Odi

Optical Distortion, Inc.

This case was prepared by Randall Wise and Darral G. Clarke.

Copyright ® 1982 by the President and Fellows of Harvard College. Harvard Business School Case 9-575-072.

ODI is a very small company seeking to introduce a radically new product that may be a viable substitute for current practice in an agricultural market. The product is contact lenses for chickens, and it is hard to imagine a more unique product concept for which to develop a business plan. The decision model that accompanies the case is a heuristic model relating marketing effort to market response. The model is developed from managerial judgment and available secondary data. No expensive research is undertaken, yet this preliminary decision model proves to be quite useful for planning an entry strategy and defining future research needs. It also illustrates the development of a preliminary decision model, which is an important part in our analytical process.

In late fall of 1974, Daniel Garrison, president and chief executive officer of Optical Distortion, Inc. (ODI), asked Ronald Olson, marketing vice president, to develop a marketing plan for ODI's new and only product - a contact lens for chickens. While human contact lenses serve mainly to improve eyesight, the lens developed by ODI was made to partially blind the chickens. Garrison explained:

Like so many other great discoveries, our product concept was discovered quite by accident. In 1962 a chicken farmer in Arizona had a flock of chickens that developed a severe cataract problem. When he became aware of the problem, he separated the afflicted birds from the rest of the flock and subsequently observed that the afflicted birds seemed to eat less and were much easier to handle. So dramatic was the difference that a poultry medical detail-man visiting the farm, rather than being asked for a cure, was asked if there was any way to similarly afflict the rest of the flock. It has not proved possible chemically or genetically to duplicate the chickens reduced vision resulting from the cataracts, but a chicken wearing the ODI lenses has its vision reduced enough to obtain the good behavior the Arizona farmer observed. This behavior has important economic implications for the chicken farmer.

By the end of 1974, the ODI lens had been tested on a number of farms in California and Oregon with satisfactory results, and Garrison was convinced that "the time has come to stop worrying about the product and get this show off the ground." While his timetable was tentative, he hoped that the ODI lens could be introduced in at least one region during spring of 1975, and that national distribution would be achieved by the end of 1977 at the latest. As he explained:

"Our patent and license protection should hold off competition for at least three years, but - if we have the success I believe we will - I would expect the large agricultural supply firms to find a way around our patent by the late 1970s. By 1980, I would expect the big boys to have come in, and the competition to be fierce. It we are to gain the fruits of our development work, we will have to be strong enough to fight them on their own terms. To do this, we will have to be a multi-product, multi-market company that can provide effective service anywhere in the country."

Company Background

The ODI lens had been invented in 1965 by Robert D. Garrison, Daniel Garrison's father - working with Ronald Olson, the owner of a large chicken farm in Oregon. Robert Garrison conceptualized and designed the original product, and he had then worked with Olson to test and refine the lenses on Olson's chicken farm. In 1966 their efforts attracted the attention of James Arnold, a local businessman who invested approximately $ 5,000 in the venture. By late 1966 the three men had formed a corporation to exploit Garrison's invention.

Further testing of the lens on Olson's chicken farm during 1967, however, had identified several technical difficulties with the product. In particular, the early prototypes did not always remain in the chickens' eyes after insertion, and they frequently caused severe irritation in the last months of the chicken's 12-month laying life. Both problems were quite serious because, as Daniel Garrison explained, "No farmer is going to spend time looking into the eyes of his chickens to make sure the lenses are still there and the eyes are not bloodshot."

By 1968 ODI had solved the retention problem by modifying the size of the lens, and the company was issued a U.S. patent on the lens in December 1969. ODI found that the irritation problem could be essentially eliminated by making the lenses of a soft plastic called a hydrophilic polymer The patents for this polymer, the same material used by Bausch and Lomb to produce soft contact lenses for human use, were controlled by New World Plastics, Baltimore, Maryland. New World's hydrophilic polymer could not be injection molded, however, and manufacturing costs using alternative production processes were far too high for the chicken market. Since New World's hydrophilic polymer was the only such material known at the time, ODI had reached an impasse and the company became dormant.

In 1973 Robert Garrison asked his son Daniel Garrison, a student at the Harvard Business School, to contact the World Plastics and see if any progress had been made in the hydrophilic polymer. Daniel Garrison found that the hydrophilic polymer could now be injection molded and he became enthusiastic about the product's potential. With the approval of the owners, Daniel Garrison obtained a long-term license from New World for the exclusive use of hydrophilic polymer for nonhuman applications.

Under the terms of the license, New World agreed not to produce the polymer for other firms seeking nonhuman markets, nor to carry out development work on related polymers for such firms. ODI, in turn, agreed to pay New World $50,000 ($25,000 per year for the first two years), and to purchase its lenses exclusively from New World. New World would manufacture the lenses and sell them to ODI at a price of $0.032 per pair (in bulk), regardless of quantity. ODI was to supply New World with injection molds (at a cost of $12,000 each). Each injection mold had an annual capacity of 7.2 million pair, and an expected life of 15 million pairs.

During the negotiations with New World Plastics, Daniel Garrison purchased 25% of the stock of ODI from the previous owners and was elected president and chief executive officer of the firm. Having completed the license agreement with New World, he was able to raise $200,000