Disruptive Innovation Week # 5 Recognizing the Potential of an Innovation Think Bubbles (Quizzing to understand the customers’ experiential context pp.

Disruptive InnovationWeek # 5

Recognizing the Potential of an Innovation Think Bubbles (Quizzing to understand the customers’

experiential context pp. 50-56)

Instructor: J. Christopher Westland, Professor, ISMTTime: Tue & Thu 1:30pm-2:50pmVenue: Rm. 4333Duration: 5 Sep – 7 Dec

Text. McGrath & MacMillan, The Entrepreneurial Mindset, HBS Press 2000

Contact: Office: 852 2358 7643 Fax: 852 2358 2421 Email: [email protected] URL: http://teaching.ust.hk/~ismt302/

Background Theory (Recap)

Who Profits from Innovations? (Teece)

Two factors are instrumental to profiting from an innovation Imitability and Complementary Assets

In v en to ry o r p arty w ithb arg a in in g p ow er

In v en to r

H o ld er o fco m p lem en ta ry a ssets

P ro f it is D if f icu lt Hig h

L o w

F r ee o r Un im p o r tan t T ig h tly h e ld

C o m ple m e n ta ry A s s e t s

I m ita bility

What Knowledge underpins an Innovation (Abernathy-Clark)

Two kinds of knowledge underpin an innovation Technological Market Incumbents Fail when they Fail to “Get” one or the other type of Knowledge

A rch itectu ra lN ich e

R ev o lu tio n a ryR eg u la r P r es er v ed

D es tr o y ed

P r es er v ed D es tr o y ed

Te ch n ica l C a pa bilit ie s

M a rk e t C a pa bilit ie s

What Knowledge underpins an Innovation (Henderson-Clark)

Products are made up of components (even services) There exist two kinds of relevant knowledge

Component Architectural

R a d ica lM o d u la r

A rch itectu ra lIn crem en ta l P r es er v ed

D es tr o y ed


A rch ite ctu ra l K n o wle dg e

C o m po n e n t K n o wldg e

Dynamic Models of Innovation

In the previous models Only the invention or market commercialization

changes All else is fixed in time

In Dynamic Models The characteristics of the Environment and Product

Change over time

Utterback-Abernathy Dynamic Model

Three Phase (stage) Model Fluid phase

Mainly lab based or custom applications of technology Transitional phase

Standardization of components, and consumer-producer interaction lead to dominant design Specific phase

Products built around the dominant design proliferate; innovation is incremental

N ear C erta in tyN on techn ica l f acto rs

m ay be igno red

L ittle U n certa in tyL o w in f luence o f

non techn ica l f acto rs

M ed ium U ncerta in tyH ig h in f luence o f


H ig h U ncerta in tyH ig h in f luence o f


Hig h

L o w

E r a o f F er m en t E r a o f I n c r em en ta l C h an g e

S ta te o f Ev o lu t io n o f Te ch

C o m ple x ity

Some Thoughts: The sort of People a Firm Needs to Hire in order to Innovate?

Idea Generators Can sift through large quantities of technological and market

data to identify ‘innovations’ Gatekeepers & Boundary Spanners

Conduits for knowledge from other firms and labs Champions (Entrepreneurs, Evangelists)

Sell the innovation to the firm Sponsors (Coach, Mentor)

Senior level manager who provides behind the scenes support, access to resources, and protection from political foes

Project Managers Planners with discipline; one-stop decision making shop

The Importance of Organization Structure

To be successful a firm’s organizational structure has to effectively coordinate and integrate: R&D activities with Marketing activities

How does 3M do this? How would you do this at your firm?

The Innovator’s Dilemma

Recap: Disruptive Innovation and

The Attacker's Advantage

Disruptive Innovations

They are (1) Architectural; and (2) Radical



D es tr o y ed




A rch itectu ra lN ich e

R ev o lu tio n a ryR eg u la r P r es er v ed

D es tr o y ed




0

10000

20000

30000

40000

50000

60000

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Time

Co

st/

MIP

S

Basic Concept:Technology Acceleration fosters Attack from Below

Moore’s Law, Gilder’s Law, etc.

