Disruptive Technology Compare disruptive and sustaining technologies Impact of the Internet The Internet has changed the way the world accesses views finds and uses information Easy to compile searching for information on products prices customers suppliers and partners is faster and easier when using the Internet Increased richness Businesses and customers can collect and track more detailed information when using the Internet Increased reach Businesses can share information with numerous customers all over the world Improved content Data and product descriptions establish the common understanding between both parties to the transaction 2 Disruptive Technology How can a company like Polaroid or Kodak go bankrupt Digital Darwinism implies that organizations which cannot adapt to the new demands placed on them for surviving in the information age are doomed to extinction Use of Porter s Five Forces Model 3 Disruptive Versus Sustaining Technology What do steamboats transistor radios and Intel s 8088 processor all have in common Disruptive technology a new way of doing things that initially does not meet the needs of customers Sustaining technology produces an improved product customers are eager to buy 4 Transistor Radio Example 5 Transistor Radio Example Sold as beach or travel radios 6 Transistor Radio Example 7 Transistor Radio Example 8 Transistor Radio Example 9 Transistor Radio Example 10 Disruptive Technology Disruptive technology a new way of doing things that initially does not meet the needs of existing customers Disruptive technologies redefine the competitive playing fields of their respective markets Disruptive technologies tend to open new markets and destroy old ones Disruptive technologies typically cut into the low end of the marketplace and eventually evolve to displace high end competitors and their reigning technologies 11 Sustaining Technology Sustaining technology produces an improved product customers are eager to buy such as a faster car or larger hard drive Sustaining technologies tend to provide us with better faster and cheaper products in established markets Sustaining technologies virtually never lead in markets opened by new and disruptive technologies 12 Disruptive Versus Sustaining Technology The Innovator s Dilemma discusses how established companies can take advantage of disruptive technologies without hindering existing relationships with customers partners and stakeholders 13 Disruptive Versus Sustaining Technology Companies like Xerox IBM Sears and DEC all listened to existing customers invested aggressively in technology had their competitive antenna up and still lost their market dominate positions Christensen believes that these companies placed too great an emphasis on satisfying customers current needs while forgetting to adopt new disruptive technology that will meet customers future needs thus causing the companies to eventually fall behind 14 Disruptive and Sustaining innovations Examples of sustaining technological changes LCD monitors from 15 inch to 20 inch Nike shoes Microsoft windows system versions Examples of disruptive technological changes Telegraph to telephone Wikipedia to Brittanica Flash drive to zip drive iTunes VS CD store 15 Why are some technologies disruptive Product level The new technology is superior to old ones eventually Examples Steam boat MS Encarta Flash drive Story of the hydraulic back hoe vs the steam shovel 16 Why are some technologies disruptive Business model level The existing business model is not compatible with new technology The case of Tivo Traditional business model for TV network companies commercials Tivo allowed time shifting and the ability to skip ads 17 A History of the Hard Drive First hard drive 1955 by IBM 24 inch with 5 MB capacity Enormous technology progress during the past years The world s first gigabyte capacity disk drive the IBM 3380 introduced in 1980 was the size of a refrigerator weighed 550 pounds about 250 kg and had a price tag of 40 000 Many sustaining innovations Several disruptive technological changes Hard drive physical size 14 inch 8 5 25 3 5 18 hard drive improvements 19 A partial history of hard drive Until the mid 70s Size 14 inch Major customers mainframe computer producers Capacity 130 MB and improve at 22 annually 1978 1980 Size 8 inch Major customers minicomputer producers like HP and DEC Capacity initially 10 MB and improve at 40 annually 1980 Size 5 25 inch Major customers desktop PC Capacity initially 5 MB 1984 Size 3 5 inch Major customers portable computers like Compaq In each disruptive technological change majority of incumbent firms died 20 Why do so many smart companies miss the boat Well managed companies often fail because the very management practices that have allowed them to become industry leaders also make it extremely difficult for them to develop the disruptive technologies that ultimately steal away their markets C Christensen Then why can t incumbents adjust evolve 21 Why disruptive to incumbent firms New technology comes from other newly emerging market Incumbent firms listen too much to their existing customers Listen responsively to their customers Invest aggressively in the technology products and manufacturing capabilities that satisfied their customers future needs Seek higher margins Target larger markets rather than new smaller ones 22 The Internet The Ultimate Business Disruption One of the biggest forces changing business is the Internet Organizations must be able to transform as markets economic environments and technologies change Focusing on the unexpected allows an organization to capitalize on the opportunity for new business growth from a disruptive technology 23 Evolution of The World Wide Web The Internet makes it possible to perform business in ways not previously imaginable It can also cause a digital divide Digital divide when those with access to technology have great advantages over those without access to technology One laptop per child See laptop org 24
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