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Case: PERFORMANCE INDICATOR (HBS# 9-702-480)

PI developed a technology that incorporates a chemical compound into golf balls that causes them to turn gray if submerged in water for an extended period, allowing players to identify compromised balls. This increases the market for new golf balls by $1 billion by removing degraded used balls. However, the technology's full benefits will only be realized if all golf ball manufacturers adopt it, otherwise early adopters may face negative customer perception from buyers only seeing their gray balls while competitors' balls appear intact. The technology ultimately helps the entire industry by reducing the supply of used balls and ensuring golfers use balls with consistent performance.

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Andrew Choi
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527 views1 page

Case: PERFORMANCE INDICATOR (HBS# 9-702-480)

PI developed a technology that incorporates a chemical compound into golf balls that causes them to turn gray if submerged in water for an extended period, allowing players to identify compromised balls. This increases the market for new golf balls by $1 billion by removing degraded used balls. However, the technology's full benefits will only be realized if all golf ball manufacturers adopt it, otherwise early adopters may face negative customer perception from buyers only seeing their gray balls while competitors' balls appear intact. The technology ultimately helps the entire industry by reducing the supply of used balls and ensuring golfers use balls with consistent performance.

Uploaded by

Andrew Choi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Andrew Choi

UCLA ID: 005264222


Case: PERFORMANCE INDICATOR (HBS# 9-702-480)

OPM #1: Assess PI’s value proposition. How much value is created by PI’s entry? How is this
value distributed?

Performance Indicator (PI) developed a proprietary technology that would revolutionize


the used golf ball market. By incorporating a chemical compound in the gold ball production
process, golf ball manufacturers have created golf balls that can detect when golf balls have
been submerged in water for an extended period of time by turning gray. This breakthrough
technology allows players to know when a golf ball’s performance hasn’t been compromised
and prevents used golf ball companies from selling compromised balls. The cost of raw
materials for this technology is estimated at one tenth of one cent per ball. For an item is
ordinarily a high margin item, this makes it very easy to implement.

The used golf market has evolved over the decades. Comparing estimates from multiple
sources, PI found that around 50 million dozen golf balls were produced every year. However, up
to more than four times the number of new dozen golf balls were lost annually. Estimates range
from 150 to 220 million dozen. Golfers tend to pick up lost golf balls throughout the course and
divers recover golf balls from water hazards. The water hazards in a single golf course can
contain up to 100,000 golf balls per year. Osinski and Winskowicz used very conservative
estimates to find that at least 50 million dozen golf balls are recovered from water hazards
annually. With new golf balls priced at around $20 a dozen, PI’s technology would increase the
new golf ball market by at least an additional $1 billion.

The value of PI in the entire used golf ball market is revolutionary. However, unless every
single golf ball brand adopts PI’s technology, early adopters will be the ones that get hurt from
customer perception. The technology helps golfers distinguish between fully intact golf balls
with degraded golf balls. Golfers will only see the early adopting brands with gray balls which
represent golf balls with degraded performance while competitor brands will be fully intact
since those don’t contain the same technology. This negative perception may actually hurt the
brand’s attempt to help golfers bring their “A” game to the course. This technology’s synergies
help the entire golf ball market by decreasing the supply of used golf balls and removing
performance degraded golf balls. This leads to an increase in new golf ball production which
improves revenue for golf ball manufacturers and offers golfers well-performing golf balls
instead of golf balls with hidden flaws. However, every company must be onboard to implement
so that every brand benefits. As the durability of golf balls is high, the high quality of today’s golf
balls is actually cannibalizing new golf ball sales.

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