Make rapidly accelerating technology ‘free’ at some point in the future

Differentiates between sustainable and disruptive

The so called ‘innovators dilemma’

Giovanni Dosi’s

“Technology Trajectories”And the Attack from Below

Industry Dynamics:

Technology’s impact on Substitutes

Between 1976 and 1995 129 Disk drive

manufacturers entered the market

109 Disk drive manufacturers exited

Example:

Four Stages in Technological Substitution

Digital Cameras

Four Stages in Technological Substitution

Digital Cameras

Disruptive Innovation in Disk Storage

Example: Disk StorageStorage Pre-1950: IBM M80 Sorter and M77 Collator

Storage

5 MB in 1952

5-10 Megabytes in 1973 (14”)

Shrink …shrink …shrink

20MB Seagate (5.25”) c. 1986

100MB Conner (3.5”) c. 1990

1000MB IBM (1”) c. 2000

Darwin Rules

Between 1976 and 1995 129 Disk drive manufacturers entered the market 109 Disk drive manufacturers existed

1970s (after DL/1) Plug Compatible and OEM IBM,Diablo, CDC, DEC, Storage Tech, Ampex 2/3rds never introduced 8” drives

1980s (8” Winchester) Shugart Assoc., Micropolis, Priam, Quantum

1985+ (5.25” Winchester) Seagate, Miniscribe, Computer Memories, Intl. Memories

1987+ (3.5” Winchester) Conner, etc.

1989+ (2.5” Winchester) Prarietek, etc.

1992+ (1.8” Winchester) … and so forth

Tech Trajectories Disk Capacity Demanded vs. Capacity Supplied

The Industry Dynamics of ‘Attack from Below’

1. Technology Cost-to-Performance accelerates 1. At an exponential rate

2. With a constant year-on-year growth

2. Substitute products accelerate on new performance parameters1. Creating a sneak attack

2. At the low profitability end of an established firm’s market

3. As substitute technologies accelerate, they consume all of the market of established firms1. Driving previously successful firms out of business

Technologies that ‘Shrink’?

Cost-to-performance acceleration

How did the ‘Big Guys’ fare?

Defeated firms were not stupid

They were held captive by their customers While new entrants tooled for new markets And in the process consumed old markets

The only way to manage this successfully … … is Darwinian evolution

Successful Transition through Creative Disruption

Control Data 60% of 14” market from 1965-82 Missed the 8” market Set up 8” production in Oklahoma city, for successful entry

Conner for 5.25” Spin-off from Seagate and Miniscribe Compaq pushed their market

Quantum retains 80% of spin-off Plus Development Corp (for 3.5” drives) Plus consumes Quantum

1994 largest producer in world Micropolis: Transition by Managerial Force

Founded in 1978 by Stuart Mabon for 8” drives 1982, Mabon read the trajectories, and retooled for 5.25” They walked away from existing customers and nearly broke the firm

More Disruptive Change

Incumbents fail to innovate Because they spend too much time listening to

their existing customers

Here’s an example from the Excavator Industry

Caterpillar

and the Mechanical Excavator Industry

Cable-driven Steam Shovel Mnfd by Osgood General

The first upheaval

Steam shovels (mechanical excavators) were invented in the early 1800s

The first great upheaval occurred in the 1920s When gasoline replaced

steam as a power source 23 of the 25 largest makers of

steam shovels Successfully negotiated the

transition to gasoline power There were also around 20

new entrants And innovation continued with

diesel and electric power

The second upheaval

Hydraulics developed for aircraft in WWII Percolated into industry throughout the 1950s-60s Replaced cables Only 4 of the top 30 excavator manufacturers in the 1950s survived this

transition into the 1970s The new diesel-hydraulic entrants included:

Caterpillar As well as John Deere, Drott, Ford, International Harvester, Hitachi, Komatsu, Case,

Bamford, Poclain

What happened? How did Cat get its start?

