Class 2: Strategic Issues in NPD August 31, 2004

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Class 2Strategic Issues in NPDAugust 31, 2004
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Part II Strategic Issues for NPD

• The Pioneering Advantage Myth or Reality?
• The Innovators Dilemma
• Sustaining vs. Disruptive Technologies
• How closely should you listen to your customers?
• Implications for Organizational Strategy
• Coping with Change
• Within existing structures (inside and outside
  corp. boundaries)
• Acquisition

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Part II Strategic Issues for NPD

• The Pioneering Advantage Myth or Reality?

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The Pioneering Advantage

• Reasons Why It Should Exist
• Consumer-Based Reasons
• Producer-Based Reasons

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The Pioneering Advantage

• Reasons Why It Should NOT Exist

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The Pioneering Advantage

• Myth or Reality?

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Part II Strategic Issues for NPD

• The Pioneering Advantage - Myth or Reality
• The Innovators Dilemma
• Sustaining vs. Disruptive Technologies

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The Innovators Dilemma

• Sustaining Technologies
• Those that foster improved product performance
• Disruptive Technologies
• Those that foster worse product performance, at
  least in the near-term

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The invasion of disruptive steel minimill
technology into progressively more sophisticated
steel markets
Steel Quality
Sheet Steel
Structural Steel
Other Bars Rods
Quality of Minimill Produced Steel
Rebar
1990
1985
1975
1980
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Changes in Market Leadership - Hard Drives

• Product Generation
• 14 in 1973
• 8 in 1978
• 5.25 in 1981
• 3.5 in 1986
• 2.5 in 1990
• 1.8 in 1994

• Leading Firm
• Control Data
• Priam, Shugart
• Seagate, Miniscribe
• Conner, Quantum
• Conner, Quantum
• Integral

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A Disruptive Technology Change The 5.25-inch
Winchester Disk Drive
Attribute Capacity (megabytes) Physical volume
(cubic inches) Weight (pounds) Access time
(milliseconds) Cost per megabyte Unit cost
8-Inch Drives (Minicomputer Market)
60 566 21 30 50 3000
5.25-Inch Drives (Desktop Computer
Market) 10 150 6 160 200 2000
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The Innovators Dilemma

• What tends to happen
• over time?

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The Impact of Sustaining and Disruptive
Technological Change
Performance demanded at the high end of the
market
Product Performance
Performance demanded at the low end of the market
Time
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The Impact of Sustaining and Disruptive
Technological Change
Performance demanded at the high end of the
market
Progress due to sustaining technologies
Product Performance
Performance demanded at the low end of the market
Time
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The Impact of Sustaining and Disruptive
Technological Change
Performance demanded at the high end of the
market
Progress due to sustaining technologies
Product Performance
Disruptive technological innovation
Performance demanded at the low end of the market
Progress due to sustaining technologies
Time
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Barriers to Downward Mobility

• The promise of up-market margins
• The up-market movement of main customers
• Difficulty in cutting costs to move downmarket
  profitably

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Case Study Business Schools

• Harvard Business School is the next likely
  victim of a disruptive technology It has become
  a finishing school for consultants and investment
  bankers - Clayton Christensen, HBS Tenured
  Professor

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Case Study Electronic Vehicles

• How much should Ford, Toyota, GM, BMW, Daimler
  Chrysler, and the other major manufacturers worry
  about electronic cars?
• Are electronic vehicles a disruptive technology?

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Part II Strategic Issues for NPD

• The Pioneering Advantage - Myth or Reality
• The Innovators Dilemma
• Sustaining vs. Disruptive Technologies
• How closely should you listen to your consumers?

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Part II Strategic Issues for NPD

• The Pioneering Advantage - Myth or Reality
• The Innovators Dilemma
• Sustaining vs. Disruptive Technologies
• How closely should you listen to your customers?
• Implications for Organizational Strategy
• Understand your firms capabilities
• Cope with change
• Within corporate boundaries
• Outside corporate boundaries (spin-off)
• Acquisition

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Understand Your Firms Capabilities

• Resources
• People, technology, equipment, cash, brands,
  supply chain relationships, product design
• Processes
• Patterns of interaction, communication,
  decision-making
• Values
• Acceptable gross margins
• Size of the hurdle for new business opportunities

Harder to Change
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Cope with Change

• Within corporate boundaries
• Use heavyweight teams
• Outside corporate boundaries
• Spin out an independent organization
• Acquisition
• Decide whether assimilation is prudent