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Disruptive Technology

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This lecture is part of course New Technology at Reykjavik University.

This lecture is part of course New Technology at Reykjavik University.

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    Disruptive Technology Disruptive Technology Presentation Transcript

    • Disruptive Technology
      “In questions of science, the authority of a thousand is not worth the humble reasoning of a single individual.”
      - Galileo Galilie.
      Copyright © 2011, Ólafur Andri Ragnarsson
    • The World is Changing
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Technology doesn’t care
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Adjacent Possible
      When in one room someone will open the next door
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Western Union Telegraph Business
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Bell offered the telephone patent for $100.000
      Western Union turned Belldown
      Bellwent into business himself, founding AT&T
    • Copyright © 2011, Ólafur Andri Ragnarsson
      In 1900
      AT&T had over million users
      AT&T revenues were $13 million while Western Union’s revenues were $6 million
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Why would Western Unionmake such short-sighted
      decision?
    • We tend to view technology based on past usagesbut not the future potential
      Copyright © 2011, Ólafur Andri Ragnarsson
    • How will this innovationchange an industry, and what impact does this have on the firms I care about?
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Nordic Marketing Conference of Lottery Companies, Mývatn, September 1995
    • Sustaining Innovations
      Gradual Improvements
      Foster improved product performance
      Each year new and improved products are offered
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Market Leading Companies
      Have a high probability of beating entrant attackers when the contest is about sustaining innovations
      Incremental or radical improvements to already existing products
      Airplanes that fly further, computers that process faster, and televisions with clearer images
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Red Ocean Industry
      Bloody Competition
      Well know industry boundaries
      Rules are established, sustained Innovation
      Commodites
      Disruption
      Blue Ocean
      Value Innovation
      Align innovation with utility, price, and cost position
      NewTechnology, new markets
    • Disruptive Technolgoy
      The product performance is good enough to fulfill a unfilled need in the market
      Current products can’t compete
      Copyright © 2011, Ólafur Andri Ragnarsson
    • The Disruptive Innovation Theory
      Existing companies have a high probability of beating entrant attackers when the contest is about sustaining innovations
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The Disruptive Innovation Theory
      New organization can use relatively simple, convenient, low-cost innovations to create growth and triumph over powerful incumbents
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The Disruptive Innovation Theory
      Low-end
      Can occur when existing products and services are “too good” and hence overpriced relative to the value existing customer can use – Value Innovation
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The Disruptive Innovation Theory
      New-market
      Occur when characteristics of existing products limit the number of potential consumers or force consumption to take place in inconvenient, centralized settings
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The Disruptive Innovation Theory
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: Christensen et. al. Seeing what’s next
    • The Innovators Dilemma
      Firms that succeed in one generation of innovation almost inevitable become hamstrung by their own success and thus doomed to lose outin the next wave of innovation
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • Disruption and Innovation
      Copyright © 2011, Ólafur Andri Ragnarsson
      Force Majeure
      Legal/Regulatory
      Political
      Disruptive changes in
      Business Environment
      Opportunity/Pitfall to
      Make/Lose Money
      Financial
      Competitor Strategy
      Technology
      Popular opinion or fashion
      Source: Yang, Harvard
    • The Innovators Dilemma
      Traditional Concept of Good Management
      Focus on your best customers
      Focus on your highest margin products
      Cannibalism is bad
      Possible consequences
      Leads successful companies to ignore disruptive innovation threats with deadly consequences
      The Innovation Trap
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: Yang, Harvard
    • The Innovation Trap
      Copyright © 2011, Ólafur Andri Ragnarsson
      “We listen to our best customers”
    • The Innovation Trap
      Copyright © 2011, Ólafur Andri Ragnarsson
      “Our customer is asking for the new product, but we don’t have it and its to late the enter the market”
    • The Innovation Trap
      Copyright © 2011, Ólafur Andri Ragnarsson
      “Our customer are starting to ask for our new product.”
    • Copyright © 2011, Ólafur Andri Ragnarsson
      It is very difficultfor incumbent companies to disrupt themselves, so usually others will do it
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Only ONEestablished firm managed the transition from one generation to the next
      Image Source Page: http://www.teach-ict.com/wp/archives/264
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Why did they fail?
    • Copyright © 2011, Ólafur Andri Ragnarsson
      They listened to their customers
    • The RPV Theory
      Resources, Processes and Values Theory
      Resources (what a firm has), processes (how a firm does it´s work), and values (what a firm wants to do) collectively defines an organization’s strengths as well as weaknesses and blind spots
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The RPV Theory
      Resources, Processes and Values Theory
      Organizations successfully tackle opportunities when they have the resources to succeed, when their processes facilitate what needs to get done, and when 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
      Copyright © 2011, Ólafur Andri Ragnarsson
      Source: (Christensen, 2000)
    • The RPV Theory
      Copyright © 2011, Ólafur Andri Ragnarsson
      Possible consequences
      Source: Christensen et. al. Seeing what’s next
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Western Union Telegraph Business
    • The telephone was a new-market disruptive innovation
      Western Union’s resources, processes, and values meant that what ultimately became the right course appeared to be unattractive at the outset
      Western Union saw entrants improving. However, investment in the core business kept trumping investment in the new business
      By the time the right course was clear, it was too late
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Western Union was in the telegraph business, not the communication business
    • Example disruption waiting to happen
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      Book Publishers
      Flickr Image by wallyg
    • Copyright © 2011, Ólafur Andri Ragnarsson
      WhenDisruptive TechnologiesCross the Chasm
    • Copyright © 2011, Ólafur Andri Ragnarsson
      “’This time it’s different’ are the four most expensive words in the investing language ”
      - Sir John Templeton
      Photo by flickr.com/photos/r4n/
    • The Hype Cycle
      A graphic representation of the maturity, adoption and business application of specific technologies
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
      NASDAQ
      January 2000
      The Internet Bubble
    • Copyright © 2011, Ólafur Andri Ragnarsson
    • Copyright © 2011, Ólafur Andri Ragnarsson
    • The Railway Bubble
      Railway Stock in Britain
      The value of railway stock grew 4 fold from 1826 to 1846
      Many companies, heavy overinvestment
      The Bubble burst 1846
      Copyright © 2011, Ólafur Andri Ragnarsson
    • Summary
      The Innovators Dilemma
      The Innovators Trap
      The Disruptive Innovation Theory
      Resources, Processes and Values Theory
      Copyright © 2011, Ólafur Andri Ragnarsson