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Disruptive Technologies – a closer look
The document discusses the concept of disruptive innovation and presents historical examples such as Kodak, Nokia, and Netflix, illustrating how established companies failed to adapt to market changes. It outlines the characteristics of disruptive innovations and emphasizes the necessity for companies to recognize and respond to disruptions in order to survive. Furthermore, it offers strategic advice on how to sustain innovation and adapt to new challenges in a rapidly evolving market.
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Disruptive Technologies – a closer look
- 1. Kannan Subbiah Principal Consultant,Blu Bricks Consulting
- 2. Agenda Context Disruptionsstories of the past The Theory behind it Surviving Disruptions Potential Disruptions Q&A
- 3. Context Disruptions aregood for customers Brings cheaper products Better products Does the job effectively and efficiently But they disrupt Established companies Market of well settled product(s) Happening a lot quicker Not all innovations are disruptions
- 5. Kodak You press the button, we do the rest Was the Apple of the last century Quick Facts Founded in 1892 by George Eastman Invented the first photographic film in roll form Added to Dow Jones in 1934 Accounted for 90% of film sales and 85% of camera sales in 1976 Employed 145,000 in 1988 Pioneer in digital camera with first megapixel prototype in 1975
- 6. Kodak Whatwent wrong? A Paradox between logic and creativity in strategy Heavy dependence on films and progressively less attention on the equipment Avoided risky decisions and maintained status quo Lacked the frame-breaking GTP approach Change came in too late in 2003
- 7. Kodak What went wrong? A Paradox between Revolution & Evolution Market signals came as early in 1981 (Sony’s filmless digital camera) Found hard to believe in something that was not as profitable as films Digital age necessitated a Revolutionary change, but Kodak did it too slowly , too late
- 8. Kodak What wentwrong? A paradox between Markets & Resources in strategy Took a market based view (MBV) as late in 2003 to broaden its digital presence But, the market change was rapid there after Kodak’s core-competency in the digital photography value chain was very little.
- 9. NOKIA Was oncethe leading mobile company Pioneered many innovations Own operating system Role in development of GSM & SIM technologies Earns Euro 400 million in royalties from competitors Was late in responding to the smart phone disruption What went wrong? 2004: Citing risks of failure, did not pursue the development of smartphones. Has missed the disruptive innovation that opened up new customers & Markets.
- 10. Netflix Firstmover with instant streaming advantage An attempt to survive disruption A case of self disruption Decoupling of DVD and streaming services in terms of pricing What went wrong? Not separating the pricing earlier Not re-branding the streaming as a separate business Not adding a streaming rental service
- 12. What is DisruptiveInnovation Definition of Disruption: the act of breaking regular flow or continuity of something; disturbance; a disorderly outburst or tumult; dislocation, especially an event resulting in dislocation or discontinuity Clearly to be disruptive, something has to disrupt the status quo. Certainly a disruptive innovation should minimally cause a market disturbance. it needs to succeed at obsoleting a product category altogether.
- 13. Characteristics Offersinferior outcome in the beginning But has an extendable core within it It is adopted by an underserved or not served market It follows a pattern and could happen to any one Decimates the market share of large incumbents in few short years Comes almost from where it is least expected Incumbents are unable to respond to the competition Usually a technology innovation is present, but not always
- 14. IT – anenabler of disruption With IT The disruptions are inherent Catching up like a viral disease Brings impacts in unrelated industries as well It is the application of technology that disrupts and not the technology itself Mobility is bringing in a wider disruption
- 15. Performance of DisruptiveTechnology
- 16. It is aCatch up game Short video
- 18. Sustain the innovation See it coming Single event than a process Some times quickly and completely, and other times slowly and incompletely Are you among the targets? An opportunity / risk? Not just a price competition
- 19. Sustain the innovation Understand the dynamics The business model The purpose vs. the customers Barriers for the disruptor The advantage matters Keep a watch on the changes
- 20. Be a Distruptor Setup the right structure
- 21. Plan the exit Dilute stake Go public Rope in private investors Merge Be acquired Sell Liquidate
- 22. Leading Disruptive innovation LEAPS Strategy Listen Start with yourself, Not the market Explore Go outside to stretch the inside Act Take Small simple steps, Again and Again and Again Persist Take the surprise out of failure Seize Make the journey part of the (Surprising) Destination
- 24. 1. Post PCdevices
- 25. 2. Mobile ApplicationsAnd HTML 5
- 26.
