1 2000-2003 Copyright – MIT 15.390 New Enterprises, Anderson/Zolot Recap of Upcoming Assignments ...

1 2000-2003 Copyright – MIT

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Recap of Upcoming Assignments

By Friday, Feb 7, 8 pm: submit (by uploading two files to SloanSpace, or emailing them to [email protected]):file 1 - one-page business idea file 2 - one/two paragraph personal bio & photo

By Tue, Feb 11, 8 pm: have read and voted on one-page business ideas (vote via SloanSpace). voting: pick your 3 favorite plans.

On Wed, Feb 12 we will announce winners and form teams


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Reminder to Submit “Surveys”

After each guest speaker, you will find a survey posted on Sloanspace.

Your completion of these surveys is a key part of your class participation grade.

Please provide as much detailed feedback as possible… don’t be afraid to tell us what you like and don’t like about the speaker.


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Readings/Assignments VISIT “SLOANSPACE” FREQUENTLY

http://sloanspace.mit.edu/class/15.390a-new-enterprises/

We change the syllabus (the one printed in the reader is already out of date). SloanSpace is the final authority.(but don’t worry -- we’ll tell you in class if we make changes to assignment due dates)

Make sure you’re signed up for the class in SloanSpace to get class emails

Go buy a course packet at “copy-tech” in the basement of E52 -- all cases and readings are in the packet

The classroom powerpoints will be posted on SloanSpace


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Grades

25% Class participation. We expect you to:- attend and be punctual to every class- display a namecard in front of you- not use your laptop in class, especially when we have a guest speaker- read the assignments, study guests’ backgrounds - respond to speaker surveys (on Sloanspace)- contribute (we will cold-call you)

25% Written assignments (chapters of full plan)25% Full Business Plan at end of semester25% In-class exercise on last day of classes

your fellow team members will grade your contribution to the team, used to “round up” or “round down” your grade


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Working With Us Outside Of Class Every Monday, one of us will stay late after class. Every month, we’ll hold a more fun version of this

Q&A session at “The Muddy Charles.” (March 3, April 7, May 12)

We will man a “phone hotline” where one of us will be available to take calls during posted hours just before an assignment is due. We’ll post these hours/phone numbers as we approach the assignments.

We always respond to emails quickly, and welcome questions.

Office appointments are always available: just ask!


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Disruptive Technologiesand

Technology Adoption Cycles


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Topics We’ll Discuss

Established companies have trouble embracing new technology, sometimes for good reason (Christensen)

New technologies take time to germinate: different people will buy at different phases of growth (Moore’s “chasm”)

As a technology matures, “dominant design” elements emerge (Utterback)


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Why Does This Matter to You?

This is the source of the attacker’s advantage

This is how you, as a tiny unknown startup, can compete against giants -- and use their own might to topple them

This is how you’ll get customers to pay attention to you


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Anybody Want Some Ice? One of New England’s first great

technology-based industry Blades for cutting ice at just the right

angles: blocks don’t melt as fast Mastery of weather patterns and spots

on the lake most likely to freeze Insulated trucks for packing ice Logistics and delivery expertise A satisfied customer base Brand recognition


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Along Comes Electricity

Unproven technology Requires all new infrastructure No brand recognition No established customer base


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Defender’s Response

Improve service to customers Speed up R&D, new blades and

insulation

Not so easy to... Throw it all away and embrace

something new Ask “are we in the business of selling

ice, or are we in the business of keeping people’s food cold”?


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Well Run Companies Have Invested Capital….

Moving to disruptive technologies means writing off invested capital.

Means….Surprises Means….Uncertainty


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Thesis: Good Companies Run Away from Disruptive

Technologies

Well run companies are Financially Driven.. And are expected to make earnings and sales targets.

Disruptive Technologies ruin income statements and balance sheets – in the short run.


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Christensen

Why is it that companies can seem to be at the top of their game, the suddenly fall off the cliff?

The cause is good management!


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Two Types of Innovation

1. Enable a company to provide better service to their best customers (favors incumbents)telecom from analog to digital

2. Bring to the market something that’s simpler and not as good as what was historically available (favors attackers)Cisco's router vs. Lucent's circuit switchedtake root in a less demanding market,

improve


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Christensen’s Framework

Innovatio

nacceptable to customers

no standards --favors verticalintegration

standards --favors modularity


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Utterback’s S CurvePattern:Initially increasing then declining R&D productivity within a given physical “architecture”

Examples:Lightbulbs, disk drives, automobiles, even pharmaceuticals

What drives the dynamics?•Early Stage•Take Off•Growth•Plateau

Cumulative R&D Effort

Technicalperformance

Physical limits


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What Drives the Dynamics of S-curves?

Initial Stage Early returns are small and filled with failures,

dead ends, and competing versions.

Takeoff Dominant design, process innovation

Growth R&D can be productive -- both focused and with

few physical barriers

Plateau (diminishing returns?) As “natural limits” are approached, progress

becomes more expensive


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Disruptive Technologies Seen As One S-curve After Another

Performance

Effort

S-curve as

creative destruction

television

radio


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Dominant Designs

In the beginning:• Innovation focuses around product concepts, is

led by small firms and is largely exploratory.• Competition is on features: profits are made

through differentiation.• Smaller firms are more open to new ideas,

more likely to experiment.• Consumers see past brand names and other

“established” assets, prefer key technical merit -- value is created by genuine innovation


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Once a Dominant Design Emerges:

Innovation focuses around process, delivery, service

Most firms are forced out: the large firms that remain are increasingly structured, hierarchical.

Profits through product differentiation fall.


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Once a Dominant Design Emerges

Large firms that can exploit economies of scale and mass production, manage the process of incremental innovation, come to dominate the industry.

Brand/service more important.


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From Utterback’s 15.365J Product - From high variety, to dominant design, to

incremental innovation on standardized products Process - Manufacturing progresses from heavy

reliance on skilled labor and general purpose equipment to specialized equipment tended by low-skilled labor

Organization - From entrepreneurial organic firm to hierarchical mechanistic firm with defined tasks and procedures and few rewards for radical innovation

Market - From fragmented and unstable with diverse products and rapid feedback to commodity-like with largely undifferentiated products

Competition - From many small firms with unique products to an oligopoly of firms with similar products


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Moore’s Chasm:don’t confuse the “false start” s-curve for the

real one

“false start”innovation and enthusiasm getsahead of itself

bubble bursts

the real industrybegins


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Who is Your Market?• What personality does your

buyer have?• What state of the industry,

application are you selling to? • Do they need a product that

works without fail, or are they willing to debug?

techenthusiasts

skeptics

key influencers,risk-takers conservatives

visionaries

pragmatists


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Entrepreneurial Firms…

Have no installed base Have no earnings history Can take market share


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Entrenched Companies

Like new technology…. but would prefer that it come in at a measured rate

Disruptive Technologies come in a rush!


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Attackers…

LOVE disruptive technologies…. VC’s love disruptive technologies

Defenders….. Pay LIP SERVICE to disruptive technologies…


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Defenders Response

Denial Anger Grudging Acceptance Acquisition

1 2000-2003 Copyright – MIT 15.390 New Enterprises, Anderson/Zolot Recap of Upcoming Assignments ...

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Transcript of 1 2000-2003 Copyright – MIT 15.390 New Enterprises, Anderson/Zolot Recap of Upcoming Assignments ...