This document provides an overview of a MIT course on technology strategy and industry life cycles. It discusses Apple's performance and competition in 2007, with revenue coming mostly from computers, iPods, iTunes and the new iPhone. It introduces frameworks for analyzing industry life cycles as an S-curve, with phases of ferment, takeover, maturity and discontinuity. Transitions often challenge existing organizations. The nature of technical work and marketing challenges evolve over the life cycle. Relationships between S-curves, diffusion curves, and constraints like technology, organizations, demand, competition are discussed.

1. MIT OpenCourseWare
http://ocw.mit.edu
15.912 Technology Strategy
Fall 2008
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2. Introduction to
Industry Life Cycles and Market
Evolution
Professor Jason Davis
MIT Sloan School of Management

3. Apple Update
• Performance:
– 2007 Revenue Breakout: Computers (43%), iPod (35%), iTunes (10%),
iPhone (1%)
– 2006 vs. 2007 stock price: almost double (75 vs. 130)
• Competition continues:
– Amazon’s store offers competition with iTunes…NBC moves there
– Handset companies rush to music & video
• Collaboration evolves:
– Exclusive service provider strategy…might open this up after 2010
– Friendly relations with MSFT after major investment and Windows iTunes
success
– Friendly relations with Google after Youtube and Google Maps iPhone
collaborations
• Relentless Innovation:
– MacBook AIR a relative flop, but moves them closer to thin client dream…

4. Value Creation: Technology, Markets,
and Organizations
How will we
Create value?
How will we
Capture value?
How will we
Deliver value?

5. A Key Framework:
The industry life cycle
Era of Ferment/
Discontinuity
Maturity
“Dominant design”
emerges
Incremental
Innovation

6. Maturity
The Industry Life Cycle as an S curve
Performance
Discontinuity
Takeoff
Ferment
Time

7. The S‐curve Maps Major Transitions
Performance
Ferment
Takeoff
Maturity
Discontinuity
Time

8. Cobilt
Canon 67 9
GCA 55
Total 75 81
Transitions often challenge existing
organizations severely
Cumulate share of sales of photolithographic alignment
equipment, 1962-1986, by generation
Contact Proximity Scanner S&R (1) S&R (2)
44 <1
Kasper 17 8 7
21
P-Elmer 78 10 <1
12
Nikon 70
61 99+ 82+

9. But they also create major
opportunity
• Corning glass
– Cookware to optical fiber
• Nokia
– Rubber boots to cell phones
• IBM
– Mainframes to PCs to Services
• Eli Lilly
– “Random” drug discovery to genetics and
genomics

10. The nature of technical work changes
Performance
We need to be
responsive & flexible
but controlled
Will it work?
Exploration, fun,
Can we make creativity key
100,000?
And service them?
Core Ideas:
Will it work? Forecasting S curves?
Exploration, fun,
creativity key
Time

11. The marketing challenge evolves
Performance
Stay close to your
customer – really close
Who
Do we have
needs this?
any reference
customers?
Core Ideas:
Market segmentation
Who The Innovator’s
Dilemma
Time
needs this?

12. What is the relationship between the
S curve and the diffusion curve?
Performance Cumulative sales
=> ?
Time Time

13. Diffusion is Hard…start with limits and
growth
• Supply:
– Technology S‐curves! …a natural constraint.
– Effective Organization …we’re not there yet.
• Demand:
– Ultimate Market Limit…changes with demographic growth & changing
preferences
– Rate of Information Transfer
– Substitutes
– …
• Competition:
– Price competition can shift growth…
• …and the interactions between Supply, Demand, and
Competition!

14. For Next Session:
• Reflections on Market Evolution:
– Diffusion over the lifecycle
– Relationship between S‐curves and Diffusion curves
– Roger’s Customer Segments:
• Crossing the Chasm
• Innovator’s Dilemma
– Disruptive Innovations
– Shifting Customer Preferences
• 2nd paper due Session 6 (so you have a
breather)