- 27. 4. Enterprise AppStores
- 28. 5. The InternetOf Things
- 29. Vision of thefuture Futuristic Short Film by Sight Systems
- 30. References Meeting the Challenge of Disruptive Change by Clayton M. Christensen and Michael Overdorf Disruptive Confusion Unravelled by innovativedisruption.com Surviving Disruption by Max Wessel and Clayton M. Christensen The impact of Disruptive Technologies on Designated organizations within the IT industry in South Africa by A.C. Windell
- 31. Thank You Q&A My Contact Details: Email : kannan@kannan-subbiah.com : kannan@blubricksconsulting.com Linkedin : http://www.linkedin.com/in/ksubbiah Twitter : @kannagoldsun
Editor's Notes
- #4 Choice of topic – EA and IT Governance, Culture and IT Governance. Couple of articles on disruptive trends.Pocket transistors displaced bigger valve radios, evolution of mobile phones.Motorola a leader in communications are now at the bottom in the market share; NOKIA struggles to make a come back. Apple even strives hard to sustain their position.
- #5 Disruption – a disease; Many stories of PCs disrupting Mini Computers, Toyota disrupting General Motors, CISCO disrupting Lucent & Nortel …
- #6 Individual experiences of photographyPrime strengths of Kodak in Films & Film processingEnded up as a victim of its own success.It did innovate successfully for over 100 years and has a portfolio of over 1100 patents, which later was sold for over USD500 millions.
- #7 Innovated successfully for over 100 yearsSaw the disruption in the form of digital innovation coming as early in mid 1970s.Roadmap for transitioning into digital in 1979But, until early 2000s, it was believed that digital initiatives would be complementaryRTP – Rational Thinking Perspective; GTP – Generative Thinking Perspective
- #8 Bob Laperle – Led teams assessing the impact of digital technologies as early in 1990sThe board missed an opportunity when it replaced the CEO Colby Chandler in 1990 with Kay WhitmoreThe team had hard time getting approval for the digital strategy.It was too late when George Fisher was brought in in 2004.
- #9 RBV – Resource Based View; MBV – Market Based View (Outside-in perspective)Clayton Christensen – Sees a pattern in all such disruptions and he blames it on the best management principles. In fact the victims of the disruptions did follow the best management principles and sees that the outside-in approach would have helped managing this disruption better.
- #10 Nokia was in fact ahead in Innovation Smart phone in 2004 – large bright screen with internet access and touch enabled. Culture of complacence prevailed and the management killed that idea.Three years later, Apple launched the iPhone with the features of the smartphone NOKIA prototyped in 2004.Another three years afterwards, Smartphones started disrupting the mobile phone market and NOKIA’s market share slipped to just 8%.NOKIA as we all know is now trying hard to come backGood Management kills innovation – Clayton ChristensenThe choice is not whether to change, but to watch the change disrupt them or to make it happen voluntarily, intelligently and elegantly.
- #11 Reed Hastings, the co-founder of NetFlix became popular for his 671 word apology to its customers. It started as “I messed up and owe you an explanation …”The decision to separate the subscriptions for the streaming businesses resulted in 60% increase for the customers.NetFlix did this realizing that the video streaming is on its course to disrupt the DVD industry.In the process, NetFlix is creating confusion and complexity with negative publicity being the result.DVDs are still about 75% of US video sales and NetFlix’s messed up pricing strategy had an impact on is DVD business too!
- #14 The fall of Mini Computers – evolved in 1960s; Though Micro Computers were introduced in the late 1970s, it took a while for it to disrupt the mini computers.Digital Equipment Corporation – was believing that its customers are happy with Minis rather than Micros for about a decadeFacebook – initially meant for college students, opened up for the upmarket and now the enterprises see it changing the rules of economics – socionomics.Digital photography – delayed adoption due to the slow evolution of its peripherals, like photo printers, photo viewers, etc.Every successful company follows the pattern of s curveGPS market being disrupted by the smartphones – A case that disruptions can impact cross market.Nokia’s case – Not being able to respond to disruptive trends.Some times a business model can disrupt a market – Share Autos.