Hydraulics

The first hydraulic excavator was developed in 1947 Limited by the power and strength of available hydraulic pumps’ seals, the capacity of early machines was minuscule And of no use in the major markets

Excavation Sewer contracting

Entrants like Cat developed new applications for their small capacity hydraulic excavator As attachments for the back of small industrial and farm tractors They called them ‘backhoes Useful to residential contractors, farmers, etc. to dig narrow ditches for sewer,

cable, etc. Jobs done by hand in the past and too small for the imprecise cable driven excavators

Stealthy Cat

Entrants like Cat developed new metrics to advertise their products Rather than measuring the quantity of earth that could be

moved as the cable-driven manufacturers advertised

Their product literature emphasized Shovel width (narrow being better for contractors) Speed and maneuverability of the tractor

So the bigger companies like Link Belt Didn’t even perceive Caterpillar as a competitor

Because they spoke a different language To different customers

Hydraulics and Performance Trajectories in the Mechanical Excavator Market

Caterpillar’s Climb By 1974, the hydraulic excavators

Had the muscle to lift 10 cubic yards of dirt A rate of improvement that outstripped demand in any of the

excavator markets In contrast, the largest makers of cable-driven excavators

Bucyrus Erie and Northwest Engineering Built better cable-driven machines, for their most profitable customers Because to do otherwise was not profit-maximizing

They logged record profits until 1966 When hydraulic excavators rapidly took over all the excavation

markets

Two Tragedies

(1) Not reaching your goal (2) Reaching your goal

Once a goal is reached Direction is lost Until another goal is set

Encore Problem: Once you’ve succeeded, How do you convince others that your success is

‘sustainable’ and not just luck

New Entrants went HydraulicMajor companies never introduced a successful hydraulic excavator

Why Cable went Bust Once both cable-driven and hydraulic-driven excavators could

satisfy all of the mainstream markets Excavation contractors no longer needed to base their choice of equipment

on which had longer reach and greater bucket capacity

Both were good enough, and cable vs. hydraulic became irrelevant

Contractors found that hydraulic machines were much less prone to breakdowns

than cable-driven excavators Not to mention the loss of life and limb resulting from a cable snapping

Cable’s demise was not due to poor knowledge or strategy

How Japanese Manufacturers Sneaked up on Cat

Entrants like Komatsu developed new metrics to advertise their products Caterpillar measured

Amount of earth moved Shovel width (narrow being better for contractors) Speed and maneuverability of the tractor

Komatsu’s product literature emphasized That Komatsu equipment needed far less service Making them less dependent on their local dealer

Since Caterpillar’s strength was its dealer network Komatsu’s new and distinctive strategy Disrupted their customer reach Kept customers out of Cat’s showrooms And convinced customers that this was good

Caterpillar didn’t perceive Komatsu as a major competitor Because they spoke a different language To different customers

Some Lessons an Heuristics From the Back-Hoe Industry

How Knowledge FailuresLead to Competitive Failures

HeuristicsThoughts on Innovation

Obsolescence

Affected by 3 factors: Style Quality Functionality

Everything grows obsolete Just at different rates The opposite of Technology Acceleration

S tyle

Q u a lity F u n ctio n a lity

Efficiency vs. Effectiveness

Efficiency = Doing Things Right i.e., with minimum use of resources

Effectiveness = Doing ‘Right’ Thing i.e., doing the high priority tasks first

Red Queen’s Challenge

When you have to run as fast as possible to stay in one place

A normal state of affairs today With short product life cycles With global entry of competitors

Sources of Innovations

What kinds of sources exist?

Where do you find innovations?

Two Sources of Innovation(Eric von Hippel)

Functional (functional relationship through which firms and individuals derive benefits from innovation, e.g., customer or manufacturer) Where do the innovations come from? Do they come from within the firm or from someplace

else? Where exactly within the firm?

Circumstantial (under what circumstances will they benefit) Under what circumstances can one expect innovation? When can one expect innovation?

