• No results found

Capturing the Upside While Avoiding the Downside

N/A
N/A
Protected

Academic year: 2021

Share "Capturing the Upside While Avoiding the Downside"

Copied!
25
0
0

Loading.... (view fulltext now)

Full text

(1)

Capturing the Upside

While Avoiding the Downside

Clayton M. Christensen

Harvard Business School

(2)

• Historically, less than 10% of companies have been able to sustain for more than a few years the growth that creates above-average

shareholder returns.

• Once a company’s growth has stalled, the probability that it can successfully re-accelerate growth is only 6%.

• Historically, it has seemed impossible to predict which innovations will successfully create new waves of growth, and which will fail.

ü Only 20% of venture capital – funded start-ups succeed

ü Only 25% of new products launched by established companies succeed.

This need not be the case. Managers can use sound theories to guide the key decisions required to build

successful growth businesses.

The Innovator’s Solution

(3)

Ten questions in building new growth businesses

1. How can we beat the competition?

2. Which customers should we target?

3. What products will our customers want to buy?

4. How should we distribute to and communicate with our customers?

5. Which things should our company do, and which should our can partners and suppliers do?

6. How can we avoid commoditization?

7. Who should be on our management team?

8. What is the best organizational structure for this business?

9. How can we know when to change course?

10. Whose investment capital will help, and whose might hurt?

(4)

Performance

Time Performance that customers

can utilize or absorb Pace of

Technological Progress

Sustaining innovations

Disruptive technologies

Incumbents nearly always win

Entrants nearly always win

Disruptive technologies are a driver of leadership failure and the

source of new growth opportunities

(5)

The Innovator’s Dilemma

Performance

Time

Sustaining innovations to minicomputers

Disruptive technology:

personal computers

60% on

$500,000

45% on

$250,000

40%

on $2,000

20%

(6)

Most value-creating growth businesses originated in disruption

Today

Toyota

Wal-Mart

Intel

Southwest Air

Microsoft

Oracle

Cisco

Sony

Bloomberg

Best Buy Yesterday

Japan

Kodak

ZCMI

Ford

Merrill Lynch

AT&T

Sears catalog

Swift; Armour

Black & Decker

Xerox

Tomorrow:

Embraer

Veritas

U. of Phoenix

RIM Blackberry

Salesforce.com

Linux

E-Bay

Sonosite

Amazon.com

Tensilica

(7)

Non

-consumers or Non

-consuming occasions

Different measure Of Performance

Time New -market disruption:

Compete against non - consumption

Low -end disruption Address over

-served

customers with a lower

-cost

business model

Performance

Time Bring a better product

into an established market

Two strategies for asymmetric competition

(8)

Non-consumers are the ideal initial target

Performance

Time

Pocket radios

Portable TVs

Disruptive technology: transistors vs. vacuum tubes

Hearing Aids

Major Established Electronics Markets:

Tabletop radios, floor-standing televisions, computers, telecomm.equipment, etc.

Path taken by

established

vacuum tube

manufacturers

(9)

Performance

Time Chat rooms

Wireless e-mail

Disruptive Technology: Voice Recognition Technology

Toy robots

Path taken by IBM

Word Processing

Wireline e-mail

Standard phrases

Non-consumers are the ideal initial target

(10)

Job-based segmentation:

What are customers trying to get done in their lives?

Nascent idea

Segmentation based upon attributes of products

Segmentation based upon attributes of customers

Powerful forces cause companies to target market segments that are irrelevant to the reasons why customers buy products

Organizational structure,

performance measurement

systems, channel structure

U

Focus on customer rather than job as the unit of analysis; demands for quantification; economics of communication

U

(11)

Never compete against customers’ manifest priorities.

Facilitate them .

Digital cameras

Electronic learning

Facilitate priorities

(12)

• Voice phone

• News summaries

• Always on

• Simple, mindless games

Structuring the market in terms defined by data that are easily collected obfuscates the right targets for innovation.

• CRM software

• E-books, e- magazines

• Stock trading

• Travelocity

• E-mail

• Voice

• Digital camera

• Word

• Excel

• Handwriting recognition

• Wireless e -mail

• Phone

Define the market as a class of products (wireless hand-held)

Competition: Palm, Handspring, Sony, HP, Compaq, Nokia

Define the market in demographic terms (the

business traveler)

Competition: wireline telecom and notebook

computers

Define the market in terms of jobs that customers need to get

done

Competition: Nokia, Wall Street Journal, CNN

Airport News, boredom

(13)

Integrated firms have the advantage when products aren’t good enough.

Focused firms overtake over-served markets.

Modular Architectures

Beat competitors

with speed, responsiveness and customization

Performance

Time Interdependent Architectures

Beat competitors

with functionality

(14)

Changes in integrality/modularity have profoundly changed the structure of the computer industry

Equipment Materials Components Product design Assembly

Operating system Applications software Sales & distribution

Field service

Intel, Micron, Quantum, Komag, etc.

Compaq, Dell, Gateway, Packard Bell

Compaq

Microsoft

Word Perfect, Lotus, Borland, etc.

