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Book Review: The Innovator’s DilemmaSubmitted to:Dr. Qadir BaluchPresented By:Noorulhadi QureshiPhD ScholarIslamia College University Peshawar.email@example.com
The Innovator’s DilemmaWhen TechnologiesCause Great firms to fail.(CLAYTON M. CHRISTENSEN)April 1997PhD Scholar atIslamia College University Peshawar,Pakistan.Noorulhadi QureshiBook Review By:Submitted to:Dr. Qadir Bakhsh Baluch.
About the AuthorClayton Christensen is professor atHarvard Business School.At the Age of 40 with 5 kids he started PhD.With his Study he was chairman for students affair at BostonConsultant firm.Introduced Hedge fund since 2002 with Return of 45% returninvested in disruptive company.Top official for congregation in church in US and Canada.Also wrote on Religion.
DilemmaDilemmaClayton Christensen writes aboutClayton Christensen writes aboutfailure of companies to stay/failure of companies to stay/sustain a top when confronting bysustain a top when confronting bytechnological change, it is abouttechnological change, it is aboutthe well managed companies whothe well managed companies whoare involved in innovation process,are involved in innovation process,investment and change but yet failinvestment and change but yet failbecause of technological change.because of technological change.
Book Summary and DiscussionBook is divided in to two parts.• Part one of this book depicts why thegreat firm fail? focused on hard disk driveindustry, value network and impetus toinnovation, three industries with disruptiveinnovation and at the end of first partexplained how companies overcomethe leader companies.• Part two is about managing disruptivetechnological change
Causes of Failure of WellManaged Firm1. Sustaining technology andDisruptive Technology.2. The Pace of Technological Progress3. Customer and Financial Structure
Disruptive TechnologyDisruptive technologies bring to a market a very differentvalue attributes/proposition than had been availablepreviously, and value to new customers, or un-demandedmarket.Disruptive Technologies are• Cheaper•Simpler•Smaller•Frequently•And more convenient to use.
Summary of the Ideas and ConceptBasic Model of Disruption: Red Line and Blue Line in Model Red Model:High Demand Customer in High Market withHigh Profit Blue Model:Simple Demand Customer with low margin.
Performancedemanded at the highend market.Performancedemanded at the lowend market.Performance due toSustaining TechnologyPerformance due toDisruptive Technology
Model explanation Technological improvement is faster than thecustomer demand. Incremental improvement in productperformance. Innovation help companies in red trajectoriesline for high performance, high profit andgrowth.Example the transistors, change from digital toanalog and analog to optical,
What innovation for in Model. Innovation bring dramatic change in telecomand constituted dramatic breakthrough andstill the leaders. This innovation help the leader to give Better Product Better customers Better profit And be the leader inindustry by sustainability.
Finding from Model Disruption start from the bottom market. Disruption technology’s product in not usedfor breakthrough improvement instead ofsustaining, A product that was not as good as leaderprovide but affordable, simple and easy touse. Entrance by cheap product and thanimproved to kill the leader.
Case StudiesIn 1980’s Microsoftand IBM introducedtheir products at lowprice at bottommarket than went upup and up andbecome the leadersof the IT technology.
Case Study of Disk Drive:1956: IBM ships the first hard drive in the RAMAC 305 system. The drive holds 5MB of data at $10,000 a megabyte. The system is as big as two refrigerators and uses 50 24-inch platters.
A Western Digital 3.5 inch 250 GB SATA-HDD; this specific model features both SATA and Molex power inputs San Jose Research Laboratory. Disk Drive
1956 – IBM 350, first commercial disk drive, 5 millioncharacters 1961 – IBM 1301 Disk Storage Unit introduced with onehead per surface and aerodynamic flying heads, 28million characters per module 1962 – IBM 1311 introduced removable disk packscontaining 6 disks, storing 2 million characters per pack 1964 – IBM 2311 with 7.25 megabytes per disk pack 1964 – IBM 2310 removable cartridge disk drive with1.02 MB on one disk 1965 – IBM 2314 with 11 disks and 29 MB per diskpack 1968 – Memorex is first to ship an IBM-plug-compatibledisk drive 1970 – IBM 3330 Merlin, introduced error correction,100 MB per disk pack 1973 – IBM 3340 Winchester introduced removablesealed disk packs that included head and arm assembly,35 or 70 MB per pack
1973 – CDC SMD announced and shipped, 40 MB disk pack 1976 - 1976 IBM 3350 "Madrid"—317.5 Megabytes, eight 14"disks, Re-introduction of disk drive with fixed disk media 1979 – IBM 3370 introduced thin film heads, 571 MB, non-removable 1979 - 1979 IBM 62PC "Piccolo" – 64.5 Megabytes, six 8"disks, First 8-inch HDD 1980 – The worlds first gigabyte-capacity disk drive, the IBM3380, was the size of a refrigerator, weighed 550 pounds(about 250 kg), and had a price tag of$40,000( $111 thousand in present day terms ), 2.52 GB 1980 – ST-506 first 5¼ inch drive released with capacity of 5megabytes, cost $1500 1983 - RO351/RO352 first 3½ inch drive released withcapacity of 10 megabytes 1986 – Standardization of SCSI 1988 - PrairieTek 220 – 20 Megabytes, two 2.5" disks, First2.5 inch HDD. 1989 – Jimmy Zhu and H. Neal Bertram from UCSD proposedexchange decoupled granular microstructure for thin film diskstorage media, still used today.
