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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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  • 1. 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
  • 2. The World is Changing
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 3. Technology doesn’t care
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 4. Copyright © 2011, Ólafur Andri Ragnarsson
    Adjacent Possible
    When in one room someone will open the next door
  • 5. Copyright © 2011, Ólafur Andri Ragnarsson
    Western Union Telegraph Business
  • 6. Copyright © 2011, Ólafur Andri Ragnarsson
    Bell offered the telephone patent for $100.000
    Western Union turned Belldown
    Bellwent into business himself, founding AT&T
  • 7. 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
  • 8. Copyright © 2011, Ólafur Andri Ragnarsson
    Why would Western Unionmake such short-sighted
    decision?
  • 9. We tend to view technology based on past usagesbut not the future potential
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 10. How will this innovationchange an industry, and what impact does this have on the firms I care about?
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 11. Copyright © 2011, Ólafur Andri Ragnarsson
    Nordic Marketing Conference of Lottery Companies, Mývatn, September 1995
  • 12. Sustaining Innovations
    Gradual Improvements
    Foster improved product performance
    Each year new and improved products are offered
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 13. 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
  • 14. 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
  • 15. 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
  • 16. 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)
  • 17. 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)
  • 18. 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)
  • 19. 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)
  • 20. The Disruptive Innovation Theory
    Copyright © 2011, Ólafur Andri Ragnarsson
    Source: Christensen et. al. Seeing what’s next
  • 21. 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)
  • 22. 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
  • 23. 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
  • 24. The Innovation Trap
    Copyright © 2011, Ólafur Andri Ragnarsson
    “We listen to our best customers”
  • 25. 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”
  • 26. The Innovation Trap
    Copyright © 2011, Ólafur Andri Ragnarsson
    “Our customer are starting to ask for our new product.”
  • 27. Copyright © 2011, Ólafur Andri Ragnarsson
    It is very difficultfor incumbent companies to disrupt themselves, so usually others will do it
  • 28. 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
  • 29. Copyright © 2011, Ólafur Andri Ragnarsson
    Why did they fail?
  • 30. Copyright © 2011, Ólafur Andri Ragnarsson
    They listened to their customers
  • 31. 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)
  • 32. 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)
  • 33. The RPV Theory
    Copyright © 2011, Ólafur Andri Ragnarsson
    Possible consequences
    Source: Christensen et. al. Seeing what’s next
  • 34. Copyright © 2011, Ólafur Andri Ragnarsson
    Western Union Telegraph Business
  • 35. 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
  • 36. Copyright © 2011, Ólafur Andri Ragnarsson
    Western Union was in the telegraph business, not the communication business
  • 37. Example disruption waiting to happen
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 38. Copyright © 2011, Ólafur Andri Ragnarsson
    Book Publishers
    Flickr Image by wallyg
  • 39. Copyright © 2011, Ólafur Andri Ragnarsson
    WhenDisruptive TechnologiesCross the Chasm
  • 40. 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/
  • 41. The Hype Cycle
    A graphic representation of the maturity, adoption and business application of specific technologies
    Copyright © 2011, Ólafur Andri Ragnarsson
  • 42. Copyright © 2011, Ólafur Andri Ragnarsson
    NASDAQ
    January 2000
    The Internet Bubble
  • 43. Copyright © 2011, Ólafur Andri Ragnarsson
  • 44. Copyright © 2011, Ólafur Andri Ragnarsson
  • 45. 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
  • 46. Summary
    The Innovators Dilemma
    The Innovators Trap
    The Disruptive Innovation Theory
    Resources, Processes and Values Theory
    Copyright © 2011, Ólafur Andri Ragnarsson