Functional Sources of Innovation

1. Internal to Value Map (bubbles)2. External Value Map (boxes)3. Competitors & related industries4. University, government & private labs5. Other nations / regions

‘Complementarity of several sources may amplify and accelerate innovation

The last two sources are strongly influenced by society and governments

M o b ile N etw o r kO p er a to r s ( 6 0 0 ,

th o u g h 1 0c o n tr o l 5 0 %s u b s c r ib er s

3 r d p ar tyAp p lic a tio n sD ev elo p er s

Han d s e t M ak er s

P r o g r am m in g / S a leso p er a tio n s

c o s t: 7 0 m illio np o u n d s an n u a l; 7 0 3

em p lo y ees

S y m b ian O /S

Cap

tive

C ap tive

L icen sin g R ev en u es

C o s t o f p rov id ing fu n c tio n s

T h es e c o s tsten d to b e r e la tiv e lyf ix ed , r ec u r r in gan n u a l c o s ts

T h es e r ev en u esten d to g r o w b y th e s q u ar eo f th e M N O s s u b s c r ib er b as e

C ap tiv e r e la tio n s h ip s ten d tob e c o n tr ac tu a l ( c o m p ar e toP alm O /S )

T h e en tir e m ar k et ( HW , S W , T elec o m N etw o r k s ) is d r iv en b y "k ille r " ap p lic a tio n s

Social characteristics that promote innovation and

success at a commercial level?

Prior experience tells us that societies which: operate, manage and build instruments of production create, adapt and master new technologies impart expertise and knowledge to the young choose people for jobs by competence and relative merit promote and demote on basis of performance encourage initiative, competition and emulation let people to enjoy and employ the fruits of their labor, enterprise and

creativity

(adapted from David Landes (1998) The Wealth and Poverty of Nations, New York: Norton, chapters 27-29)

Government has a role to play

Where innovation has flourished in the past, the government does the following: encourage saving and investment enforce rights of contract secure rights of personal liberty against tyranny and crime provide stable government, though not necessarily democratic provide responsive government provide no rents or favors for government position have governments that are moderate, efficient and ungreedy

Direct government involvement in innovation tends to favor the creation and maintenance of powerful, conservative, expensive scientific bureaucracies which rob would-be innovators of scarce talent .e.g., Sematech, MITI, Malaysian projects, US Aerospace and NASA, European Space

Agency.

(adapted from Landes’ The Wealth and Poverty of Nations )

Circumstantial Sources of Innovation

Planned firm activities Serendipity (fortunate accidents) Change (creative destruction)

For Example:For Example:Consider the Electric Lighting InnovationConsider the Electric Lighting Innovation

Thomas Alva Edison didn’t invent the lightbulb

Humphry Davy, an English chemist, invented the first electric light in 1809

Joseph Wilson Swan, an English physicist, was the first person to invent a practical and longer-lasting electric lightbulb in 1878

But new technology Offered new customers Substituting for gas and arc lighting … and a new competitor

westland

Hu mphrey Davies in 1809 ... Edison

Edison’s System

“all parts of the system must be constructed with reference to all other parts,, since in one sense, all the s form one machine part

1878 - Thomas Alva Edison, referring to an electrical grid in his article on the phonograph in the North American Review

Edison and his team of engineers in Menlo Park, N.J., spent years building the entire electric system, from light sockets and safety fuses to generating facilities and the wiring network.

Edison beat all his predecessors at one crucial task: managing the whole process of innovation, from light-bulb moment to final product

Edison’s Strategy

Develop the working DC system Protect it with patents

When George Westinghouse introduced a superior AC system He attacked with a smear campaign

He eventually switched to AC systems when customers demanded

Microsoft’s O/S InnovationThe most profitable innovation in history

Linking & Leveraging Strategy Get the business Create the standard Leverage the business Crush the competition

An Early Competitor

Case Study in MS-DOS

MS purchased Seattle Computer Products' QDOS for Quick and Dirty Operating System (written by Tim Paterson)

Written as a version of CP/M, with 4000 lines of assembler.

