PMC-Sierra: Riding the Waves of Disruption (B)

PMC-Sierra: Riding the Waves of Disruption (B)

By
Yossi Feinberg, Debra Schifrin, Derek Dicker
2019|Case No.SM272B| Length 3 pgs.

The (B) case starts with PMC-Sierra’s decision to acquire for $100 million a solid state drive controller business, which included a prototype and a team of 50 people. The company also acquired intellectual property required to build PCIe switches—a related product family that was newer and cutting edge, but riskier to develop. After the acquisition, PMC-Sierra created a new, isolated business, the Non-Volatile Memory Solutions Group (NSG), and protected NSG’s resources. To encourage rapid decision making, PMC-Sierra rolled marketing, R&D, and technical support under NSG’s leader. NSG was indeed able to move quickly to produce a new product. At the same time, carving out this dedicated business meant that PMC-Sierra lost some efficiencies in the company as a whole. The acquisition and formation of NSG also put some burden on other parts of PMC-Sierra, as NSG required dedicated attention and resources during its start-up phase. A few months after the acquisition, PMC-Sierra leadership shut down the existing internal group working on the solid state drive controller, because the company had two teams and two sets of products. This proved to be one of the company’s biggest tradeoffs—and an unpopular decision. Along with that decision, the company opted to develop the newer, riskier product that it had acquired the intellectual property for, PCIe switches.

Also see:  SM272A: PMC-Sierra: Riding the Waves of Disruption (A)

Learning Objective

The two teaching goals are for students to: 1) evaluate the strengths and weaknesses of different corporate entrepreneurship strategies; and 2) explore how companies can respond to, and try to get ahead of, industry disruptions. More broadly, students should discuss how internal new ventures create benefits for the larger organization—but may also pose threats to it. Conversely, the larger organization provides key assets to new ventures, but also brings liabilities to it.

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