The Comparative Success of The Comparative Success of Leaders and Followers Leaders and Followers

PRODUCT INNOVATOR FOLLOWER WINNER

Jet Airliners De Havilland (Comet) Boeing (707) Follower

Float glass Pilkington Corning Leader

X - Ray Scanner EMI General Electric Follower

Office P.C. Xerox IBM Follower

VCRs Ampex/Sony Matsushita Follower

Diet Cola R.C. Cola Coca Cola Follower

Instant Cameras Polaroid Kodak Leader

Pocket Calculator Bowmar Texas Instruments Follower

Microwave Oven Raytheon Samsung Follower

Plain Paper Copiers Xerox Canon Follower

Fiber Optic Cable Corning many companies Leader

Video Games Players Atari Nintendo/Sega Followers

Disposable Diapers Proctor & Gamble Kimberly-Clark Leader

Internet Browser Netscape Microsoft Follower

Disruptive TechnologiesDisruptive Technologies

Perf

orm

an

ce

Time

Disruptivetechnology

Disruptive Steel Mini-mill Disruptive Steel Mini-mill TechnologyTechnology

Ste

el Q

ualt

iy

Time1975 1980 1985 1990 1995

Rebar

Other bars and Rods

Structural Steel

Sheet Steel

Quality o

f min

imill-

produce

d steel

Strategic Decisions in Strategic Decisions in Commercializing Disruptive Commercializing Disruptive TechnologiesTechnologies

Disruptive Technology

Should we push or stretch the technology until we can use it in existing market segments

and applications, with existing customers?

Should we find or create a new market segment in which the

attributes of the disruptive technology, as it exists today,

are valued?

Catching the WaveCatching the Wave

Determine the nature of the technologyDefine the strategic significance of itLocate the initial market for the

disruptive technologyPlace responsibility in an independent

organization, and keep it independent

Approaches to Managing a Disruptive Approaches to Managing a Disruptive AttackAttack

“We Ought to Be Able to Do This

Inside”

Control Data: 8-inchQuantum: 5.25-inchSeagate: 1.8-inchDEC: Desktop ComputersApple: Palmtops

“Face the Facts and Create a New Creosote

Bush”

Launch Separate OrganizationsControl Data: 5.25-inchQuantum: Plus DevelopmentHP: Inkjet PrintersIBM: PC DivisionGeneral Motors: Saturn

Acquire Disruptive Firms Early (and keep them separate)Johnson & JohnsonIntel

Judging Potential Judging Potential DisruptionsDisruptions

Source: Rafii & Kampas, HBR, 11/02

Dealing with Disruptive Dealing with Disruptive ChangeChange

How you frame the disruption matters

Separate new venture from the coreFund in stagesCultivate outside perspectivesIdentify an integratorModularize integrationConsider acquisitions

What is a high-velocity What is a high-velocity environment?environment?

Rapid product life cyclesDiverse competitors and unpredictable

movesCompetitive advantages are less sustainable

and subject to undermining and imitationBoth technological/strategic uncertainty is

highNew entrants and startup strategiesDisruptive technologies and strategies

Sources of UncertaintySources of Uncertainty

Unpredictable environmental events (e.g. disruptive technologies)

customer or stakeholder demandscompetitors’ movesactions of buyers and suppliers managerial actionsemployee behaviorgovernmental actions (or lack of them)

This business is intensely, vigorously, bitterly, savagely competitive.

- Robert Crandall, CEO, American Airlines

Major sustainable competitive advantages are nearly non-existent in the field of financial services.

- Warren Buffett

I don’t believe in friendly competition. I want to put them out of business.

- Mitchell Leibovitz, CEO, Pep Boys

Declare business war. This is the enemy.- statement over a photo of Northern Telecomm CEO Paul

Stern, on posters at an AT&T plant in Denver

HypercompetitionHypercompetition

Rapidly escalating competition based on price/quality positioning

Competition to create new knowledge, first-mover advantage, and protect/invade markets

The frequency, boldness, and aggressiveness of competitors accelerates to create a condition of constant disequilibrium and change

Market stability is threatened by short product life/design cycles, new technologies, frequent entry, repositioning by incumbents, and redefinitions of industry boundaries

Firms actively work to disrupt their own advantages and those of competitors

Competitive advantages are fleeting and unsustainable

Sources of InertiaSources of InertiaCognitive Inertia

◦Framing lock-ins◦Dangerous analogies◦Emotional traps

Action Inertia◦Sticky routines◦Ingrained culture◦Leadership failures

Strategy as Simple RulesStrategy as Simple Rules

Greatest opportunities for competitive advantage lie in market confusion

Advantage comes from successfully seizing fleeting opportunities

A focus on key processes How-to Rules – spell out key process features Boundary Rules – guidelines for choosing opportunities Priority Rules – heuristics for ranking opportunities Timing Rules – synchronize processes with the pace

of opportunities Exit Rules – help decide when to pull out of

failing/decaying projects

What explains Google’s early success? Is search a “winner take all” category? Why?How does Google create value?What is the basis for Google’s competitive

advantage? Is it sustainable?What should Google do….

◦ About Yahoo – Cartel/All In◦ About Apple – Gains, E-Town◦ About Amazon – Gold Medal, Dash◦ About Microsoft – Emerge, Excelr8