From Luddites to Fruit Flies (Part 2 of 2)

1
From Luddites to Fruit Flies (Part 2 of 2)

• IEM5010 Summer 2003
• Paul E. Rossler, Ph.D., P.E.

2
The Innovators Dilemma

• the logical, competent decisions of management
  that are critical to the success of their
  companies are also the reasons why they lose
  their positions of leadership. (Christensen, p.
  xiii)

3
A technological mudslide?

• neither the pace nor the difficulty of
  technological change lay at the root of the
  leading firms failures. The technology mudslide
  hypothesis was wrong. (Christensen, pp. 8-9)

4
ruled out poor management as a root cause (p.
97)

• sensible resource allocation processes were at
  the root of companies upward mobility and
  downward immobility (Christensen, p. 80)
• to expect the processes that accomplish these
  things also to do something like nurturing
  disruptive technologies (p. 98)

5
Disruptive technologies

• Result in worse product performance, at least in
  the near term
• Bring different value proposition
• Attributes that make them worthless in mainstream
  markets become strongest selling point in
  emerging markets
• Tend to be simpler, cheaper, and more reliable
  and convenient than established products

(Source Christensen, p. xv, 190)
6
Sustaining technologies follow conventional
technology S-curve
Source Christensen, p. 40
7
Disruptive technology S-curve defined by
different y-axis
Source Christensen, p. 41
8
Different value propositions and therefore
metrics of success

• The performance of the first backhoes was
  measured differently from the performance of
  cable-actuated equipment. (Christensen, pp.
  66-67)
• The organization was free to succeed along
  metrics of success that were relevant (p. 110)
• played havoc with the accustomed metrics (p.
  111)

9
Response of established firms

• Established firms confronted with disruptive
  technology typically viewed their primary
  development challenge as a technological one
  (Christensen, p. 191)

10
A tendency exists toward northeast migration
Source Christensen, p. 66
11
A different response by entrants

• The firms that were most successful in
  commercializing a disruptive technology were
  those framing their primary development challenge
  as a marketing one (Christensen, pp. 191-192)

12
A basic problem for established firms moving
down-market

• the problem established firms seem unable to
  confront successfully is that of downward vision
  and mobility, in terms of the trajectory map.
  (Christensen, p. 24)

13
Value networks affect perceptions of innovation
Source Christensen, p. 33
14
Three barriers to downmarket mobility

• Three factors the promise of upmarket margins,
  the simultaneous upmarket movement of a companys
  customers, and the difficulty of cutting costs to
  move downmarket profitably together create
  powerful barriers to downmarket mobility.
  (Christensen, p. 87)

15
Along with pressure for quarterly results

• Building such markets entails a process of
  mutual discovery by customers and manufacturers
  and this simply takes time. (Christensen, p. 131)

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And management philosophies

• Philosophies such as management by objective and
  management by exception often impede the
  discovery of new markets because of where they
  focus management attention. (Christensen, p. 157)

17
Allocation innovation two sides of the same
coin (p. 103)

• disruptive projects stalled when it came to
  allocating scarce resources among competing
  product and technology development proposals.
  (Christensen, p. 42)

18
Increasing the level of difficulty

• Every innovation is difficult. This difficulty
  is compounded immeasurably, however, when a
  project is embedded in an organization in which
  most people are continually questioning why the
  project is being done at all. (Christensen, p.
  134)

19
Matching innovation requirements to capabilities
Christensen, p. 177
20
Senior managers may have less control than they
think

• the organizations middle managers play a
  critical but invisible role in screening these
  projects. (Christensen, p. 82)
• In practice, it is a companys customers who
  effectively control what it can and cannot do.
  (p. 101)

21
Resources, processes, and values influence
response

• Yet, resource analysis clearly does not tell a
  sufficient story about capabilities.
  (Christensen, p. 163)
• This means that the very mechanisms through
  which organizations create value are
  intrinsically inimical to change. (p. 164)
• Clear, consistent, and broadly understood values
  , however, also define what an organization
  cannot do. (p. 165)

22
Pressure to succeed influences decisions made

• Projects that fail because technologists
  couldnt deliveroften are not (necessarily)
  regarded as failures at allBut projects that
  fail because the market wasnt there have far
  more serious implications for managers careers.
  (Christensen, p. 82)
• Rightly or wrongly, individual managers in most
  organizations believe they cannot fail. (p. 155)

23
Core competence probably not the answer

• In practice, however, most managers have found
  that the concept is sufficiently vague that some
  supposed competence can be found to support a
  bewildering variety of innovation proposals.
  (Christensen, p. 162)

24
Tried-and-true tools and techniques fall short

• Markets that do not exist cannot be analyzed
  Suppliers and customers must discover them
  together. (Christensen, p. 143).
• It is simply impossible to predict with any
  useful degree of precision how disruptive
  products will be used or how large their markets
  will be. (p. 154)

25
The end result Performance oversupply attack
from below
Source Christensen, p. 16
26
The basic pattern

• Disruptive technology first developed within
  established firms
• Marketing then sought reactions from lead
  customers
• Established firms step up pace of sustaining
  technological development

27

1. New companies formed and markets for disruptive
   technologies found
2. The entrants moved upmarket
3. Established firms belatedly jumped on bandwagon
   to defend customer base

(Christensen, pp. 43-48)
28
Three potential strategies
Christensen, p. 197
29
A priori, who knows for sure?

• Experts lined up on both sides of the question,
  offering HP extensive advice on which technology
  would ultimately become the printer of choice
  (Christensen, p. 116)
• what is obvious in retrospect might not be at
  all obvious in the thick of battle.
  (Christensen, p. 196)