1990 – 1990 IBM 0681 "Redwing" – 857 Megabytes, twelve 5.25"disks. First HDD with PRML Technology (Digital Read Channel withPartial Response Maximum Likelihood algorithm) 1991 - IBM 0663 "Corsair" – 1,004 Megabytes, eight 3.5" disks;first HDD using magnetoresistive heads 1991 - Integral Peripherals 1820 "Mustang" – 21.4 Megabytes, one1.8" disk, first 1.8 inch HDD 1992 – HP Kittyhawk first 1.3-inch hard-disk drive – 1993 – IBM 3390 model 9, the last Single Large Expensive Diskdrive announced by IBM 1994 – IBM introduces Laser Textured Landing Zones (LZT) 1997 – IBM Deskstar 16GP "Titan" – 16,800 Megabytes, five 3.5"disks; first (Giant Magnetoresistance) heads 1997 – Seagate introduces the first hard drive with fluid bearings 1998 – UltraDMA/33 and ATAPI standardized 1999 – IBM releases the Microdrive in 170 MB and 340 MBcapacities 2002 – 137 GB addressing space barrier broken 2003 – Serial ATA introduced 2003 – IBM sells disk drive division to Hitachi 2004 – MK2001MTN first 0.85 inch drive released by IBM withcapacity of 2 gigabytes 2005 – First 500 GB hard drive shipping (Hitachi GST)
2005 – Serial ATA 3Gbit/s standardized 2005 – Seagate introduces Tunnel MagnetoResistive Read Sensor(TMR) and Thermal Spacing Control 2005 – Introduction of faster SAS (Serial Attached SCSI) 2005 – First Perpendicular recording HDD shipped: Toshiba 1.8-inch40/80 GB 2006 – First 750 GB hard drive (Seagate) 2006 – First 200 GB 2.5" hard drive utilizing Perpendicularrecording (Toshiba) 2006 – Fujitsu develops heat-assisted magnetic recording (HAMR) thatcould one day achieve one terabit per square inch densities. 2007 – First 1 terabyte hard drive (Hitachi GST) 2008 – First 1.5 terabyte hard drive (Seagate) 2009 – First 2.0 terabyte hard drive (Western Digital) 2010 – First 3.0 terabyte hard drive (Seagate, Western Digital) 2010 – First Hard Drive Manufactured by using the Advanced Format of4,096 bytes a block ("4K") instead of 512 bytes a block 2011 – First 4.0 terabyte hard drive (Seagate) 2012 - Western Digital announces the first 2.5-inch, 5mm thick drive,and the first 2.5-inch, 7mm thick drive with two platters. (WesternDigital) 2012 - HGST announces helium-filled hard disk drives, promisingcooler operation and the ability to increase the maximum number ofplatters from five to seven in the 3.5" form factor.(Hitachi GST) 2012 - TDK demonstrates 2TB on a single 3.5-inch platter.
• Before 1960 only integrated Steel Mills were involve in manufacturing of steel using natural resources for raw materials with 6% profit margin.• Disruptive technology got entry in 1960 by MiniMills, using scrape material, 20% lower cost with 12% profit.Four rang of Steel.From crummy range to high quality productCase Study of Steel-Mill:
Integrated Mill (8 Billion US$)Integrated Mill (8 Billion US$)An integrated steel mill has all the functions forAn integrated steel mill has all the functions forprimary steel production:primary steel production:iron making (conversion of ore to liquid iron),iron making (conversion of ore to liquid iron),steelmaking (conversion of pig iron to liquid steel),steelmaking (conversion of pig iron to liquid steel),casting (solidification of the liquid steel),casting (solidification of the liquid steel),roughing rolling/billet rolling (reducing size of blocks)roughing rolling/billet rolling (reducing size of blocks)product rolling (finished shapes).product rolling (finished shapes).The principal raw materials for an integrated mill areThe principal raw materials for an integrated mill are
Mini MillA steel mini mill is a facility which produces steel products from recycled scrap metal. Unlike integrated steel mills, which make new steel from iron ore in a blast furnace, mini mills melt and refine scrap steel using electric arc furnace (EAF) technology.
