Danger Inc

Danger inc was one of the few communication startup companies which was able to sustain itself in a weak startup financing phase of silicon valley during 2002-2003. This was achieved due to strong nature of the innovation by its founders and being able to find it’s market niche by offering end-to-end solution that enabled wireless carriers to offer next generation wireless applications to their customers.

Danger inc has already been past its first phase of start-up by coming up with good first generation product in four years of existence and getting decent revenues stream by getting a big client and excellent product in T-Mobile Sidekick. As startups grow into sustainable companies, they must form and maintain a complex portfolio alliances and partnerships. Hank Nothhaft CEO of danger knew that their contract with T-mobile was coming to end and this gives them chance to make a pitch for their company to grow. Danger was looking to grow in US as well as Europe and had limited options here in USA while had whole European market to work with.

Let us first consider USA communication market, where we know that Danger had 3 companies(50% of US market) that they could work with T-mobile, AT&T and Cingular as they only offered GSM/GPRS compatible phones. James Issac has couple of options in working and creating strategic partnership with these companies. Option 1 is to create a strategic partnership with branded OEM (i.e nokia, ericssion, etc) and license them the hardware design technique and sell the product to wireless carriers like any other communication device. Advantage of this option is creation of value based on brand name, reduced inventory management, working relationship and easy acceptance of wireless carries and the disadvantages are reduced gross margin on products for OEM will have to pay consultation fees, product cannibalization of OEM, patent issues for danger, also by doing so relationship with T-Mobile might be damaged. Option 2 is to create strategic partnership with ODM where advantages are low production cost, working relationship with wireless carriers and disadvantages were more licensing issues with ODM, deteriorating relationship with T-mobile, limited access to wireless carriers as not all the wireless carriers use ATT or cingular. Option 3 is to use CM (current partnership model) where you improve upon your current relationship and try to improve plan offerings and disadvantage would be let go of remaining 66% of GSM/GPRS market. Options available in Europe were almost similar to what issac had in US just that Europe was all GSM market making options 1 and 2 more