978-1259278211 Case 8 Solution Manual Part 1

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Teaching Note: Case 8 – Dippin’ Dots: Is the Future Frozen?

Case Objectives

1. To discuss the decisions and actions that a firm has to undertake to sustain a competitive

advantage.

2. To understand the importance of managing innovation, especially when pursing an

See the table below to determine where to use this case:

NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The

Chapter Use Key Concepts Additional Readings or

Exercises

PRIMARY

Strategy

Generic strategies NOTE – see additional

8: Entrepreneurial

Entrepreneurship; opportunity

NOTE – see additional

12: Managing

Innovation; scope of innovation;

SECONDARY

2: External

Environment

External environmental forces; five

3: Internal Analysis Value chain; tangible vs. intangible

6: Corporate-Level

Diversification; synergy; core

9: Strategic Control Informational vs. behavioral control

Case Synopsis

Dippin’ Dots was a specialty ice-ceam company headquartered in Paducah, Kentucky. In 1998,

Dippin’ Dots founder Curt Jones had patented his idea to flash freeze liquid cream and sell the

The frozen dairy industry had been occupied by family-owned businesses like Dippin’ Dots, full-

line dairies, and a couple of big international companies that focused on only one sales region.

But by 2009, Dippin’ Dots faced bankruptcy due to increased competition from companies such

as Cold Stone Creamery in the “scoop shop” ice cream market, from direct competitors

MolliCoolz and Ittibitz whose product was available in the grocery freezer, as well as from

knock-offs like Mini Melts in vending machines. With such fierce competition, Dippin’ Dots

needed to adapt to customers‘ changing needs and invest in product and service inovation to

Teaching Plan

This short case is a good one to use to illustrate the competitive environment of companies

pursuing entrepreneurship and innovation. The Dippin’ Dots case can also be used to discuss

ICEBREAKER

This case can start with an icebreaker. Starting from the perspective of a customer may make it

easier for students to transition to a strategic analysis.

How many of you have tried Dippin’ Dots? Or Mini-Melts, Ittibitz, MolliCoolz?

What do you think of this product?

If students are confused about the product, show one of these brief videos, produced by different

customer segments (military personnel in Kuwait, and senior citizens at an ice cream social):

Here is a one minute video showing the operation of a Dippin Dots vending machine in Kuwait,

on a military base:

http://www.youtube.com/watch?v=8ZTxd_24Alg&mode=related&search=ice%20cream

%20contest%20competition%20fun%20humor%20lol%20animation%20Packy%20Dippin

%20Dots%20cool%20funny%20hip%20awesome%20rad%20future

And here’s a two minute video of a 2007 ice cream social event in Dippin’ Dots’ hometown

Paducah, KY featuring a brief appearance by Curt Jones:

http://www.youtube.com/watch?v=iVrSz2LVeEw&NR=1

Or visit the Dippin Dots website:

http://www.dippindots.com/

Some students may have encountered similar products, Ittibitz or MolliCoolz, in their local

grocery freezers. Others may have seen Mini-Melt or Dippin’ Dots vending machines on campus

Summary of Discussion Questions

Here is a list of the suggested discussion questions. You can decide which questions to assign,

and also which additional readings or exercises to include to augment each discussion. Refer

Discussion Questions:

1. PRIMARY QUESTIONS: What is Dippin’ Dots’ competitive strategy?

2. What role did entrepreneurial strategy and the management of innovation play in

establishing Dippin’ Dots’ initial competitive edge?

3. SECONDARY QUESTIONS: What elements in the external environment might affect

Dippin’ Dots’ strategy?

4. What internal resources does Dippin’ Dots have that might help it support its competitive

strategy? What challenges remain?

Discussion Questions and Responses

1. What is Dippin’ Dots’ competitive strategy?

Referencing Chapter 5: Business-Level Strategy

How firms compete with each other and how they attain and sustain competitive advantages go

to the heart of strategic management. In short, the key issue becomes: why do some firms

outperform others and enjoy such advantages over time? The viability of a firm’s success is

A business-level strategy is a strategy designed for firm or a division of the firm that competes

within a single business. Within the firm’s industry environment generic strategies include basic

advantage:

●Overall cost leadership

oLow-cost-position relative to a firm’s peers

●Differentiation

oCreate products and/or services that are unique and valued

●Focus strategy

oNarrow product lines, buyer segments, or targeted geographic markets

Generic strategies are plotted on two dimensions: competitive advantage and strategic target. The

Both casual observation and research supports the notion that firms that identify with one or

more of the forms of competitive advantage outperform those that do not. In order to achieve a

sustainable competitive advantage, Dippin’ Dots has to assess its ability to contend with other