IBM tested Gates’ cleaned up MSDOS 1.0, finding well over 300 bugs, and decided to rewrite the program

This is why PC-DOS is copyrighted by both IBM and Microsoft.

Gates locked up the IBM deal with the help of his father’s law firm

est. value of services $250,000

Case Study in DOS

You could order one of three operating systems for your original IBM PC:

Digital Research's CP/M-86 for $495$495

UCSD p-System for several hundred dollarsseveral hundred dollars

this was a souped-up BASIC operating systems like that used by the Commodore 64

but portable like Java

DOS 1.0 for $39.95$39.95

Case Study in DOS

Microsoft’s OEM brochure touted future enhancements to DOS:

Unix-compatible pipes, process forks, and multitasking, as well as graphics and cursor positioning, kanji support, multi-user and hard disk support, and networking

None of these was ever added

Innovation = Invention + Commercialization!

Innovation Transfer

Across functional boundaries the stovepipes

Absorptive and Transmission Capacities bounded rationality on the receiving side

Cultural differences Culture = shared ‘values’ (what’s important) + shared ‘beliefs’

(what works or what’s true)

Nature of the innovation Timing

Science & TechnologyWhat are they? How are they related?

S c ien c e

T ec h n o lo g y

I n f lu en c e / f eed b ac k

I n f lu en c e / f eed b ac k

Ver b allyE n c o d edI n f o r m atio n

Ver b allyE n c o d edI n f o r m atio n

Ver b ally E n c o d edI n f o r m atio n * p u b lic a tio n s * p a ten ts

P h y s ic a lly & Ver b ally E n c o d edI n f o r m atio n * p r o d u c ts & s er v ic es * d o c u m en ta tio m * p u b lic a tio n s * p a ten ts

Practicum

Industrial Design Competition

(Design due by end of semester)

Activity #1: Select an Invention

Select an invention from he set of available handouts The Innovation workshop will comprise the following:

Work in groups of three to four 45 Minutes to prepare answers and presentation for Questions #1 to

#9 15 Minutes for presentation and Q&A (by class and myself) for each

group (~5-7) Possible second round (time permitting)

Remember: Innovation = Invention + Commercialization

Money is important Innovation Utility Commercial value

Activity #2: CommercializationTurn your ‘Invention’ into a Profitable Innovation

Tasks:1. Describe the target customer for the company’s

product (age, income, medical history, and other demographics)

2. Draw a value map describing your companies proposed business model, and provide some indication of the costs and revenues that will flow into and out of the business

3. What will differentiate your innovation from competitors’ in the customer’s minds?

List the three features that are important to the target customer, and rank them from most to least important.

Question #1: CommercializationHow do you turn your ‘Invention’ into a Profitable Innovation ?

1. Define how you will measure the usefulness or attractiveness of each of these features to the target customer.

This performance metric should be a numerical measure

2. Define your innovation’s top competitor in each of these 3 features

a company marketing a competitive product or service Are these companies profitable? How big (approximately) is their business?

Think: Low-cost or Differentiated Products?

Question #1: Function of Consumption Chain Analysis

A complement to quizzing … And (perhaps) quizzing done from a different (more

graphical) perspective

Consumption Chain Analysis Works from the premise that

opportunities for redifferentiation lurk at every step and decision that your customers take From the time they first become aware of their need for your

product or service To the time thy finally dispose of the remnants of the used up

product

Rather than ‘stream of consciousness’ It is time-sequential

Question #1: Consumption Chain Analysis A complement to quizzing …

And (perhaps) quizzing done from a different (more graphical) perspective

Consumption Chain Analysis Works from the premise that

opportunities for redifferentiation lurk at every step and decision that your customers take From the time they first become aware of their need for your

product or service To the time thy finally dispose of the remnants of the used up

