DISRUPTIVE%20TECHNOLOGIES,%20FIRMS

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DISRUPTIVE TECHNOLOGIES,FIRMS STRATEGIES, AND
GOVERNMENT POLICIESProfessor Y.L. DozThe
Timken Chaired Professor of Global Technology and
InnovationINSEAD, Fontainebleau,
SingaporeVANCOUVER, CANADA, June 5th 2003
The Six Countries Conference on Disruptive
Technologies
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Three core questions

• What is a disruptive technology?
• What are its strategic implications, for
  incumbents?
• For challengers?
• Why does it matter to governments?
• Technology, Innovation, Discontinuity, Radical
  Innovation, Architectural
• Innovation, Transilience, Competence enhancing,
  destroying

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What is a disruptive technology?
Performance
Third technology
Second technology
First technology
Time / Resources devoted
Source Adapted from Foster (1986) and from
Christensen (1992)
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What is a disruptive technology?
Performance (log. Scale)
Time
Source Adapted from Christensen (1993)
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A well researched example hard disk drives
Intersecting Trajectories of Capacity Demanded
versus Capacity Supplied in Rigid Disk Drives
Source Christensen, 1993
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Disruptive, or not? Some key questions

• Innovation or Technology?
• . Social technologies (low cost airlines)
• . Value innovations (regional jets)

3. Radical / substitutive or incremental /
complementary? . Bio technology and pharmacy
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Disruptive, or not? Some key questions

• For Whom?
• (e.g., small office copiers)

new
XEROX
base
market
access
new
Same
CANON
competence
Same
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Disruptive, or not? Some key questions

• How fast Tornado or mild breeze?
• - Dynamics of diffusion Network effects and
  critical mass
• - Misguided incumbent response

• Happening or created?
• - Innovations are created
• - Creative destruction
• - Strategic innovation
• - New technologies are resources / tools for
  innovation

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Why are incumbents (often) sitting ducks?

• Economic interest
• . Better-off funding incremental supportive
  innovation
• . Risk of accelerating substitution and
  destroying value
• . Increasing returns to competence/installed
  base, trajectory lock-in
• Organizational logic
• . Structural fit, interaction routines,
  collective tacit skills
• . Successful strategies grow into mindless
  recipies
• . Orthodoxies, rigidities, cultural homogeneity
• . Internal resource allocation processes
• . Lack of relevant, and well-located absorptive
  capacity
• Social heritage
• . Network embeddedness (customers, suppliers,
  partners)
• . Ties that Bind, unwillingness to challenge
  past commitments
• . Value networks require collective agreement
  on change across firms

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The incumbent's weak response

• Late, slow, half-hearted, tentative and
  ineffective
• On the wrong trajectory (accelerate their own,
  ignore the new)
• Lacking critical mass, under funded, under
  supported
• Expensive
• . Time compression diseconomies
• . Lasting stalemate
• Often strategically flawed
• . Transfer of old value creation system

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To challengers, disruptive technologies open a
window of opportunity

• They are disruptive for incumbents, supportive
  for challengers
• They mix technical , social and value
  innovations, making them difficult for incumbents
  to emulate
• They create / open vast new low-end markets to
  use a staging areas...
• They originate and spread below / beyond the
  radar screen of incumbents
• They draw on distant and diverse sources of
  knowledge
• They rely on new, or hard to enter, social
  networks

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Incumbents that respond successfully

• Widely distributed prospecting for and active
  sensing of new knowledge, worldwide, including
  emerging / latent market needs
• Cultivating absorptive capacity and knowledge
  melding

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Mobilizing Globally Dispersed Knowledge
Prospecting and accessing distant innovative
competencies and lead market knowledge
LOGIC Discovery Reconnaissance
Melding dispersed capabilities and lead market
opportunities to pioneer new solutions
LOGIC Entrepreneurship Mobilization
Optimising the scale and configuration of
Operations
LOGIC Efficiency, Flexibility, Financial
Discipline
(Source Doz, Santos, Williamson - "From Global
to Metanational - HBS Press, 2001)
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STMicroelectronics in HDD electronics
Engineering and Design skills in fast
microprocessors Bristol, U.K.
Process Technology RD in BICMOS (mixed) and CMOS
(digital) Manufacturing(Front End) Grenoble,
France
Joint Design center with SeagateScotts Valley,
CA
Engineering and Design skills in digital servo
controllers (JV) SSD - Dublin, Ir.
Process Technology RD in Bipolar and BCD Design
competence on analog and mixed chips Milano,
Italy
Lead Customers RD and Engineering Seagate,
Western Digital (California,Colorado, ...)
Competence on R/W technology (JV) EXAR, CA
Coordination and strategic capability Geneva,
Switzerland
Engineering and Design Capability / Close
understanding of customer application / Design
Center S. Jose CA
Design of packaging, testing and final assembly
(Back End) capability Malaysia, Singapore
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The Innovation Turbine
MetaCorp 29
Sensing
Magnet
Magnet
Crucible
Crucible
Attracting
Relay
Relay
Leveraging
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Tapping the world for new knowledge
(Shiseido in Fragrance)
Carita
Sensing
Les Salons
French Suppliers
Zouari
Gien Plant (France)
Beaute Prestige International Chantal Roos Issey
Miyake Jean-Paul Gaultier
Melding
Product Development Process
Yokohama Product Strategy Managers
Worldwide Distribution
Ofuna (Kamakura) Plant
Leveraging
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Incumbents that respond successfully

• Widely distributed prospecting for and active
  sensing of new knowledge, worldwide, including
  emerging / latent market needs
• Cultivating absorptive capacity and knowledge
  melding
• Sustaining a pluralistic dialogue, internally and
  externally
• Creatively challenging existing orthodoxies and
  business models
• Letting autonomous strategic processes
  flourish, and select, at various levels, from
  their outcomes
• Fostering Internal differentiation of
  organization

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Why should disruptive technologies matter to
governments?

• Open, close opportunities for local industries,
  obsolete some, create new ones
• Geographically displace knowledge bases of given
  industries, markets
• May change the rootedness of underlying
  knowledge, and, hence, the need for knowledge
  clusters
• May call for new knowledge networks, and hence
  new knowledge hubs (co-located core, global
  links)
• May change the social regime of an industry
  (e.g., from products to networks), and its value
  creation and value capture points and drivers

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PixTech A Metanational Start Up
Research Development
Futaba
Motorola
Raytheon
US FinancialMarket
TI
F.E.D. Alliances
Capital
Research
LETI
PixTech
Materials Tech.
Rhone-Poulenc
Nichia
Manufacturing
Distribution
Unipac
Sumitomo
SAES Getters
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Small and medium entreprises

• What is selected by new disrupted conditions
• - cultural memes
• - strategic initiatives, proposals, commitments
• - individual firms
• - networks
• _Creating an internal strategic ecology does
  not work when you are small!
• Are SMEs more or less adaptive than larger firms?
• Can global knowledge prospecting, sensing,
  accessing and melding be achieved by SMEs? How?
• Are networks adaptive mechanisms or
  straightjackets?