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Innovators Solution
Transcript of Innovators Solution
- 1. Innovators Solution Clayton Christensen
- 2. Imperative Dilemma Investorsrequire to grow But innovation
that can satisfy investors demand for growth require taking risks
unacceptable to investors We need to know how to grow
- 3. Disruptive Innovation Model DisruptiveInnovation Model 3-D
Disruptive Innovation Model Shaping ideas to become disruptive
- 4. Disruptive Innovation Model B A
- 5. Disruptive Innovation Model Customers performance acceptance
level Steeper companys ability to make technology progress Thus,
after Point A, overshoot Distinctionbetween sustaining and
disruptive innovation moving to lower parallel line B outstrip
point Low-end disruptionReturn
- 6. 3-D Disruptive Innovation Model
- 7. 3-D Disruptive Innovation Model The third dimension: new
value network for previous non-consumers similar to BOS New-market
disruptionReturn
- 8. Shaping ideas to become disruptive Three litmus testsExplore
whether the idea can become a new market disruptionExplores the
potential for a low-end disruptionIs the innovation disruptive to
all of the significant incumbent firms in the industry?
- 9. Test 1Is there a large population of people whohistorically
have not had the money,equipment, or skill to do this thing
forthemselves, and as a result have gonewithout it altogether or
have needed to paysomeone with more expertise to do it
forthem?Return
- 10. Test 2Are there customers at the low end of themarket who
would be happy to purchase aproduct with less (but good
enough)performance if they could get it at a lowerprice? Can we
create a business model thatenables us to earn attractive profits
at thediscount prices required to win the businessof these
over-served customers at the lowend?Return
- 11. Test 3Is the innovation disruptive to all of thesignificant
incumbent firms in the industry? Ifit appears to be sustaining to
one or moresignificant players in the industry, then theodds will
be stacked in that firms favor, andthe entrant is unlikely to
win.
- 12. Competing Against Non-consumption Why Competing Against
Non-consumption So Hard? What Makes Competing Against Non-
consumption So Hard? How to Avoid Hard Non-Consumption
Competition
- 13. Why Competing Against Non- consumption So Hard? The logic
of competing against non- consumption as the means for creating
new-growth markets seems obvious. Despite this, established
companies repeatedly do just the opposite.Return
- 14. What Makes Competing Against Non- consumption So Hard? Not
see disruption coming in. Even if, Threat rigidity - Threat elicits
more intense and energetic response than opportunity, and then
focus on countering the threat to survive.Return
- 15. How to Avoid Hard Non- Consumption Competition First,get
top-level commitment by framing an innovation as a threat during
the resource allocation process. ex. Newspapers embraced online
editions to give existing customers additional choice
- 16. How to Avoid Hard Non- Consumption Competition Later,shift
responsibility for the project to an autonomous organization that
can frame it as an opportunity. ex. Place the responsibility to
commercialize the disruption in an independent unit for which the
innovation represents pure opportunity newpapers online group
- 17. How to Avoid Hard Non- Consumption Competition This is
incumbents problem, not for new entrant. This take care of both
commitment and flexibility.
- 18. Getting the Scope of Business Right Integration or
Outsourcing? Circumstance and production design Production
architecture and integration Innovation Strategy PC industry as
innovation strategy example
- 19. Integration or Outsourcing? Which activities should a
new-growth venture do internally in order to be as successful as
possible as fast as possible, and which should it outsource to a
supplier or a partner? Will success be best built around a
proprietary product architecture, or should the venture embrace
modular, open industry standards? What causes the evolution from
closed and proprietary product architectures to open ones? Might
companies need to adopt proprietary solutions again, once open
standards have emerged?
- 20. Core Competence? If something fits your core competence,
you should do it inside? NO! Ex., IBM outsourcing microprocessors
and operating systems was a mistake. Answer relied on:
Circumstance-Based versus Production Design
- 21. Circumstance Based Integration or outsourcing decision
based on products good enough or not good enough
- 22. Production Design Interdependence One part cannot be
created without the other. Optimize performance in functionality
and reliability Proprietary Modularity Optimize flexibility
Sacrifice performance due to rigid design
- 23. Production Architecture and Integration B A
- 24. Innovation Strategy Before Point A: Interdependence
architecture Goal: improve performance After Point A: Overshooting,
Commoditization point Goal: speed, convenience, customization,
etc.
