Chapter 7 Disruptive Technologies.pdf

Disruptive Technologies: Understanding Giant Killers and Tactics to Avoid Extinction Dr. Bharti Motwani 1  Section 7.1: Learning Objectives 1. Identify the two characteristics of disruptive innovations. 2. Understand why dominant firms often fail...

Disruptive Technologies: Understanding Giant Killers and Tactics to Avoid Extinction Dr. Bharti Motwani 1  Section 7.1: Learning Objectives 1. Identify the two characteristics of disruptive innovations. 2. Understand why dominant firms often fail to capitalize on disruptive innovations. 3. Recognize examples of past disruptive technologies, and learn from the disruption that faced once-dominant firms, including Kodak, and currently, Intel.  Understanding Truly Disruptive Innovation Many once-large firms fail to make the transition as new technologies emerge to redefine markets (Kodak). These patterns are seen in everything from earthmoving equipment to mini-mills, the tech industry is perhaps the most fertile ground for disruptive innovation. The market-creating price elasticity of fast/cheap technologies acts as a catalyst for the fall of giants.  The Characteristics of Disruptive Technology Disruptive technologies are technologies that create market shocks and catalyze growth (also referred to as disruptive innovation). True disruptive technologies have two characteristics: Come to market with set of performance attributes existing customers don’t value. Over time, performance attributes improve to the point where they invade established markets. These attributes are found in many innovations that have brought about the shift from analog to digital. First digital cameras were terrible: Photo quality was laughably bad. Poor performance of early digital music, digital video, mobile phones, etc. Figure 7.1: The Giant Killer  Some Examples of Disruptive Innovation Web Video for TV and Movies Broadband was not widely available and was very expensive Cheaper processors embedded internet-accessing smarts into televisions. Availability through mobile and time-shifting to watch shows on their schedule. Netflix navigated through a radical, tech-fueled disruption. Digital Audio Portable MP3 Players were initially terrible. Apple arrived when storage became smaller and cheaper. Apple Music and Spotify have millions of customers. Ride Sharing Devices Getting in a stranger’s car was crazy. Now more Uber drivers than taxis Ride prices fell, reliability and security all proved superior  Why Big Firms Fail Failure to see disruptive innovations as a threat. Resources aren’t dedicated to developing the potential technology Firms don’t nurture the needs of a new customer base. Early customers for a disruptive technology care about different features and attributes than incumbent customers. Examples: A free call over a quality call, Portable music over high-fidelity music Over time, disruptive technology becomes good enough to appeal to customers of incumbent products and invade these markets. Startups amass expertise quickly and benefit from increasing scale and a growing customer base. Big firms are forced to play catch-up, and few ever close the gap with the new leaders.  Section 7.2: Learning Objectives 1. Suggest techniques to identify potentially disruptive technologies. 2. Understand how incumbent firms might more effectively nurture their experimentation with and development of potentially disruptive technologies. 3. Contrast the approaches used by Yahoo! and Intuit when encountering disruptive technologies, and understand how firms might learn from these examples. 4. Examine several potentially disruptive technologies, brainstorm what it might take for their potential to be realized, and consider the potential positive and negative impact of these innovations across industries, workers, consumers, and governments.  Don’t Fly Blind: Improve Your Radar Remove short-sighted, customer-focused, and bottom- line-obsessed blinders. Firm’s current customers don’t want the initially poor-performing new technology. Markets don’t look attractive, big firms don’t dedicate resources for the new technology. Have conversations with those on the experimental edge of advancements. Top-tier scientific researchers and venture capitalists Increase conversations across product groups and between managers and technologists. Regularly rotate staff to improve idea sharing and innovation. If employees are quitting to join a future technology, it may signal a development worth paying attention to.  Don’t Fly Blind: Improve Your Radar Many disruptive firms were started by the former employees of disrupted giants. Adobe founder came from Xerox Apple founder’s worked for Hewlett Packard Oracle employee founded Salesforce.com WebEx Cisco division employee created Zoom Yahoo attempted to invest in potentially disruptive innovation, but lost its lead due to poorly supported efforts and underinvestment for its mobile team (not allowed to experiment and grow, team leader left Yahoo Messenger may have become Whatsapp).  Potential Disruptor Spotted: Now What? Build a portfolio of options on emerging technologies, investing in firms, startups, or internal efforts that focus solely on what may or may not turn out to be the next big thing. Options give the firm the right to continue and increase funding as a technology shows promise. If a firm has a stake in a startup, it may consider acquiring the firm. If it supports a separate division, it can invest more resources if that division shows promise.  Potential Disruptor Spotted: Now What? Have innovation separated from core businesses to encourage new market and technology development. However, they are extraordinarily difficult to get right. Facebook was late to the mobile revolution Google News missed the powerful trends in social Microsoft brought Nokia , but huge loss, lagged behind Apple and Google AT&T hired McKinsey and company to forecast US Cell phone usage, Prediction was 1% of the actual figure To make-up for the mistake, acquired McCaw cellular for $12.6 billion  Intuit Pilots a Course through Disruption Leader in several packaged software categories like personal finance, small business and tax preparation. How has Intuit dealt with disruption (covid)? Acquisitions—bought upstart rival Mint.com( Mint makes money by making recommendations of ways to improve finances and take cut from these promotions) Migration to the cloud Uses AI-driven learning models to detect trends and anomalies Tools present a custom dashboard of widgets Tools present a custom dashboard using KPI (Key Performance Indicators)—measurable values defined by a firm to demonstrate progress toward a given goal. Examples are quite broad and could include customer acquisition, cost reduction, or improvement in the ROI of online ad campaigns. Intuit has managed to find growth in disruption(covid). So-called connected services that either run in the cloud or enhance existing offerings make up over 65 percent of the firm’s revenues.  No Easy Answers Newspaper industry has been gutted by Internet alternatives to key products. Fast/cheap technology fueled the Internet and created a superior substitute for newspaper classifieds. Advertisement could now: Be unlimited in length Sport photos Link to an e-mail address Be modified or taken down instantly, and were, in many cases, free  No Easy Answers For every Kodak that suffered collapse, new wealth can be generated for those who ride the wave of disruptive innovation. Instagram built a billion-dollar business that now has 500 million users worldwide For your best bet at being a tech victor and not a tech victim: Keep your disruption-detecting radar dialed up high Watch trajectory of fast/cheap technology curves.  Potential Disruptive Technologies 3D printing Augmented reality (AR) Cryptocurrencies and blockchain Gene editing (Pharmaceutical industry and health care) Driverless cars Wireless technologies and smart devices Battery technologies (store and recharge renewables, waste management) Robotics and AI Quantum computing (Big devices that needs to be cooled, not implemented yet, if realized, will have efficient simulations)