KV Patri, Mgmt of Tech Inn., Disk Drives Case Study 1 Case Study on Disk Drive Industry Adapted from...
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Transcript of KV Patri, Mgmt of Tech Inn., Disk Drives Case Study 1 Case Study on Disk Drive Industry Adapted from...
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
1
Case Study on
Disk Drive IndustryAdapted from
Clayton, M. Christensen,
The Innovator’s Dilemma:
When New technologies Cause Great Firms to Fail,
Harper Business,
2000.
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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Primary Components of a Typical Disk Drive
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Brief History
• 1952-56: IBM’s San Jose research laboratories developed RAMAC (random Access Method for Accounting and Control) which was the size of a large refrigerator incorporating 50 disks of 24 in. size. Total storage 5 MB.
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RAMAC: The first disk drive
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• 1961: IBM introduced removable packs of rigid disks
• 1971: IBM introduced the floppy disk drive • 1973: IBM introduced the Winchester architecture• In the 1960s: A few firms developed the plug-
compatible-market (PCM) selling copies of IBM drives directly to IBM customers at discount prices. At the same time, IBM competitors (Control Data, Burroughs, and Univac) were integrated vertically into the manufacture of their own disk drives.
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• In the 1970s: Smaller non-integrated computer makers such as Nixdorf, Wang and Prime developed OEM for disk drives.
• In 1976: US$1 billion worth of disk drives were produced (50% PCM and 25% OEM). There were about 17 firms. All were relatively large and diversified corporations such as Diablo, Ampex, Memorex, EMM, and Control Data.
• By 1995: Production rose rose to $ 18 billion, PCM almost vanished, and OEM became 75%. Almost all the 17 corporations except IBM failed or were acquired by IBM. Meanwhile, additional 129 firms entered, of which 109 failed (Fujitsu, Hitachi, and NEC survived).
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• During 1978 to 1993, the smallest available 20 MB drive shrank from 800 cubic inches to 1.4 cubic inches -- 35% annual rate of reduction.
• During 1977 to 1994, the price per megabyte in 1982 dollars from $900 to 0.2
-- a reduction rate of 53% pa (although other microelectronic devices fell only at the rate of 70%).
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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Which technological developments contributed to this spectacular
improvement in performance of disk drives?
• Materials: Ferrite-oxide heads Thin-film heads Magneto-resistive heads
• Architecture: Removable disc-pack drives Winchester Drives
• Embedded servo systems
• RLL and PRML recording codes
• Higher RPM motors
• Embedded interfaces
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1. Innovations in Read-Write Head Materials
In the period 1975 to 1992, mainly ferrite-oxide heads were used. Incremental innovations within this technology such as
- grinding the ferrite head to finer and more precise dimensions, and
- more finely dispersed oxide particleshelped improve areal recording density from 1 to 30 terabyte per sq. in. This growth was approximately following the S-curve pattern(an initial accelerating growth followed by steady growth followed by saturation).
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• Around 1985, a new thin-film head technology was developed.
- Super-thin films of magnetic metal on aluminum was achieved by sputtering thin films of metal on recording head and then using photolithography to etch much finer electromagnets than could be achieved by ferrite technology. The technology was adapted from integrated-circuit industry. Burroughs and IBM led in this development.
- Meanwhile entrant firms such as Maxtor andConnor Peripherals continued to rely on refining ferrite technology.
- Established firms such as IBM, Control Data, Digital Equipment, Storage Technology, and Ampex -- each spent some $50 million in 8 years. Most new entrants perished.
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• In the 1990s magneto-resistive heads were developed which accelerated the performance improvement.
IBM, Seagate, and Quantum led the race.
Established firms beat out entrants.
• Moving up an S-curve is made possible through incremental innovations. Jumping from one S-curve to another is the result of radical innovations.
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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11975 1980 1985 1990 1995
10
100
1000
Terabits/sq.in
Ferrite-oxideheads
Thin-filmheads
Magneto-resistive
heads
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• Between 1976 and 1988: The number of established firms offering drives with thin-film heads increased from 0 to 22. Likewise, the corresponding number of entrant firms increased from 0 to 22.
• Between 1984 and 1988: The number of established firms offering drives with thin-film disks increased from 0 to 12. Likewise, the corresponding number of entrant firms increased from 0 to 27.
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2. Innovations in architecture
• In the period, 1965 to 1978, removable disk pack drives dominated. This trend followed an S-curve with regard to areal density.
• Around 1978, 14-inch Winchester drive was substituted for the removable disk packs. This was a radical innovation (not incremental).
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0.1
1965 1970 1975 1980 1985
1.0
10
Terabits/sq.in
RemovableDisk-pack
drives
Winchesterdrives
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• Between 1974 and 1979: The number of established firms offering drives with with Winchester architecture increased from 2 to 9. Likewise, the corresponding number of entrant firms increased from 0 to 19.