Cost Leadership: This is perhaps not a good strategy for Dippin’ Dots at this point since it is still

Differentiation: The challenge of differentiation is to create a product that is perceived industry

wide as being unique and valued by customers so much so that they will seek it out if not readily

available. Dippin’ Dots must work to link its value chain processes, for instance integrating

Focus: Dippin’ Dots had so far chosen to market to the out-of-home market, but industry giants

Other options firms sometimes pursue include:

Combination of Differentiation and Cost Leadership, Combination of Focus and Cost

Leadership, Combination of Differentiation and Focus: Although initially best suited for a

Stuck in the Middle? Dippin’ Dots must be careful to choose a strategy that will fit with its

NOTE – ADDITIONAL READING, EMBEDDED VIDEO STORIES:

Here is an interview with founder Curt Jones in 2006:

http://www.msnbc.msn.com/id/14001806/

Jones is trying to reinvent Dippin’ Dots in 2009 with the coffee product. See the story here:

http://www.usatoday.com/money/companies/management/entre/2009-05-10-dippin-dots_N.htm?

csp=34

Here is a video from the Food Network showing how the product is made in the Kentucky

facility. Note how the LOW temperature is critical to the process:

Further news on the production facility comes from January 2013 as the new owners invest in the

Regarding the various customer groups who might be interested in Dippin’ Dots, here is

a two minute video of a 2007 ice cream social event in Paducah, KY featuring a brief appearance

by Curt Jones:

http://www.youtube.com/watch?v=iVrSz2LVeEw&NR=1

Here is a one minute video showing the operation of a Dippin Dots vending machine in Kuwait,

on a military base:

http://www.youtube.com/watch?v=8ZTxd_24Alg&mode=related&search=ice%20cream

Visit the Dippin Dots website:

http://www.dippindots.com/

Which demographic group does this seem aimed at? Does it seem to be consistent with previous

marketing promotions?

Here is commentary on the popularity of ice cream, and its long-term prospects as a market

commodity:

http://www.nytimes.com/2006/07/26/dining/26cream.html?

ex=1182916800&en=501180740dd57a44&ei=5070

And on the category of frozen specialty treats:

http://www.nytimes.com/2006/10/26/business/26sbiz.html?

ex=1319515200&en=5f77555844021708&ei=5088&partner=rssnyt&emc=rss

Read this article from 2008 describing the state of the ice cream industry. Dippin’ Dots is

mentioned as the originator of the cryogenically frozen ice cream pellet dessert, but competitors

Mini-Melts, MolliCoolz and Ittibitz have gained strength. In 2007 MolliCoolz broke down the

And an article from 2011 details the competition for Dippin’ Dots then new coffee product:

http://www.nytimes.com/2011/07/20/dining/in-the-lab-with-the-ice-cream-makers.html?

pagewanted=all&_r=0

IttiBitz markets itself as different from competitors “because you can serve, store and ship it like

regular ice cream. While other products require special handling and freezing at -40ºF, IttiBitz

To illustrate how this process is not that unique, see this video of how to make dippin’ dots

yourself, as long as you have access to liquid nitrogen and the right equipment (styrofoam

In 2013 there was another new product from Dippin’ Dots: the vanilla and chocolate YoDots line,

which “is made with nonfat yogurt and has only 70 calories per three-ounce pack.” This was

Dippin’ Dots promotes itself as the “ice cream of the future”, but doesn’t seem to have changed

2. What role did entrepreneurial strategy and the management of innovation play in

establishing Dippin’ Dots’ initial competitive edge?

Referencing Chapter 8: Entrepreneurial Strategy and Competitive Dynamics

Entrepreneurship involves the creation of new value by an existing organization or new venture

that involves the assumption of risk. New value can be created in start-up ventures, major

For an entrepreneurial venture to create new value, three factors must be present—an

entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur or

Entrepreneurs need to understand the concept of opportunity recognition: the process of

discovering and evaluating changes in the business environment, such as a new technology,

socio-cultural trends, or shifts in consumer demand, that can be exploited. Good entrepreneurial

Dippin’ Dots had been in business for 23 years as of 2011, the year it filed for bankruptcy, and

had had some success, growing into a multimillion-dollar company with authorized dealers

operating in all fifty states and internationally. CEO Curt Jones had introduced a new product,

The major challenge for Dippin’ Dots appeared to be the lack of opportunity in the industry,

opportunity that was perhaps unachievable given the firm’s existing resources, or the inability of

Resources are an essential component of a successful entrepreneurial launch. The most Important

resource is usually money, but human resources, strong and skilled management, is also an

essential asset. Social capital, or entrepreneurs who have extensive social networks or well-

