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Disruptive Technology - Why large companies often fail to innovate

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Why do large companies often fail to innovate? Often it is good management, that has made them become industry leaders. This paper gives an analysis of the 5 principles of disruptive technologies and some advice what managers of large companies can do.

Published in: Leadership & Management
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Disruptive Technology - Why large companies often fail to innovate

  1. 1. by Norman Hiob DISRUPTIVE TECHNOLOGY WHY LARGE COMPANIES OFTEN FAIL TO INNOVATE
  2. 2. © NORMAN HIOB WHY DO LARGE COMPANIES OFTEN FAIL TO INNOVATE?
  3. 3. © NORMAN HIOB 5 REASONS
  4. 4. © NORMAN HIOB 1 COMPANIES DEPEND ON CUSTOMERS
 AND INVESTORS FOR RESOURCES
  5. 5. © NORMAN HIOB GOOD MANAGERS
 DO WHAT
 MAKES
 SENSE © NORMAN HIOB
  6. 6. © NORMAN HIOB WHAT MAKES SENSE IS PRIMARILY SHAPED BY THEIR VALUE NETWORK © NORMAN HIOB
  7. 7. © NORMAN HIOB VALUE NETWORK = ECONOMIC ECOSYSTEM
  8. 8. © NORMAN HIOB COMPANIES MUST SATISFY…
  9. 9. © NORMAN HIOB CUSTOMERS © NORMAN HIOB
  10. 10. © NORMAN HIOB INVESTORS © NORMAN HIOB
  11. 11. © NORMAN HIOB WITH PRODUCTS, SERVICES AND PROFITS THAT THEY REQUIRE
  12. 12. © NORMAN HIOB WHICH LEADS TO
  13. 13. © NORMAN HIOB RESOURCE DEPENDENCE COMPANIES FREEDOM OF ACTION IS LIMITED TO SATISFYING THE NEEDS OF EXTERNAL ENTITIES
  14. 14. © NORMAN HIOB IN OTHER WORDS
  15. 15. © NORMAN HIOB IT DRIVES THE ALLOCATION OF RESOURCES
  16. 16. © NORMAN HIOB TOWARDS SUSTAINING TECHNOLOGIES © NORMAN HIOB
  17. 17. © NORMAN HIOB AND AWAY FROM DISRUPTIVE ONES © NORMAN HIOB
  18. 18. © NORMAN HIOB 2 MARKETS THAT DON’T EXIST CAN’T BE ANALYSED

  19. 19. © NORMAN HIOB THE TECHNOLOGY S-CURVEProductperformance Time or engineering effort Richard N. Foster: „Innovation: The attacker's advantage“, New York, Summit Book, 1986 OFTEN USED TO PREDICT NEW TECHNOLOGIES
  20. 20. © NORMAN HIOB THE TECHNOLOGY S-CURVEProductperformance Time or engineering effort Richard N. Foster: „Innovation: The attacker's advantage“, New York, Summit Book, 1986 DECREASING RATE OF IMPROVEMENT INDICATES THAT A NEW TECHNOLOGY MAY EMERGE
  21. 21. © NORMAN HIOB USEFUL FOR SUSTAINING TECHNOLOGIES
  22. 22. © NORMAN HIOB #1 Sustaining technologies IMPROVES
 PRODUCT PERFORMANCE Productperformance Time or engineering effort Technology #1 Technology #2 Technology #3 Clayton M. Christensen: „Exploring the Limits of the Technology S-Curve“, Productions and Operations Management 1, no. 4, 1992
  23. 23. © NORMAN HIOB BUT NOT FOR DISRUPTIVE TECHNOLOGIES
  24. 24. © NORMAN HIOB #2 Disruptive technologies Technology #1 Technology #2 Technology #2 Application (Market) „A“ Application (Market) „B“ Time or engineering effort Productperformance DISRUPTS OR REDEFINES PERFORMANCE TRAJECTORIES Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 10, 47
  25. 25. © NORMAN HIOB PROBLEM
  26. 26. © NORMAN HIOB MOST MANAGERS LEARN ABOUT INNOVATION IN
 A SUSTAINING CONTEXT
  27. 27. © NORMAN HIOB Sustaining innovations MARKETS: KNOWN CUSTOMERS: UNDERSTOOD MARKET
 RESEARCH
 GOOD
 PLANNING
 EXECUTION ACCORDING
 TO PLAN + + © NORMAN HIOB
  28. 28. © NORMAN HIOB MARKET
 RESEARCH
 GOOD
 PLANNING
 EXECUTION ACCORDING
 TO PLAN + + Disruptive innovations MARKETS: UNKNOWN CUSTOMERS: UNKNOWN © NORMAN HIOB
  29. 29. © NORMAN HIOB MARKETS THAT DON’T
 EXIST CAN’T
 BE ANALYSED
  30. 30. © NORMAN HIOB APPLICATIONS FOR DISRUPTIVE TECHNOLOGIES ARE UNKNOWABLE
  31. 31. © NORMAN HIOB 3 SMALL MARKETS DON’T SOLVE
 THE GROWTH NEEDS OF LARGE COMPANIES
  32. 32. © NORMAN HIOB SUCCESSFUL COMPANIES NEED TO GROW © NORMAN HIOB
  33. 33. © NORMAN HIOB WHY?
  34. 34. © NORMAN HIOB TWO REASONS
  35. 35. © NORMAN HIOB 1 CREATE INTERNAL OPPORTUNITIES FOR EMPLOYEES

