Big Bang Disruption ACHE of Massachusetts May 2013
Pinball not only survived the early period of arcade video games, it thrived…
New Wizards Flipping Out Over PinballPinball is back, after nearly dying in the mid-'80s as video games took over. In 1983, pinball accounted for only 5 percent of the amusement industry market. But by 1990, the number had jumped to 30 percent.March 10, 1994, San Francisco Chronicle
Units, hundred-thousands
Full-Tilt Comeback
“…I've played video games, but I like pinball
more… Sooner or later, you grow out of video
games. You never grow out of pinball.".
April 28, 1995, Tampa Tribune
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…but then along came a Big Bang Disruptor…
Pinball Units Sold(Hundreds of Thousands Per Year)
Playstation™ Units Sold(Millions Per Year)
1989 1992 1995 1998 2001 2004
0
0.5
1.0
1.5
0
10
20
30
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…and then another appeared in travel…
Thousands Millions
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… and another wiped out newspapers
Ad Revenue, $US, billions
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Some examples by industry
• Manufacturing – The “Internet of Things” drives the supply chain from the bottom
• Health care – Biometric sensors demystify the shamanistic myth of medicine
• Finance – Money becomes just another form of information
• Government – Market pricing for public services
• Consumer Products – Market-led marketing takes over
• Energy – Practical fuel cells…launched on Kickstarter
• Education – The virtual ivory tower revolutionizes learning
• Utilities – Portable electricity networks mirror wireless communications
• Pharmaceuticals – Bespoke drugs based on your DNA
• Retail banking – The end of cash
• Retail – The disruptive force of the sharing economy
Where can we expect Big Bangs?
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Disruption pending in the healthcare industryAdvances in telecommunications, precision diagnostics, and information management and decision-making tools could result in a variety of disruptions:
Where can we expect Big Bangs in healthcare?
Copyright © 2013 Accenture All rights reserved.Adapted from David Chase’s Forbes article “Healthcare CEO’s Guide to Avoiding Newspaper Industry Mistakes”
New curve of market adoption of innovation
Innovators(2.5%)
Early Adopters(13.5%)
Late Majority(34%)
Laggards(14%)
Early Majority(34%)
Trial Users
Everybody else
Big-Bang Market Segments
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Three key characteristics of Big Bang Disruption
Time
Mar
ket
Penet
rati
on
Unencumbered Development
Undisciplined Strategy
Unconstrained Growth
Traditional Technology Product Adoption
Big Bang Disruption
9
Undisciplined Strategy: You can’t beat it
• BBDs begin life with better performance, lower price, and greater customization.
• Customers now expect new products to be better and cheaper.
• In fact, BBDs rarely come from traditional competitors – many are never intended to compete directly with the incumbents they disrupt.
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Standalone GPS
•$100 - $300
•Intermittent update
•Little to no real time context
Smartphone Nav App
•Free
•Real time updates of data and software
•Integrated with contacts and search
How Google Maps Navigation Beta “Big Bang” disrupted personal navigation devices
“There’s been no market impact on the demand for standalone GPS devices”
- TomTom SVP regarding the smartphone market, in 2010
$US millions
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They disrupt without even trying
From 2010 to 2011, TomTom’s:
•sales declined by 29%
•stock lost 60% of its value
•market cap fell from $2.3 billion to $1.3 billion
Technology costs are declining logarithmically, and it’s not just Moore’s Law
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Cost of 1 GB of data storage
Cost of 1 MIPs of mainframe computing power
Cost of 1 Mbps of data transfer
How can something be better and cheaper?
How can something be better and cheaper?
When technology-driven deflation is greater than innovation costs
Deflationary pressures on innovation:
•Crowdsourcing
•Open source communities
•Open innovation
•Open markets
•Nonstop seamless channels
•Crowdfunding
Deflationary pressures on costs:
•Moore’s Law effects on
– Core technologies
– Sourcing
– Manufacturing
– Distribution
– Selling
– Servicing (!)
– Other costs
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Innovation costs = technology savings
Better, but more expensive here
Better andcheaper here
Per unit cost of innovation
Per unit cost of technology
TimeCost
+
-
14
Four eras of disruptive innovation theory
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Blue Ocean Strategy
Big Bang Disruption
Innovator’s Dilemma
Traditional Product
Innovation
Unconstrained Growth: You can’t stop it
• Near-perfect market information eliminates market segmentation –there are only “trial users”and “everyone else”
• Unconstrained growth causes once-healthy businesses to die off almost overnight.
• Uptake and abandonment slopes are nearly vertical.
* Estimated based on annual report unit sales and revenuesCopyright © 2013 Accenture All rights reserved. 15
The shifting model of innovation adoption and industry change
Old Model of Industry Change New Model of Industry Change
Perf
orm
ance
Time
The Innovator’s “Dilemma Zone”
“Sudden Death” Line
Big Bang“Disruption Zone”Big Bang disruptors demolish industries before S-curves have reached maturity.
Perf
orm
ance
Time
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Unencumbered Development: You can’t see it
• BBD innovations are born of rapid, low-cost experiments in the market, and use ubiquitous platforms.
• Failed experiments are conducted cheaply and quickly, built on the Internet, cloud computing, and fast cycling mobile devices.
• When the winning BBD arrives, its succeeds suddenly.
20031993 1996 19991998
20071992 1998 20062004
Napster
iTunes Music StoreInternet
Underground Music Archive
Ritmoteca.com, eMusic
Cductive
Kindle™Expanded
books
Rocket eBook, SoftBook
Librié
iLiad, Reader
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Big Bang Disruption upends conventional wisdom
Conventional Wisdom Big-Bang Wisdom
Focus on only one strategic “discipline” or “generic strategy” – low cost, product innovation, or customer intimacy.
First target a small group of early adopters and later enter the mainstream market.
Seek innovation in lower-cost, feature-poor technologies that meet the needs of underserved customer segments.
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The accelerating pace of Nintendo® game systems
Nintendo Console Sales: Accelerating Sales, Accelerating Declines
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Four stages of Big Bang Disruption
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1. See it coming
2. Slow innovation long enough to better it
3. Get closer to the exits, ready for a fast escape
4. Try a new kind of diversification
Strategic Imperatives by Stage
SingularityBig Bang
BigCrunch
Entropy
SingularityBig Bang
BigCrunch
Entropy
Some strategy implications by stage
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Risk Management
No prize for second place
Catastrophic success; business interruption in supply, delivery
Instant obsolescence; return on residual assets (RORA)
How to win the endgame
Pricing Design to a target price
Exploit optimal market-saturating prices
Discount to create optimal competitor delay and profits
Return to pricing power as last player standing
M&A Even-more-openinnovation
Optimize virtual and vertical integration
Partners to collar risk; strategic abandonment
Consolidation in the endgame
EntropyBig CrunchBig BangSingularityStrategy
Stage
Disruption pending in the healthcare industryAdvances in telecommunications, precision diagnostics, and information management and decision-making tools could result in a variety of disruptions:
Where can we expect Big Bangs in healthcare?
Copyright © 2013 Accenture All rights reserved.Adapted from David Chase’s Forbes article “Healthcare CEO’s Guide to Avoiding Newspaper Industry Mistakes”
Questions
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http://www.accenture.com/us-en/Pages/insight-surviving-big-bang-disruption.aspx
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