The Dippin’ Dots story contains many elements of the resource dilemma – even the best idea can

be difficult to launch without proper resources. Jones had difficulty acquiring both money and

human resources. Although he was initially successful getting financing through his family, and

Launching a new venture requires a special kind of leadership involving courage, belief in one’s

convictions, and having the energy to work hard. Three characteristics of entrepreneurial leaders

are:

●Vision

To achieve excellence, venture founders and small business owners must understand the

Jones appeared to have had the initial vision, dedication and drive, but he had also seemed to get

tired of the day-to-day operational aspects of the business. (Although not in the case, Jones had

removed himself from any administrative decision-making at Dippin’ Dots for several years – in

2006 a news story reported that he was working to develop an ethanol plant in southern Illinois.

New entry into markets, whether by start-ups or by incumbent firms, nearly always threatens

existing competitors. This will likely provoke a competitive response. Competitive dynamics —

intense rivalry among similar competitors—has the potential to alter a company’s strategy. New

entrants may be forced to change their strategies or develop new ones to survive competitive

challenges by incumbent rivals. Companies launch competitive responses to:

●Improve market position

●Capitalize on growing demand

When Dippin’ Dots first entered the business, it had obtained a first mover advantage. However,

Jones was not able to protect that advantage. Dippin’ Dots was facing competitive dynamics and

In order to grow the business, new President Fischer would have to maintain and expand his

current market base and choose a big push in the scoop shop through expanded support for

franchising or a push into the grocery store business or develop some truly innovative new

Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

Innovation involves using new knowledge to transform organizational processes or create

Some of challenges of innovation involve choosing when and how to continue to innovate, the

scope of future innovation and the pace, as well as whether or not to collaborate with innovation

partners. The innovation of new ventures requires resources such as financial, human and social

We don’t know how well Jones actually promoted an entrepreneurial orientation in his

organization, but his old habit of hiring friends, and his decision to fire his top managers,

indicates perhaps he didn’t have the willingness to create a culture of autonomy, and team-

Before proceeding, firms must first define the scope of the innovation efforts, and must ensure

that their innovation efforts are not wasted on projects that are outside the firm’s domain of

interest. In defining the innovation scope, a firm should answer several questions:

●How much will the innovation cost?

●How likely is it to actually become commercially viable?

●How much value will it add; that is, what will it be worth if it works?

●What will be learned if it does not pan out?

As a counter example of innovation, Mini Melts had adopted a strategy of global expansion.

Mini Melts expanded by selling dealerships for vending machines and kiosks, rather than

While the strategy adopted by Dippin’ Dots was to introduce new products, it appeared as if the

Dots’n Cream and Dot Delicacies both may have required additional, possibly costly,

manufacturing equipment. Certainly the frozen coffee dots would. Perhaps the Dots’n Cream and

coffee dots products required distribution connections and marketing expertise the company did

What challenges exist for the new ownership? Will any market testing be sufficient enough to

determine whether the new products are worth pursuing? Does new management have the

operational skill to lead this effort? Has new President Scott Fischer thought out the implications

NOTE – ADDITIONAL READING:

Read this 2003 article about two Dippin’ Dots imitators:

http://www.enquirer.com/editions/2003/10/07/biz_wwwbiz2dot.html

Here is information about one of those competitors, who has done well since:

http://www.minimelts.com

Here is a website where you can download a copy of the patent infringement judgment at

http://www.gehrkelaw.com/2007/02/dippin_dots_inc.html

And here is a shortened version of the court case outcome:

http://www.nixonpeabody.com/publications_detail3.asp?ID=1704

Dippin Dots was found to have procured their patent through fraud, so therefore their suit for

patent infringement was unenforceable. Did Dippin’ Dots respond to the imitators appropriately

in your opinion? If not, what would you do differently?

Dippin’ Dots has had trouble in the past with its franchisees. Here’s a report from one former

Dippin’ Dot franchisee, who was not happy: http://askme.hubpages.com/hub/I-was-a-Dippin-

http://www.wsj.com/articles/SB10001424052970204136404577211391192172770 and another

report on unhappy Cold Stone Creamery franchise investors, calling it “one of the worst

Here is information on the Dippin’ Dots franchise from Entrepreneur Magazine:

http://www.entrepreneur.com/franchises/dippindotsfranchising/289468-0.html

and check out Dippin’ Dots competitors’ franchise arrangements at

http://www.entrepreneur.com/franchises/categories/ffqicecr.html

In 2013, the new management announced a renewed push to open up “additional franchise

territories in the Northeast, Southeast and other parts of the U.S.” The selling point for potential