  36. 36. © NORMAN HIOB 2 MAINTAIN
 OR INCREASE SHARE PRICE

  37. 37. © NORMAN HIOB GROWTH RATE SHARE PRICE =
  38. 38. © NORMAN HIOB PROBLEM SMALL MARKETS OF DISRUPTIVE TECHNOLOGIES DON’T SERVE THE NEAR- TERM GROWTH OF LARGE COMPANIES
  39. 39. © NORMAN HIOB REVENUE 2016 GROWTH
 RATE ADDITIONAL REVENUE $40M 20 % $8M $400M 20 % $80M $4G 20 % $800M Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 147-148 SMALL COMPANY LARGE COMPANY
  40. 40. © NORMAN HIOB RESULT
  41. 41. © NORMAN HIOB LARGE COMPANIES LOSE THE CAPABILITY TO ENTER SMALL EMERGING MARKETS
  42. 42. © NORMAN HIOB THEY OFTEN FAIL, BECAUSE THEY WAIT TOO LONG UNTIL THE
 MARKET IS ESTABLISHED © NORMAN HIOB
  43. 43. © NORMAN HIOB 0 % 10 % 20 % 30 % 40 % ESTABLISHED MARKET EMERGING MARKET Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 143-146 FIRMS REACHING $100M WITHIN TWO YEAR OF ENTERING THE MARKET
  44. 44. © NORMAN HIOB FIRMS THAT ENTERED
 SMALL, EMERGING
 MARKETS CAPTURED
  45. 45. © NORMAN HIOB 20TIMES 
 THE 
 REVENUE
 Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 143-146Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 143-146
  46. 46. © NORMAN HIOB THAN FIRMS THAT ENTERED ESTABLISHED MARKETS
  47. 47. © NORMAN HIOB 0 500.000.000 1.000.000.000 1.500.000.000 2.000.000.000 ESTABLISHED MARKET EMERGING MARKET Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 143-146 AVERAGE REVENUE CAPTURED PER FIRMS WITHIN TWO YEAR OF ENTERING THE MARKET
  48. 48. © NORMAN HIOB 4 COMPANIES CAPABILITIES RESIDE IN THEIR PROCESSES AND VALUES
  49. 49. © NORMAN HIOB TWO COMPANIES BA
  50. 50. © NORMAN HIOB SAME RECOURSES = A B … …
  51. 51. © NORMAN HIOB DIFFERENT OUTPUTS ≠ A B
  52. 52. © NORMAN HIOB WHY?
  53. 53. © NORMAN HIOB PROCESSES AND VALUES
  54. 54. © NORMAN HIOB PROCESSES FORMAL INFORMAL CULTURAL Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 185-196 © NORMAN HIOB
  55. 55. © NORMAN HIOB ESTABLISHED TO PERFORM TASKS IN A CONSISTENT WAY (= VALUE CREATING MECHANISMS) © NORMAN HIOB
  56. 56. © NORMAN HIOB PROBLEM
  57. 57. © NORMAN HIOB EMERGING MARKETS REQUIRE A DEGREE OF AGILITY
  58. 58. © NORMAN HIOB BUT…
  59. 59. © NORMAN HIOB PROCESSES ARE INIMICAL TO CHANGE
  60. 60. © NORMAN HIOB VALUES CRITERIA BY WHICH DECISIONS ABOUT PRIORITIES ARE MADE Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 185-196 © NORMAN HIOB
  61. 61. © NORMAN HIOB COMPANIES THAT FOCUS ON HIGH-MARGIN PRODUCTS © NORMAN HIOB
  62. 62. © NORMAN HIOB CAN NOT
  63. 63. © NORMAN HIOB SIMULTANEOUSLY FOCUS PRIORITIES ON LOW-MARGIN PRODUCTS * * EMERGING MARKET
  64. 64. © NORMAN HIOB 5 TECHNOLOGY SUPPLY MAY NOT EQUAL MARKET DEMAND

