Innovator's Dilemma

Principles of Innovator's Dilemma

- companies depend on customers and investors for resources - small markets do not solve the growth needs of large companies - markets that do not exist can not be analyzed - an organization's capabilities define its disabilities - technology supply may not equal market demand

How can bigger corporations match their organization size to the small opportunity

- construct a smaller division in a different location to address the disruptive innovation - buy a smaller company working in the area of the disruptive technology

Value network Processes

- how technology is evaluated - how decision are made - how products are developed

What did the great companies do that they thought were strengths that lead to their demise?

- listened to their customers - invested in new technology - carefully studied market trends - systematically invested in the innovations that promised the best returns

Possible Approaches to take for an emerging market

- try to grow into it and make it interesting to the large corporation - wait until the market is large enough to enter - give the small market to the smaller organizations - change the value network

Companies successful at overcoming the innovator's dilemma

-started projects for disruptive technologies, but marched the right market - placed products in separate organization, outside the value network, who where excited about small wins - planned to fail but inexpensively

Johnson and Johnson

160 autonomously operating companies - each with their own value networks

Example of Forced market growth

Apple Newton in the first year sales were 140,00 units which was considered a flop compared to the other existing apple products. resources were poured into growing the market but it was not ready yet so abandoned. later on apple sold 43,000 units of another product and thought of it as a suceces

Value Network

Company organization, existing customers

Seagate vs. Conner

Conner differed their approach in allowing a custom designed for major customers. Seagate was not able to adapt.

T or F: leadership in sustaining innovations is important

False. information is known for this market so plans can be made. making the first move less important

Net Margin =

Gross Margin - All other expenses

T or F: leadership in disruptive innovations is important

True. the least is known about the market, so strong first-movers have the advantage

Skunk works

a group within an organization given a high degree of autonomy and unhampered by bureaucracy, tasked with working on advanced or secret projects

disruptive technologies

bring to market a different value proposition than available previously - chapear, simpler, smaller, more convenient - worse product performance - underperform establish products in mainstream markets

What was the sustaining technology of the disk drives?

capacity and cost per megabyte?

Entrant companies

disruptive technology companies must initially find its own mainstream market

Summary of Innovator's Dilemma

failure of a good companies to stay atop their industries when confronted with technological change. good management was the reason that they eventually failed.

T or F: an established company's value network can make it less vulnerable to attacks from disruptive technologies below

false. make them vulnerable

sustaining technologies

foster improved product performance - can be discontinuous, radical, or incremental - ALWAYS improve performance of established products - wanted by existing customers - fits within goals for profit margin

HP laser-jet vs. ink-jet.

ink jet was a disruptive technology (smaller, cheaper, simpler, but more affordable and in color)

entrant company

is designed around a new market and grows with it

emerging markets

markets that do not exist cannot be analyzed. therefore plan to deal with disruptive technologies should be for learning and discovery

What are "other" expenses that fall under net margin

personnel, building, advertising, utilities, travel and entertainment, R&D cost

Priam vs. Seagate

priam was leader, but seagate could product new model each year. priam could only product a new model every other year. priam closed its doors.

Gross Margin =

sales - Cost of Goods Sold (COGS)

What was the disruptive technology of the disk drives?

size and overall cost

honda motorcycles

started with low-cost cycles and moved upmarket, putting established manufacturers out of business

two kinds of technologies

sustaining and disruptive

T or F: established companies tend to focus upmarket

true