More on this book
Community
Kindle Notes & Highlights
Read between
March 13 - March 23, 2018
programs. It is through these mechanisms of seeking corporate profit and personal success, therefore, that customers exert a profound influence on the process of resource allocation, and hence on the patterns of innovation, in most companies.
where they were dependent upon the appropriate set of customers for survival, those managers harnessed the powerful forces of resource dependence.
It seems to be very difficult to manage the peaceful, unambiguous coexistence of two cost structures, and two models for how to make money, within a single company.
The evidence from the disk drive industry shows that creating new markets is significantly less risky and more rewarding than entering established markets against entrenched competition.
Firms that sought growth by entering small, emerging markets logged twenty times the revenues of the firms pursuing growth in larger markets.
Because emerging markets are small by definition, the organizations competing in them must be able to become profitable at small scale.
Small markets cannot satisfy the near-term growth requirements of big organizations.
Projects make sense to people if they address the needs of important customers, if they positively impact the organization’s needs for profit and growth, and if participating in the project enhances the career opportunities of talented employees.
a project to commercialize a disruptive technology in a small, emerging market is very unlikely to be considered essential to success in a large company;
small markets don’t solve the growth problems of big companies.
There are enormous returns and significant first-mover advantages associated with early entry into the emerging markets in which disruptive technologies are initially used.
large, growth-oriented companies face the problem that small markets don’t solve the near-term growth needs of large companies.
cost structures enabling them to become profitable at small scale.
Each of these factors argues for a policy of implanting projects to commercialize disruptive innovations in small organizations that will view the projects as being on their critical path to growth and success, rather than as being distractions from the main business of the company.
Not only are the market applications for disruptive technologies unknown at the time of their development, they are unknowable.
The strategies and plans that managers formulate for confronting disruptive technological change, therefore, should be plans for learning and discovery rather than plans for execution.
Applying inappropriate marketing, investment, and management processes can render good companies incapable of creating the new markets in which enabling or disruptive technologies are first used.
An important corollary is that, because markets for disruptive technologies are unpredictable, companies’ initial strategies for entering these markets will generally be wrong.
In most companies, however, individual managers don’t have the luxury of surviving a string of trials and errors in pursuit of the strategy that works.
Given the powerful first-mover advantages at stake, however, managers confronting disruptive technologies need to get out of their laboratories and focus groups and directly create knowledge about new customers and new applications through discovery-driven expeditions into the marketplace.
This is because organizations themselves, independent of the people and other resources in them, have capabilities.
Three classes of factors affect what an organization can and cannot do: its resources, its processes, and its values.
a process that defines a capability in executing a certain task concurrently defines disabilities in executing other tasks.
The reason good managers strive for focus in their organizations is that processes and tasks can be readily aligned.
on. Prioritization decisions are made by employees at every level.
The values of successful firms tend to evolve in a predictable fashion in at least two dimensions. The first relates to acceptable gross margins. As companies add features and functionality to their products and services in order to capture more attractive customers in premium tiers of their markets, they often add overhead cost.
as companies become large, they literally lose the capability to enter small emerging markets.
Huge size constitutes a very real disability in managing innovation.
But their processes and values constituted disabilities in their efforts to succeed at disruptive technologies.
Large companies often surrender emerging growth markets because smaller, disruptive companies are actually more capable of pursuing them.
Culture enables employees to act autonomously and causes them to act consistently.
But because these factors also define what an organization cannot do, they constitute disabilities when the problems facing the company change.
financial analysts have a better intuition for the value of resources than for processes.
New team boundaries enable or facilitate new patterns of working together that ultimately can coalesce as new processes—new capabilities for transforming inputs into outputs.
When disruptive change appears on the horizon, managers need to assemble the capabilities to confront the change before it has affected the mainstream business.
The market research and planning processes that are appropriate for the launch of new products into existing markets simply aren’t capable of guiding a company into emerging, poorly defined markets.
And it is very difficult for a single organizational unit to employ fundamentally different, opposing processes.
this is why managers need to create different teams, within which different processes to address new problems can be defined and refined.
A separate organization is required when the mainstream organization’s values would render it incapable of focusing resources on the innovation project.
And it is very difficult for a company whose cost structure is tailored to compete in high-end markets to be profitable in low-end markets as well.
Because values are the criteria by which prioritization decisions are made, projects that are inconsistent with a company’s mainstream values will naturally be accorded lowest priority.
Functional and lightweight teams are appropriate vehicles for exploiting established capabilities, whereas heavyweight teams are tools for creating new ones.
Understanding problems is the most crucial step in solving them.
performance oversupply triggers a shift in the basis of competition, and the criteria used by customers to choose one product over another changes to attributes for which market demands are not yet satisfied.
the attributes that make disruptive products worthless in mainstream markets typically become their strongest selling points in emerging markets;
simpler, cheaper, and more reliable and convenient than established products.
The figure shows the strategic alternatives available to companies facing performance oversupply and the consequent likelihood that disruptive approaches will change the nature of competition in their industry.
A second alternative, labeled strategy 2, is to march in lock-step with the needs of customers in a given tier of the market, catching successive waves of change in the basis of competition.
disruptive technologies involve no new technologies; rather, they consist of components built around proven technologies and put together in a novel product architecture that offers the customer a set of attributes never before available.
Perhaps the most powerful protection that small entrant firms enjoy as they build the emerging markets for disruptive technologies is that they are doing something that it simply does not make sense for the established leaders to do.