- #15 For most of the recent disruptions, IT and more specifically the Internet is at the root.Evolution of Smartphones – IT is behind itDigital Cameras – It is IT behind itSecurity and Surveillance systems – IT is making it possibleIT related disruptions are spreading like a viral disease across heterogenous markets – Recent Advertisement of a city based call taxi – wi-fi on the go, Automatic SMS alerts to predefined mobile(s)
- #16 Innovations are of two types – Sustaining and DisruptiveSustaining – maintains the rules of the game vs Disruptive – break the rules; game changersChanging market boundaries low end market
- #17 Conception. When a disruptive idea is first born, typically far away from the market’s mainstream. In these early days, there typically are a range of companies experimenting with a new model, fighting to figure out a sustainable business model.Coming of age. When at least one of the would-be disruptors crosses from the fringes to more mainstream applications.Crossing over. When the disruptor becomes the mainstream. Sometimes this shift results in the whole-sale replacement of the previous market leader; sometimes it creates a completely parallel market (which typically ends up being larger than the previous market due to the democratizing power of disruption).”
- #20 The difficult part is seeing a disruptor emerging. By the time one sees it, it might already be late.Risk Management approach can certainly help in seeing it, but identifying the specific innovation as a risk is still a challenge.The disruptors emerge from no where to mainstream, so the chances of considering oneself as a potential victim of disruption is remote.
- #21 Christensen advocates to look at what for and why the customers use the products as against who are using it.Identify what barriers hold the disrupters from entering into mainstream.Special purpose GPS devices vs Mobile Phone GPS – talk about the advantages and disadvantages and the barriers.Taxis vs Car Pooling – discuss the advantages and disadvantages and the potential barriers
- #22 Many times, the disruptors emerge from an unorganized sector with no process boundaries and principles. It is that structure that makes them a disruptor.
- #23 When it is too late to stage a come back, plan for the exit, intelligently and elegantly.
- #24 A typical characteristic of a startup fosters disruptive innovation
- #26 Steve Jobs made mention of it in 2011 during the iPad 2 launch.There are arguments for and against all along and it looks like it is coming.Microsoft responded to this threat with its Windows 8, a unified operating system for all Post PC devices alike.Michael Dell founder & CEO of DELL still thinks that PCs would co-exist alongside the Post PC devices, In recent public conference, he asked can any one edit a power point presentation on a mobile phone. This is the impression the disruptions paint for the incumbents, the incumbents have reasons to believe that they are not amongst the target.Considering the principle of surviving the disruption, if editing a power point is a barrier, then this can certainly be overcome by the disruptors.
- #27 Linked with the Post PC devices and the BYOA trend, enterprises are exploring options to save costs in unifying their applications. HTML5 and CSS3 standards are certainly an option as all devices irrespective of the hardware architecture and OS, they offer a standards compliant web browser and that is what is needed to run HTML5 CSS3 based applications.Microsoft tries to be in the game by addressing this problem by unifying their operating system across a variety of devices, so that applications built using its development tools work on all.
- #28 Microsoft looks at the Post PC era as PC +1, that is every one will own a PC in addition to one or more Post PC gadgets / devices.Whether that be the case or not, personally every one today now interact with more than one device from more than one location.How many of us use cloud drives to manage this problem?Not many, but this could be a game changer down the line. The barrier here could be security, internet data cost, which could be overcome down the line.Instead of investing on local device specific storage media, it would be better to go for cloud based storage space.
- #29 With BYOD, BOYA (App) is also catching up. With a myriad of devices to manage, IT heads find managing inventory and licensing of the enterprise applications a daunting task. The evolution of mobile devices have brought with them an App Store ecosystem, a similar kind of it for the enterprises can resolve much of the challenges and this will drive and be driven by the BYOD.
- #30 As we have touched on in one of the earlier slides, Internet is a key enabler of disruptive innovations across industries. Many innovations are being made possible simply by connecting things. AT & T and GM have recently announced that all cars that roll out late in 2014 will be connected using AT & T LTE network.Die Hard 4 – remote start assistance of carInnovations are already happening around this space, but we can expect lots of such innovations being disruptive.