CompUSA

Independent contractors

Microsoft

Contract assemblers Contract assemblers

1960 - 1980 1980 - 1990 1990 - Present

Dell

IBM Control Data Digital Equipment

Monsanto, Sumitomo Metals, Shipley, etc.

Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.

(15)

7%

4%

Quality of minimill

-produced steel 12%

8%

18% 22%

% of tons

Steel Quality

1975 1980 1985 1990

Rebar Angle iron; bars & rods

Structural Steel Sheet steel

25–30%

55%

Beat competitors with asymmetry of motivation

(16)

Speed & responsiveness

Performance

Time

Functionality

Over-shooting precipitates reciprocal processes of commoditization and de-commoditization.

$

$

Design &

assembly of proprietary products is highly profitable.

Components are undifferentiable

commodities Retailing is undifferentiable

$

$

Design &

assembly of modular systems is commoditized.

Performance- defining subsystems are

very profitable Retail/

distribution that addresses speed and convenience

is attractive

(17)

Disruption enables less-skilled people to do more sophisticated things

Disruptive innovations enable a larger population of less-skilled, less-

wealthy people to do things in a more convenient, lower-cost setting, which historically could only be done by specialists in less convenient settings.

Disruption has been one of the fundamental causal mechanisms through which our lives have improved.

• Computers

• Xerography

• Angioplasty

Almost always, disruptive innovations such as these have been ignored or opposed by the leading institutions in their industries for perfectly

rational reasons.

(18)

Disruption is facilitated by sophisticated technology that makes things foolproof

Complex

Simple

Experimentation

& problem-solving

Pattern Recognition

Rules-Based

(19)

Simple Clarity of the rules Ambiguous Little Skill required to follow the rules Deep

Sick child Nurse Family

doctor Specialist Home

Office Outpatient

Clinic

Parent General

Hospital hospital

Scientific understanding,

built upon the ability to diagnose unambiguously, shifts the method used

to diagnose and treat disorders from an unstructured, experimental problem-solving process, towards

a rules-based regime.

Simple Clarity of the rules Ambiguous

Little Skill required to follow the rules Deep

(20)

How can I know what my organization is capable and incapable of accomplishing?

• Hiring & Training

• Product development

• Manufacturing

• Planning &

Budgeting

• Market Research

• Resource allocation

• People

• Technology

• Products

• Equipment

• Information

• Cash

• Brand

• Distribution

Processes

Resources Values

• Ethics

• Cost structure/

income statement

• Size of opportunity

The criteria by which

prioritization decisions

are made

(21)

The strategy-making processes that are good at planning sustaining innovations, are bad at guiding disruptive ones.

Intended strategy

Resource allocation

process

Strategic Actions:

New products, services,

processes, acquisitions

Actual Strategy

Emergent strategy

Unanticipated opportunities problems and successes Improved understanding of what works and what doesn’t

The

Organization’s

values

(22)

J&J’s Professional Division has grown much faster than its Consumer Division over the last decade

0 2,000 4,000 6,000 8,000 10,000 12,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

J&J Annual Sales

($ millions)

Consumer

Division

Professional

Division

(23)

New disruptive growth businesses account for nearly all of this growth

0 2,000 4,000 6,000 8,000 10,000 12,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

10.3%

3.7%

CAGR

2.9%

40.9%

*Adjusted for revenues from Cordis, Ethicon Endo Surgery, LifeScan and Vistakon Source: Johnson and Johnson 10-K

Total

Normalized*(1) Absolute*

New Disruptive Growth Businesses*

Annual Sales

($ millions)

(24)

Disruption amongst healthcare institutions is well underway

General Hospitals Complex

Simple

Out -patient Facilities In- office care

In- home care

Complexity of diagnosis

and

treatment

(25)

Disruptions amongst healthcare professionals

Time

Specialist & sub

-specialist physicians

Nurse practitioners Self -care

Family / personal care physicians

Performance that the

marketplace needs or utilizes

Complex

Simple

Complexity of diagnosis

and

treatment

References

Related documents

In this chapter, we faced the question of whether it is possible to estimate at the same time the task being performed (reach a target position) and the signal model (binary

Three main priorities from empowerment strategy are (1) Creating Batik culture within the people of Indonesia, (2) Continuous coaching on Batik production, and (3) Assistance

Such a collegiate cul- ture, like honors cultures everywhere, is best achieved by open and trusting relationships of the students with each other and the instructor, discussions

In order to examine the effect of teaching text structure and discourse signaling features to Iranian EFL learners, 170 undergraduate students (85 students in treatment group and

Previous research has evidenced that the most self-determined regulations (i.e., intrinsic motivation and identifies regulation) are associated with more adaptive behaviors, both

“Everyone, everywhere, has the right to an adequate, safe and secure home in which to live” (UN- HABITAT, 2003). The United Nations Conference on Human Settlements was held

Based on previous research, product innovation does not have a significant effect on consumer buying interest A positive brand image has a positive influence on

import unit values inclusive of tariffs (import values divided by input quantities) for each tariff wave and for unaffected countries and products; proportional changes for each