  65. 65. © NORMAN HIOB INITIALLY USE OF DISRUPTIVE TECHNOLOGIES IN SMALL MARKETS ONLY
  66. 66. © NORMAN HIOB TECHNOLOGY SUPPLY MARKET DEMAND ≠ * MAINSTREAM MARKET *
  67. 67. © NORMAN HIOB BUT…
  68. 68. © NORMAN HIOB DISRUPTIVE
 TECHNOLOGIES EVOLVE FASTER THAN MAINSTREAM MARKETS
  69. 69. © NORMAN HIOB TOMORROW, THEY MAY BECOME COMPETITIVE IN MAINSTREAM MARKETS
  70. 70. © NORMAN HIOB LET’S SUMMARISE WHY LARGE COMPANIES FAIL TO INNOVATE
  71. 71. © NORMAN HIOB 1 2 3 4 5 TECHNOLOGY UNDERSUPPLY RESOURCE DEPENDENCE UNKNOWN MARKETS GROWTH NEEDS PROCESSES AND VALUES
  72. 72. © NORMAN HIOB WHAT TO DO?
  73. 73. © NORMAN HIOB GIVE AWAY RESPONSIBILITY TO FIRMS WHOSE CUSTOMERS NEED THE TECHNOLOGY
  74. 74. © NORMAN HIOB SO RESOURCES WILL FLOW
 TO THEM
  75. 75. © NORMAN HIOB CHECK INNOVATION REQUIREMENTS FIT WITH PROCESSES AND VALUES
  76. 76. © NORMAN HIOB SET UP SEPARATE ORGANISATION SMALL ENOUGH TO GET EXCITED BY SMALL GAINS
  77. 77. © NORMAN HIOB 1 SPINS-OFF CREATE AN ORGANISATION WHOSE SIZE MATCHES THE OPPORTUNITY
 
 Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 154-155
  78. 78. © NORMAN HIOB 2 INCUBATE ACQUIRE A SMALL COMPANY WHOSE STRUCTURE MATCHES THE OPPORTUNITY
 
 Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 154-155
  79. 79. © NORMAN HIOB DISCOVERY
 DRIVEN LEARNING TEST MARKET ASSUMPTIONS Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 180-182
  80. 80. © NORMAN HIOB PLANS FOR EXECUTION PLANS FOR LEARNING Clayton M. Christensen: “The Innovators Dilemma“, Harper Business, New York, 2011, p. 180-182
  81. 81. © NORMAN HIOB PLAN FOR
 FAILURE DON’T RUN OUT OF RESOURCES OR CREDIBILITY
  82. 82. © NORMAN HIOB 1 2 3 4 5 PLAN FOR FAILURE FIND NEW CUSTOMERS CHECK PROCESSES AND VALUES SET UP SEPARATE ORGANISATION CREATE PLANS FOR LEARNING
  83. 83. © NORMAN HIOB ARE YOU READY TO INNOVATE? © NORMAN HIOB
  84. 84. © NORMAN HIOB GET IN TOUCH! 
 Norman Hiob Olivaer Platz 17 10707 Berlin normanhiob@me.com

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