MiniMills vs Integrated MillsRang 1: 1960-1979Started from crummy product with in 10 years capture the whole market this range and expand market, Rang 2: 1979 to 1984On demand of customer with low cost strategy started production of Bar steel and improved market.Rang 1:Postpone the production and show high profit because this production badly effect the profit margin., Rang 2:Its sales were reduced and also left the production of this range
MiniMills vs Integrated MillsRang 3: 1985-1990Started the production ofangle bar steel with 18%profit margin that attractinvestors, creditors andcustomersRang 4: 1990 and 1996Started the highest rang ofproduction, 1996 capturedwhole market.Rang 3:Its market collapsed andout of the market in threerange and difficult for themto survive by one range ofproductionRang 4:Bankrupt, Clayton want tocall them stupid managersto allow minimill inentrance.
Toyota did not start from laxus, Toyota, too,does not have a long automotive lineage likesome car makers, having brought its firstvehicle to the U.S. in 1957. Hit the bottom market of North America byIntroducing passenger car and fleeing up upand up to the big vehicles. Now Toyota strategy to cope competitors tocompete with them by high product and killedthem from bottom market.Case Study of Toyota vs General Motor and Ford
1957 - Crown becomes firstpassenger car made inJapan to be exported to theUnited States.The first generation Corona,introduced in May 1957,The Land Cruiser FJ25 wasintroduced to the U.S. in1958 as a two-door utilityvehicle
The Corolla E70 was the fourthgeneration of cars sold by Toyota1980
Vacuumed tube vs Transistor1950’s Blue space technology .1955 Sonny introduced Transistor Radio,(could carry in pocket) disruptivetechnology.1959 Sonny introduced compatible tv anddominated others1966 all companies got license of transistorand vacuumed tube technology collapse.
Part two of this book explain how to• MANAGING DISRUPTIVE TECHNOLOGICALCHANGE,• Give Responsibility for Disruptive Technologies toOrganizations Whose Customers Need Them• Match the Size of the Organization to the Size ofthe Market• Discovering New and Emerging Markets• How to Appraise Your Organization’s Capabilitiesand Disabilities• Performance Provided, Market Demand, and theProduct Life Cycle• Managing Disruptive Technological Change
Findings• Managers of the companies mustkeep the track record inunderstanding customers’ futureneeds, identifying which technologycould best address those needs, andin investing to develop and implementthem.
Findings• Good management play game in gooddecision when change in process,resources and product, do thesething carefully. Flying strategy maynot effect the fundamentaltendencies.
Findings• Good management play game in gooddecision when change in process,resources and product, do thesething carefully.• Flying strategymay not effectthe fundamentaltendencies.
Findings• Customers not the managersessentially control the investmentpattern of the company.• Good Resource allocation weed-outproposal that customers don’t want.DEC, IBM and the Personal computer.
Findings• Survival by Suicide:Hewlett-Packard’s kill the dot matrixtechnology by Ink Jet and than byincremental improvement of LaserJet.Ink-Jet(costly,heating,time) VsLaserJet.
Findings• Leading in sustaining Technology may notbe essential. (can gain no competitiveadvantage. IBM and Fujitsu at 15th.• Leadership in disruptive technologycreates enormous value. 83 companiesenter in disk drive 20% successful, IBMwith leading in disruptive earn 62% marketshare between 1976 to 1980.
Findings• Mostly innovation occurred in smallorganizations.• Identify the new customer and market andnew need to discovering new and emergingmarket.• Capabilities and disabilities are appraisedand three factors allow organization to door not do that are process, resources andvalue, creating and Migrating capabilites.
Findings• Provide that what customers demand.• Commodity not the product, productbecome commodity when therepeated changes in the basis ofcompetitors.
• How to know disruptive technology.– By Trajectories of performanceimprovement demand in the market vsperformance improvement supply by thetechnology.– What customer do, how they use theproduct.– Demographic and economic consideration.– If not sustaining innovation is symptom ofdisruption.– Doing market research.• Continuous business plan and strategy.
The Dilemmas of Innovation:Managing better, working harder, and notmaking so many dumb mistakes is not theanswer to the innovator’s Dilemma but theDisruptive Technology.For Profit and Growth successfulcompanies, using the best managerialtechniques, have led their firms towardfailure.
The Dilemmas of Innovation:First, the pace of progress that marketsdemand or can absorb may be different fromthe progress offered by technology.Second, managing innovation mirrors theresource allocation process.Third, just as there is a resource allocationside to every innovation problem, matching themarket to the technology is another.
Fourth, Organizations have capabilities totake certain new technologies intocertain markets. They have disabilities intaking technology to market in otherways. Organizations have the capabilityto tolerate Failure.Fifth, in many instances, the informationrequired to make large and decisiveinvestments in the face of disruptivetechnology simply does not exist.Dilemma of Innovation
Sixth, it is not wise to adopt a blankettechnology strategy to be always aleader or always a follower. Companiesneed to take distinctly differentpostures.Seventh, and last, the researchsummarized in this book suggests thatthere are powerful barriers toentry and mobilityDilemma of Innovation