New Technology Lecture L08 Disruptive Technology


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New Technology Lecture L08 Disruptive Technology

  2. 2. Why do start-ups exits?
  3. 3. Technology is one of the major factors in change
  4. 4. Opportunity Threat
  5. 5. Example:  Digital  Photography
  6. 6. Media companies
  7. 7. Tech Has No Feelings:
 Gary Vaynerchuk Crushes Old Media
  8. 8. The World is Changing
  9. 9. Technology has no feeling
  10. 10. Is this Good or Bad?
  11. 11. Kranzberg’s
 1. law of 
 technology 1. Technology is neither good nor bad; nor is it neutral
  12. 12. Adjacent Possible When in one room someone 
 will open the next door
  13. 13. Western  Union  Telegraph  Business
  14. 14. Bell offered the telephone patent for $100.000 Western Union turned Bell down Bell went into business himself, founding AT&T
  15. 15. In 1900 ! AT&T had over million users AT&T revenues were $13 million while Western Union’s revenues were $6 million
  16. 16. Why would Western Union
 make such short-sighted decision?
  17. 17. We tend to view technology based on 
 past usages 
 but not the future potential
  18. 18. Telephone (1876) "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.
  19. 19. Telephone (1876) “What use could this company 
 make of an electrical toy?” - Western Union president William Orton.
  20. 20. Telephone (1876) „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.
  21. 21. Telephone (1876) „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
  22. 22. Railroads (1815) “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
  23. 23. 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
  24. 24. "Heavier-than-air flying 
 machines are impossible." - Lord Kelvin, president, Royal Society, 1895. Airplanes (1903)
  25. 25. Radio (1905) “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
  26. 26. Television (1926) “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
  27. 27. Computers (1943) "I think there is a world market for maybe five computers.“ - Thomas Watson, chairman of IBM, 1943
  28. 28. Personal Computers (1977) "There is no reason for any individual to have a computer in their home.” - Kenneth Olsen, president and founder of 
 Digital Equipment Corp., 1977
  29. 29. Internet (1970) “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
  30. 30. I don't think that digital photography is romantic yet. It's not sympathetic the way that film is - Matthew Modine Digital Cameras (1991)
  31. 31. "The knowledge transition was much more rapid for those learning from 
 printed material...” - The E-book skeptic Digital books (1992) Picture from
  32. 32. innovation  change  an  industry,   and  what  i mpact  does  this  have  on  the  firms  I  care   How  will  this   about?
  33. 33. Nordic Marketing Conference of Lottery Companies, Mývatn, September 1995
  34. 34. Sustaining Innovations Gradual Improvements Foster improved product performance Each year new and improved products are offered
  35. 35. Mature Leading Companies Existing companies, incumbents, have a high probability of beating entrant attackers when the contest is about 
 sustaining innovations Source: (Christensen, 2000)
  36. 36. Red Ocean Industry ! Bloody Competition   Well know industry boundaries   Rules are established, sustained Innovation   Commodities Disruption Blue Ocean   ! Value Innovation   Align innovation with utility, price, and cost position New
 new markets  
  37. 37. Disruptive Technology The product performance is good enough and affordable to fulfil a unfilled need in the market
  38. 38. The Disruptive 
 Innovation Theory New organisation can use relatively simple, convenient, low-cost innovations to create growth and triumph over powerful incumbents Source: (Christensen, 2000)
  39. 39. Source: (Christensen, 2000)
  40. 40. 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 Source: (Christensen, 2000)
  41. 41. New Market Occur when characteristics of existing products limit the number of potential consumers or force consumption to take place in inconvenient, centralised settings Source: (Christensen, 2000)
  42. 42. The Disruptive Innovation Theory Source: Christensen et. al. Seeing what’s next
  43. 43. 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 Source: (Christensen, 2000)
  44. 44. Disruption and Innovation Force  Majeure   Legal/Regulatory   Political   Disruptive  changes  in Business  Environment Competitor  Strategy   Opportunity/Pitfall  to   Make/Lose  Money Financial   Popular  opinion  or  fashion   Technology Source: Yang, Harvard
  45. 45. Western  Union  Telegraph  Business
  46. 46. The RPV Theory Resources, Processes and Values Theory ! R e s o u r c e s (what a firm has), 
 P r o 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)
  47. 47. 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 Source: (Christensen, 2000)
  48. 48. The  RPV  Theory Possible consequences Source: Christensen et. al. Seeing what’s next
  49. 49. Western  Union  Telegraph  Business
  50. 50. 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
  51. 51. Western Union was in the telegraph business, not the communication business
  52. 52. Key Concepts The Disruptive Innovation Theory The Innovators Dilemma Resources, Processes and Values Theory
  53. 53. READING ASSIGNMENT Economist article: The last Kodak moment? ! Kodak is at death’s door; Fujifilm, its old rival, is thriving. Why?