product

Rather than ‘stream of consciousness’ It is time-sequential

Question #1: Consumption Chain Analysis

Aw ar en es so f n eed

S to r ag e an dtr as p o r t

In s ta lla t io na n d A s s e mb ly

R ec eip t

F in an c in g

P ay m en t

D eliv er y

O r d er an dp u r c h as e

S e lec tio nS ear c h

F in a l d is p o s a l

R ep air s an dR etu r n s

S er v ic e

Us e

Question #1: Every Link in the Consumption Chain has its Own Attribute Map

The Attribute Map compares your product to those of others

BasicDiscriminato

rEnergize

r

PositiveNonnegotiabl

e Differentiator Exciter

Negative Tolerable Dissatisfier Enrager

Neutral So What? Parallel

Question #1: At each step, remember to Keep It Simple

The simplest way to change a business model Is to redesign your offerings … i.e., products and

services

Aim for blockbuster design One that so appeals to your target customers That they feel almost compelled to buy from you

Question #1: The Purpose of a Business is to Create a Customer

-- Peter Drucker

Even if you create marvelous inventions Your customers won’t care Unless that is exactly what they need

Business customers are especially impatient With any product that doesn’t help them gain

competitive advantage

Yet your firm wants to build products that take advantage Of their Core Competences

Question #1: Creative Tension

Core Competences are the things that the firm does That they do better than other firms That are the source of their competitive advantage

They are not necessarily what the customer wants (!!)

Firms establish their core competences by: Investing in people Investing in assets, plant and land Identifying and focusing their mission

The Firm’s core competences are often those of its CEO and management

Question #1: Steps for Quizzing / MM/ Attribute Maps

1. For each customer segment sketch the consumption chain2. Identify the trigger events that precipitate customer

movement from link to link3. Put in place procedures to alert you when the trigger is pulled

(and plan your response)4. Quiz to assess needs that may not be met currently5. Create an attribute map for each significant link in the

Consumption Chain6. Use your knowledge of Customer Experience to create

Blockbuster Products7. Put the ideas you generate into your opportunity register

Repeat this process for each class of stakeholders

Question #2: CommercializationHow do you identify your Co-opetitors?

Define your innovation’s top competitor in each of these 3 features (i.e., a company marketing a competitive product or service). Choose one competitor for each feature.

Henderson and Clark model of knowledge underpinning innovation: Component and Architectural. Describe the degree of reengineering of the firms business

model and core competences that will be required by their innovation

Describe the product knowledge that you will be required to acquire in the development and commercialization of your invention

Question #3: What Knowledge underpins your Innovation?

(Abernathy-Clark) Two kinds of knowledge underpin an innovation Technological Market Incumbents Fail when they Fail to “Get” one or

the other type of Knowledge



D es tr o y ed




(Henderson-Clark) Products are made up of components (even services) There exist two kinds of relevant knowledge

Component Architectural

A rch itectu ra lN iche

R ev o lu tionaryR egu la r P r es er v ed

D es tr o y ed




What Kind of Business Do you Need to Be to Commercialize this Innovation?

Question #4: Who will Profit from you Innovation? (Teece)

Two factors are instrumental to profiting from an innovation Imitability and Complementary Assets

In v en to ry o r p arty w ithb arg a in in g p ow er

In v en to r

H o ld er o fco m p lem en ta ry a ssets

P ro f it is D if f icu lt Hig h

L o w

F r ee o r Un im p o r tan t T ig h tly h e ld

C o m ple m e n ta ry A s s e t s

I m ita bility

Questions #3 and #4: What Kind of Business Do you

Need to Be to Commercialize this Innovation?

Abernathy-Clark framework of knowledge that underpins an innovation are Technical and Market. Describe the degree of reengineering of the firms business model

and core competences that will be required by a new innovation. Describe the product knowledge that you will be required to acquire

in the development and commercialization of your invention

Teece framework that describes profit from an innovation through Imitability and Complementary Assets. who will profit from the invention. Describe the product knowledge that you will be required to acquire

in the development and commercialization of your invention

Question #5: What sort of people does Your Firm Need to Hire in order to Innovate?

