really
very desirablekind of thing.And it can't frequentlybe
achieved."Mr. Klossfelt that he might be on the way
towardsucha situationalready,towardan Advent that
but to
could carry on, increasinga bit in his absence,
which he could contributesubstantiallv.

h{*l;''l
iru{st
tr*l}ffit3r'}#ifllr'**ii*ff'r
{}*lrffi*r*{lr
il$f**l*Int;
Alan R. Fusfeld
Every executive knows of cotporate successesin which
technology has played a dominant role. Almost everyone in venture capital and entrepreneurship has a perto emulate.Dreams of techsonallist of thesesuccesses
nology turned to profit are nuftured by real-life
success-Intel Corporation, Minnesota Mining and
Manufacturing (3M), Polaroid, Hewlett-Packard, and
Digital Equipment Corporation, to name a f'ew of many.
Despite the obvious role of technology in superlatively successfulenterprises,technologicalissuesonly
occasionallyare included explicitly in typical corporate
strategy reviews, and only rarely are they among the
regular inputs to corporate planning and development.
TECHNOLOGY THE UNDERUTILIZED INPUT
TO PLANNING
Most executiveshave limited managementexperience
with technology. They see researchand development
as a black box: money and manpower resources are
put in, but what should come out? How should these
resourcesbe directed and managed?And what should
be the characteristicdelays, successrates, and managerial control variables? General business management lacks an intuitive feel for strategically directing
and positioning research and development investments as compared with similar investments in marketing, sales, and manufacturing. The result is that
technology issues tend to be downgraded in overall

Reprinted with permission fromTechnology Review,MIT, Alumni Association,copyright O 1978.Al1 rights reserved.