- 25. Innovation Strategy Between A & B: Either approach OK
With interdependence: performance over-satisfied With modularity:
performance not satisfied but other factors are After B: Should
take Modularity approach Performance and other factors all
satisfied Once mature, back to interdependence approach
- 26. Innovation Strategy Example IBM interdependence design
dominate mainframe After 1964, System 360 to respond to
non-performance demand modularity allowed custom-configuration
Birth of mini-computer disruption from mainframe! Then, DEC
dominated with integration design better performance
- 27. The Transition from Vertical Integration to Horizontal
Stratification inthe Microprocessor-Based Computer Industry
- 28. How to Avoid Commoditization Process of commoditization
Process of de-commoditization
- 29. Process of Commoditization 1As a new market coalesces, a
companydevelops a proprietary product that, whilenot good enough,
comes closer to satisfyingcustomers needs than any of
itscompetitors. It does this through aproprietary architecture, and
earnsattractive profit margins.
- 30. Process of Commoditization 2As the company strives to keep
ahead of itsdirect competitors, it eventually overshootsthe
functionality and reliability thatcustomers in lower tiers of the
market canutilize.
- 31. Process of Commoditization 3, 4 &5This precipitates a
change in the basis ofcompetition in those tiers, which . . .. . .
precipitates an evolution towardmodular architectures, which . . ..
. . facilitates the dis-integration of theindustry, which in turn .
. .
- 32. Process of Commoditization 6. . . makes it very difficult
to differentiatethe performance or costs of the productversus those
of competitors, who haveaccess to the same components andassemble
according to the same standards.This condition begins at the bottom
of themarket, where functional overshoot occursfirst, and then
moves up inexorably to affectthe higher tiers.
- 33. Process of De-Commoditization 1The low-cost strategy of
modular productassemblers is only viable as long as they
arecompeting against higher-cost opponents.This means that as soon
as they drive thehigh-cost suppliers of proprietary productsout of
a tier of the market, they must moveup-market to take them on again
in order tocontinue to earn attractive profits.
- 34. Process of De-Commoditization 2Because the mechanisms that
constrain ordetermine how rapidly they can move up-market are the
performance-definingsubsystems, these elements become notgood
enough and are flipped to the left sideof the disruption
diagram.
- 35. Process of De-Commoditization 3Competition among subsystem
supplierscauses their engineers to devise designsthat are
increasingly proprietary andinterdependent. They must do this as
theystrive to enable their customers to deliverbetter performance
in their end-useproducts than the customers could if theyused
competitors subsystems.
- 36. Process of De-Commoditization 4The leading providers of
these subsystemstherefore find themselves sellingdifferentiated,
proprietary products withattractive profitability.
- 37. Process of De-Commoditization 5This creation of a
profitable, proprietaryproduct is the beginning, of course, of
thenext cycle of commoditization and de-commoditization.
- 38. Death Spiral of Core Competence When facing
commoditization, companies may still insist their core competence.
They then miss the opportunity to go up- market. Likewise, if they
insist on performance optimization, they miss disruption.
- 39. Death Spiral of ROA MaximizingDue to the low premium in
modular competition base, Increasing the numerator of ROA is nearly
impossible, and Decreasing the denominator will facilitate
dis-integration. It can shrink the asset where they might need to
move up to interdependence strategy, or It can result in better
profitability for later on integration.
- 40. Capability of Disruptive Growth Reasons innovation fails
Right organization structure for sustaining and disruptive
growth
- 41. Why Innovation fails Not because of some fatal
technological flaw or because the market isnt ready They fail
because responsibility to build these businesses is given to
managers or organizations whose capabilities arent up to the task.
An organizations capabilities become its disabilities when
disruption is afoot.
- 42. Factors affecting structure choice Organizations processes
vs. development team Heavyweight team Lightweight team Functional
organization Organizations value vs. responsible commercial
structure Autonomous organization Mainstream organizationNext
- 43. Heavyweight TeamA group of people who are pulled out of
theirfunctional organizations and placed in a teamstructure that
allows them to interact overdifferent issues at a different pace
and withdifferent organizational groups than theyhabitually could
across the boundaries offunctional organizations to
changeprocesses.Return
- 44. Organizations Valuestandards by which employees
makeprioritization decisionsReturn
- 45. Autonomous Organization New growth opportunity in non-
consumption market disruptive opportunity Autonomous organization
shares different value Opportunity, not threat
- 46. A Framework forFinding the Right Organizational Structure
and Home