• Between 1984 and 1988: The number of established firms offering drives with RLL recording codes increased from 4 to 20. Likewise, the corresponding number of entrant firms increased from 5 to 31.
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All the disk-drive innovations described thus far were of the sustaining type irrespective of whether they were incremental or radical, expensive or cheap, software or hardware, component or architecture, or competence-enhancing or competence-destroying.
A major characteristic of a sustaining innovation is that leading practitioners of prior technology continue to dominate. The business is not disrupted. Progress happens along historically anticipated lines.
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Further architectural improvements aimed at shrinking the drive size
(from 14-inch to 8-inch to 5.25-inch to 3.5-inch to 2.5-inch to 1.8-inch)
turned out to be disruptive, i.e., they displaced the industry leaders
(irrespective of they were well-managed or not)
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14-inch Winchester Drives• Until the mid-70s, 14-inch removable disk packs
accounted for all disk drives.
• Then 14-inch Winchester drive emerged to sustain performance.
• Most were used for mainframes.
• In 1974, typical median-priced mainframe had a drive of 130 MB. This increased for 15 years at 15% per year. At the same time, the capacity of average drive increased at 22%. Capacity was outstripping demand and reaching beyond mainframe into scientific and super computers.
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The advent of 8-inch drives
• Between 1978 and 1980, Shigart Associates, Micropolis, Priam, and Quantum developed 8-inch drives with 10, 20, 30, 1nd 40 MB capacity.
• These were of no interest to mainframes which, at that time, asked for around 40MB.
• These disruptive innovations were however suited for minis used/produced by DEC, Data General, Prime, and HP.
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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• Partly because of the availability of suitable disk drives, minis gained over mainframes. A median-priced mini shipment grew at 25% per year.
• Meanwhile 8-inch saw further innovations that resulted in capacity growth at the rate of 40% year although the computer requirements themselves grew at about 20%. Again, capacity outstripped demand.
• Cost per MB of 8-inch became lower than that of 14-inch and other advantages became apparent, e.g. less vibration sensitive.
• Hence, established 14-inch manufacturers began to fail. 2/3 never introduced 8-inch. The 1/3 were 2 years behind new entrants.
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Why did 8-inch disrupt the dominance of the established 14-inch suppliers?
• 14-inchers were not toppled by technology because the 8-inch drives mainly used off-the-shelf components.
• The reason for failure was delay in making the strategic commitment to switch to 8-inch. This was because mainframes did not need 8-inch drives as told by their established (mainframe) customers. It appears listening to current customers is not always good.
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A similar story was repeated when 5.25 gave way to 3.5 to 2.5
to 1.5. All were disruptive.
• As the size reduced minis gave way to desktops which in turn partly gave way to portables and then Palms.
• Newer versions were not superior in the established market whereas they were attractive to fringe customers interested in an emerging technology.
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A disruptive innovation: The 5.25 inch drive (1981)
Attribute8-inch drive
(Mini-computermarket)
5.25-inch drive(desktop computer
market)Capacity (MB) 60 10
Volume (cubic inches) 566 150
Weight (pounds) 21 6
Acess time (ms) 30 160
US$ per MB 50 200
US$ per unit 3000 2000
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Prod
uct P
erfo
rman
ce
Time
Performance demanded at the high end of the market
Performance demandedat the low end of the market
DisruptiveTechnological
Innovation
Progress due to
sustaining technologies
Progress d
ue to
sustaining tec
hnologies
The Impact of Sustaining and Disruptive Technological Change
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What are the typical characteristics of disruptive innovations?
