Make an statement of the problem for case study derive from the reference below.

Subject: Risk Management

\f\"Product recalls slow many types of innovation for the rms that experience them.\" Stern says. \"At the same time. we see that competitors are likely to accelerate their own innovation activities to take advantage of these weaknesses.\" Stern, along with Indiana University Assistant Professor George P. Ball and Georgetown University Professor Jeffrey T. lvlacl'ler. set out to quantify the innovation risks and opportunities that recalls pose in one of the most RD-intensive industries, medical technology. Product failures in medtech, where the cost to bring a device to the market can top $90 million, can not only hohhle a rm. but cause catastrophic harm to patients. \"T he extremely high prot margins in medical devices offers a setting in which the risks are often overwhelmed by the potential rewards to innovate. especially when competitors face their own product failures." according to the team's working paper, Ft ll Innvion nd mtitrFinn:Evin ml'v'ldilElvi Firm. released in January. Bigger recalls. bigger reactions Using 13 years of US Food and Dmg Administration data and a novel set of competitor classication algorithms. the team created a detailed history of product development submissions and recalls in the medical device industry. That allowed the researchers to evaluate how a recall's severity and proximitythe degree of product market overlap between recalled and competing productsmay stall or speed innovation in a product market. Among their ndings: A recall can delay a company's Incremental Innovations by six months. Medtech product development teams typically focus on a single product category or line, allowing them to apply their expertise more efciently. However, recalls force these teams to shift their attention from making meaningful improvements to addressing aws. The revenue impact can be signicant. the researchers say. Competitors ramp up major innovation efforts In response to rival recalls. Large-scale new product development projects cost more. take longer to complete. and require specialized teams to manage complex processes. such as clinical trials in patients. However, if a medtech rm can bring a new product to the market even one month earlier following a rival's recall, it could bring in an additional $10 million in revenue. The more severe a recall. the faster competitors speed up Innovation. Major product failures. such as ones that can lead to serious injuries or even patient fatalities, provide the biggest opportunities for a competitor to grab market share. A well-timed incmmental or major innovation can provide the toehold a company' needs in a competitive market. \"Low-risk mistakes. like a type on a label, constitute reasons to recall a product. but those aren't driving the big responses that we see by rms and their competitors." Stern says. \"It's the really severe recalls. where perhaps the materials tumed out to be unsafe or there's a major matfunction that are leading to competitor responses.\" Prevention is key, but preparation also matters Prevention is key, but preparation also matters The team's research suggests that recall prevention is even more valuable than previously thought. given the higher stakes of pmduct failures. Companies would also be wise to develop more internal expertise to not only manage their own recalls but react quickly to those of rivals. Two specic steps could help most Ran-centric companies: - Create recall recovery teams. A specialized group of managers witl't deep knowledge about a companys products and the recall process might keep a company from diverting time and resources from product development efforts. thereby undermining the roll-out of future innovations. .- Develop competitor recall intelligence tools. Companies that develop the capabilities and tools to react quickly to other companies' recalls stand to gain more when market opportunities present themselves. While Stern's past research has focused primarily on innovation in health care. these new ndings could apply broadly to any company that invests heavily in Roll}. even those in industries that lack a formal recall process. While Stern's past research has focused primarin on innovation in health care. these new ndings could apply broadly to any company that invests heavily in Rap, even those in industries that lack a formal recall process. "Whether your rm is making phones or drones or self-driving cars. recalls can divert efforts fmm subsequent innovations and sour your competitors to take advantage of the market opportunity." she says