new technology lecture l08 disruptive technology
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Lecture L08 DISRUPTIVE TECHNOLOGY
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Why do start-ups exits?
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Technology is one of the major factors in
change
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Opportunity Threat
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Example: Digital Photography
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Media companies
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Tech Has No Feelings:Gary Vaynerchuk Crushes Old Media
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The World is Changing
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Technology has no feeling
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Is this Good or Bad?
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Kranzberg’s 1. law of technology
1. Technology is neither good nor bad; nor is it neutral
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Adjacent Possible
When in one room someone will open the next door
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Western Union Telegraph Business
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Bell offered the telephone patent for $100.000
Western Union turned Bell down
Bell went into business himself, founding AT&T
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In 1900 !
AT&T had over million users AT&T revenues were $13 million while Western Union’s revenues were $6 million
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Why would Western Unionmake such short-sighted decision?
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We tend to view technology based on
past usages but not the future potential
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"This 'telephone' has too many shortcomings to be seriously considered as a means of
communication. The device is inherently of no value to us."
- Western Union internal memo, 1876.
Telephone (1876)
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“What use could this company make of an electrical toy?”
- Western Union president William Orton.
Telephone (1876)
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„Well informed people know it is impossible to transmit the voice over wires and that were it possible to do so, the thing would
be of no practical value.“ - Editorial in the Boston Post.
Telephone (1876)
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„Thus the telephone, by bringing music and ministers into every house, will empty the
concert halls and the churches…“ - “The Telephone”, The New York Times, March 22, 1876
Telephone (1876)
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“Rail travel at high speed is not possible because the passengers,
unable to breathe, would die of asphyxia”
- Dr. Dionysus Lardner, Professor of Natural Philosophy and Astronomy at University College,
London
Railroads (1815)
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Cars (1885) “The horse is here to stay, but the automobile is only a novelty – a fad”
- The president of the Michigan Savings Bank to advised Henry Ford's lawyer Horace Rackham not to
invest in the Ford Motor company
Image from http://www.huffreport.com/
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Airplanes (1903)"Heavier-than-air flying machines are impossible." - Lord Kelvin, president, Royal Society, 1895.
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“The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?" - David Sarnoff's associates in response to his urgings for investment in the radio in the 1920s
Radio (1905)
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“For God’s sake go down to the reception and get rid of a lunatic who’s down there. He says he’s got a machine for seeing by
wireless!” - Editor of the Daily Express in response to a prospective
visit by John Logie Baird, 1925
Television (1926)
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"I think there is a world market for maybe five computers.“
- Thomas Watson, chairman of IBM, 1943
Computers (1943)
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"There is no reason for any individual to have a computer in their home.” - Kenneth Olsen, president and founder of
Digital Equipment Corp., 1977
Personal Computers (1977)
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“The Internet is a shallow and unreliable electronic repository of dirty pictures, inaccurate rumors, bad spelling and worse grammar, inhabited largely by people with no demonstrable social skills.” - Chronicle of Higher Education, 1997
Internet (1970)
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I don't think that digital photography is romantic yet. It's not sympathetic the way that film is - Matthew Modine
Digital Cameras (1991)
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"The knowledge transition was much more rapid for those learning from printed material...” - The E-book skeptic
Digital books (1992)
Picture from Amazon.com
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How will this innovation change an industry, and what impact does this have on the firms I care
about?
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Nordic Marketing Conference of Lottery Companies, Mývatn, September 1995
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Gradual ImprovementsFoster improved product performanceEach year new and improved products are offered
Sustaining Innovations
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Source: (Christensen, 2000)
Mature Leading CompaniesExisting companies, incumbents, have a high probability of beating entrant attackers when the contest is about sustaining innovations
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Red Ocean Industry !
Bloody Competition Well know industry boundaries
Rules are established, sustained Innovation Commodities
D i s r u p t i o n
Blue Ocean !
Value Innovation Align innovation with utility,
price, and cost position
New Technology, new markets
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The product performance is good enough and affordable to fulfil a unfilled need in the market
Disruptive Technology
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Source: (Christensen, 2000)
The Disruptive Innovation Theory
New organisation can use relatively simple, convenient, low-cost innovations to create growth and triumph over powerful incumbents
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Source: (Christensen, 2000)
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Source: (Christensen, 2000)
Low EndCan occur when existing products and services are “too good” and hence overpriced relative to the value existing customer can use – Value Innovation
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Source: (Christensen, 2000)
New MarketOccur when characteristics of existing products limit the number of potential consumers or force consumption to take place in inconvenient, centralised settings
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Source: Christensen et. al. Seeing what’s next
The Disruptive Innovation Theory
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Source: (Christensen, 2000)
The Innovator’s Dilemma
Firms that succeed in one generation of innovation almost inevitable become hamstrung by their own success and thus doomed to lose out in the next wave of innovation
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Disruptive changes in Business Environment
Opportunity/Pitfall to Make/Lose Money
Force Majeure Legal/Regulatory
Competitor Strategy
Popular opinion or fashion
Political
Financial
Technology
Source: Yang, Harvard
Disruption and Innovation
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Western Union Telegraph Business
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Resources, Processes and Values Theory !
R e s o u rc e s (what a firm has), P ro c e s s e s (how a firm does it´s work), and Va l u e s (what a firm wants to do) collectively defines an organization’s strengths as well as weaknesses and blind spots
Source: (Christensen, 2000)
The RPV Theory
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Source: (Christensen, 2000)
The RPV Theory
Organisations successfully tackle opportunities !
When they have the resources to succeed, when their processes facilitate what needs to get done, and then their values allow them !
to give adequate priority to that particular opportunity in face of all other demands that compete for the company’s resources
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The RPV Theory
Possible consequences
Source: Christensen et. al. Seeing what’s next
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Western Union Telegraph Business
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1. The telephone was a new-market disruptive innovation
2. Western Union’s resources, processes, and values meant that what ultimately became the right course appeared to be unattractive at the outset
3. Western Union saw entrants improving. However, investment in the core business kept trumping investment in the new business
4. By the time the right course was clear, it was too late
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Western Union was in the telegraph business, not the
communication business
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The Disruptive Innovation Theory The Innovators Dilemma Resources, Processes and Values Theory
Key Concepts
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Economist article: The last Kodak moment? !
Kodak is at death’s door; Fujifilm, its old rival, is thriving. Why?
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