• Worse product performance at least in the near term• Other attractive features that a few fringe (often new)
customers value• Simpler and cheaper.• Architectural: New functionality achieved through a clever
arrangement of ‘off-the shelf’ components or technologies.• Promise lower margins• First commercialized in emerging insignificant markets• Generally not wanted by leading firms’ most profitable
customers (hence listening exclusively to one’s best customers may not always be good)
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D A
C B
Poor fit(disruptive)
Strong fit(sustaining)
AutonomousOrganizationis required
Mainstreamorganizationis responsible
Fit with Organization’s values
Who should be responsible
New
Customary
Heavyweightteams
Lightweightteams
Functionalteams
Fit
wit
h o
rgan
izat
ion
al p
roce
sses
Str
uc t
ur e
of
dev
elop
me n
t te
a m
Fitting Innovation’s Requirements with Organizational Capabilities
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Characteristic Cost Structures of Different Value Networks
0
20
40
60
80
100
34%
25to30%
41%
40%
56%
60%
Des
ktop
OE
Ms
5.25
-inc
h di
skdr
ive
mak
ers
Min
icom
pute
rO
EM
s6-
inch
dis
kdr
ive
mak
ers
Mai
nfra
me
OE
Ms
14-i
nch
disk
driv
e m
aker
s
Desktop PCValue Network
MinicomputerValue Network
MainframeComputing
Value Network
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Difference in Valuation of Attributes Across Different Networks (1988)
Value networkShadow price (US$) ofan incremental MB of
capacity
Shadow price (US$) ofincremental reduction of 1
cubic inch in sizeMainframe 1.66 -0.1
Minicomputer 1.5 -0.14
Desktop PC 1.45 0.17
PortableComputer
1.17 0.24
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Market
needEstablish
ed
Disruptive
Time
Cap
acit
y
Market
needEstablish
ed
Disruptive
Time
Ph
ysic
al S
ize
Market
need Established
Disruptive
Time
Rel
iab
ilit
yTime
Pri
ce Sustaining technologies
Market need
The basis of competitive success
Phase 1Competition based
upon capacityPhase 2
Competition basedupon physical size
Phase 3Competition based
upon reliabilityPhase 4
Competition basedupon price
Innovations with regard to every
performance variablehave saturated.The product has
become
a Commodity
Changes on the Basis of Competition in disk drive industry
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Need in Tier 1
Need in Tier 2
Need in Tier 3
Performance Relaibility
ConveniencePrice
PerformanceReliability
Convenience
PerformanceReliability
Technology Trajectory
Strategy 1: Push Upmarket Towards Higher-End Customers
Strategy 2: Stay with Customers
Strategy 3:Change Market’s
Demand forFunctionality
Time
Func
tion
alit
y
Managing Changes on the Basis of Competition
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DISCUSSION
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See Slide 12In the period, 1975-1990, terabits/sq. in improved from 1 to
12 owing to improvements in ferrite.oxide technology.
Is this due to
incremental innovation?
radical innovation?
disruptive innovation?
sustaining innovation?
process innovation?
product innovation?
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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See Slide 12 Around 1990, ferrite oxide technology started being replaced
by thin film technology.
Can this be classified as
incremental innovation?
radical innovation?
disruptive innovation?
sustaining innovation?
process innovation?
product innovation?
architectural innovation?
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See Slide 12 Around 1994, thin film technology started being replaced by
thin magneto-resistive technology.
Can this be classified as
incremental innovation?
radical innovation?
disruptive innovation?
sustaining innovation?
process innovation?
product innovation?
architectural innovation?
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See Slide 14 In the period, 1965 to 1978, removable disk pack drives
dominated. Around 1978, 14-inch Winchester drive was substituted for the removable disk packs.
Can this be classified as
incremental innovation?
radical innovation?
disruptive innovation?
sustaining innovation?
process innovation?
product innovation?
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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See Slide 15 Around 1976, removal disk-pack drives were replaced by
Winchester drives.
Can this be classified as
incremental innovation?
radical innovation?
disruptive innovation?
sustaining innovation?
process innovation?
product innovation?
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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See Slide 7
During 1977 to 1994, the price per megabyte in 1982 dollars from $900 to 0.2.
Was this due to market pull?
Was this due to technology push?
Was this due to competition?
Name five technologies that contributed to this development.
KV Patri, Mgmt of Tech Inn., Disk Drives Case Study
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See Slide 18 Architectural improvements aimed at shrinking the
drive size (from 14-inch to 8-inch to 5.25-inch to 3.5-inch to 2.5-inch to 1.8-inch) turned out to be disruptive.
• Why are these labeled as ‘disruptive’?• Whose businesses were ‘disrupted’?• Why is the continued development of ferrite oxide
technology not viewed as being ‘disruptive’?• Why should it be viewed as ‘sustaining’?• Whose businesses were sustained?
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Some Broad and Open-ended Questions
• The companies ‘disrupted’ were large and having a good R&D as well as marketing infrastructures and cultures. Yet they were ‘disrupted’ by smaller players. Why?
• Listening to customers is the basic precept in the era of quality. Does this suffice when one transits to the era innovation?
• What are the general characteristics of disruptive innovations?
• What steps could the large and established companies take to avoid being ‘disrupted’?
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Further Questions
• Can small firms hope to engage in incremental innovation? No!! No! Yes! Yes!!
• Can small firms hope to engage in radical innovation? No!! No! Yes! Yes!!
• Can small firms hope to engage in architectural innovation? No!! No! Yes! Yes!!
• Can small firms hope to engage in disruptive innovation? No!! No! Yes! Yes!!
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What type of innovation is best suited for Hong Kong’s manufacturing sector?
Insert a preference rating between 1 to 5 (5 for highest preference and 1 for lowest preference).
incremental innovation
radical innovation
disruptive innovation
sustaining innovation
process innovation
product innovation
architectural innovation