Idea Generators Can sift through large quantities of technological and market data to identify

‘innovations’ Gatekeepers & Boundary Spanners

Conduits for knowledge from other firms and labs Champions (Entrepreneurs, Evangelists)

Sell the innovation to the firm Sponsors (Coach, Mentor)

Senior level manager who provides behind the scenes support, access to resources, and protection from political foes

Project Managers Planners with discipline; one-stop decision making shop

Question #6: ComplementarityWhat other products are needed to complete your Commercialization?

What are your ‘Killer Apps’?

Who are your ‘Co-opetitors’ and what essential assets do they control?

Most economically significant modern products have little value on their own They require complementary products from many firms to be of value

Petroleum has little use without internal combustion engines Or Cars without Roads (US Road costs are around $5-10 per gallon of gasoline) Or Electricity without Electric Motors Or iPods without MP3s … you get the idea

Sustainability

Different Industries; Different Rates of ChangeW h e r e to u s e F in a n c ia l D y n a m ic s(a n d w ha t k in d s of corp ora te a ssets or serv i ces g en era te v a lu e)

P ro p erty,M o rtg a g es,M in in g & E x tra ctiveIn d u stries

U tilities &V o ice T elep h o n y

In su ra n ce,E lectro n ic M a rk ets& R isk M a n a g em en t

S o f tw a re,V id eo g a m es,C in em a , M u sic,N ew s

D a ta T elep h o n y,G lo b a l N etw o rkS ervices (e.g . , sh ip p in g )

C o m m o d ityM a n u fa ctu rin g(e.g . , p a p er)

C o m p lexM a n u fa ctu rin g(e.g . , ca rs, ch ip s)

L o ca l S ervices(e.g . , L eg a l,G o vern m en t)

R eta ilin g ,E d u ca tio n &P u re R & D

B ra n d ed -L u x u ryM erch a n d ise

M a in ly Ta n g ible A s s e t s M a in ly K n o wle dg e - I n ta n g ible A s s e t s

D C F & Tra dit io n a lV a lu a t io n M e th o ds a re A ccu ra te

Fin a n cia l D y n a m ics is Ne ce s s a ryfo r A ccu ra te V a lu a t io nPast is indicator of Future Future is Volatile

Question #7: How Sustainable is your Business?

Now that you have devised an innovation strategy

Tell us if it is sustainable What phase are you in?

Fluid phase Mainly lab based or custom applications of technology

Transitional phase Standardization of components, and consumer-producer interaction lead to dominant

design Specific phase


How long will the current arrangement of 5-forces stay put? What disruptive innovations are predicted?

When will they replace your invention and undermine its commercial value?

Sustainability

Utterback-Abernathy Dynamic ModelDoes your strategy fit with the Phase of technology development that your invention is in?

Three Phase (stage) Model Fluid phase

Mainly lab based or custom applications of technology Transitional phase

Standardization of components, and consumer-producer interaction lead to dominant design Specific phase


N ear C erta in tyN on techn ica l f acto rs

m ay be igno red

L ittle U n certa in tyL o w in f luence o f


M ed ium U ncerta in tyH ig h in f luence o f


H ig h U ncerta in tyH ig h in f luence o f


Hig h

L o w

E r a o f F er m en t E r a o f I n c r em en ta l C h an g e

S ta te o f Ev o lu t io n o f Te ch

C o m ple x ity

Sustainability

S-Curve (Foster and others)

Eras of incremental change terminate with a ‘discontinuity’ We look for limits on the technology’s life cycle using knowledge of the

technology's physical limits E.g., Moore’s Law will run out on current platforms at 2013

Advance of a technology is a function of development effort

E f f o r t

Rate of T

ech Progress

P h y s ic a l L im it

E f f o r t o n S u p er c o m p u tin g

Rate of

Supercom

puter Progress

S p eed o f L ig h t

C o m m u n ic a tio n Bo tt len ec k s

M ulti-p ro cessor

S ing le-p rocessor

Disruptive Innovation Week # 5 Recognizing the Potential of an Innovation Think Bubbles (Quizzing to understand the customers’ experiential context pp.

Documents

market data

belowmoores law

gilders law

disruptive innovationweek

firms organizational

accelerating technology

innovators dilemma recap

previous modelsonly