Innovation

B290

Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly 31 439-465

Cement industry

Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly 31 439-465

Computers

Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly 31 439-465

Passenger Aircraft

The Technology Cycle

Source: Anderson, P. and M. L. Tushman, 1990, Administrative Science Quarterly 35(4) 604-633

Technological change

• Discontinuity – Technology breakthroughs

• Competence enhancing– Transistors (for computer companies)– Float glass

• Competence destroying– Transistors (for valve companies)– Plastic– Flash memory– Xerography

Types of Innovation

• Incremental vs. Radical

• Competence enhancing vs. competence destroying

• Component vs. architectural

• Sustaining vs. Disruptive

Incremental vs. Radical

• Incremental – Small changes that improve the

performance of a product (or service)

• Radical– Dramatic change in performance, an

inflection point or discontinuity

Component vs. Architectural

• Component – Does not alter the basic product

architecture• Thermal Conduction Module in 3083• Multi-core microprocessors (Pentium Core 2)

• Architectural– Takes existing components and

combines them in novel ways• IBM PC, Apple’s iPhone

Competence enhancing/destroying

• Competence enhancing – Innovations that build on a company’s

current knowledge and resource base• Hybrid disk drives for Seagate

• Competence destroying– Innovations that require completely new

skills and resources• Digital image capture for Kodak (essentially

a chemical company)

Sustaining vs. Disruptive

• Whether an innovation is sustaining or disruptive:– May have little to do with technology– More often, a function of the interaction

of changing markets and organizational imperatives

Tech

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Technology S curves

Time

Tech

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Three different technologies

Ferrite heads

Metal in Gap heads

More recently:MagnetoresistiveGiant MagnetoresistiveTunneling Magnetoresistive

Thin film heads

1950 19901970 1995

Are

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ty

IBM’s development trajectory

• IBM’s R&D scientists reported to management that different technologies (e.g., “Ferrite head”) had performance limits determined by the laws of physics

• As each technology ran out of steam the company had to be positioned to implement its successor

Fujitsu and IBM (continued)

• As IBM approached the predicted technological limit– funding for the next promising technology

(e.g., thin-film) was increased– funding for further research into the

existing technology (e.g., ferrite heads) was reduced

• Thin film head improved increasingly rapidly while progress in ferrite heads slowed…

…Fujitsu pushes on with Ferrite

Ferrite heads

Metal in Gap heads

More recently:MagnetoresistiveGiant MagnetoresistiveTunneling Magnetoresistive

Thin film heads

1950 19901970 1995

Are

al D

ensi

ty

Ferrite heads

Technology S-curves

• May be a function of a particular technology

• Or may simply be a self-fulfilling prophesy

Disruptive Innovation

• Why do incumbent firms often fail?– Companies listen to their most lucrative

customers– Emerging markets are too small (and risky) to

pursue– Forecasts of emerging markets are generally

wrong– A firm’s existing capabilities shape its

approach– Progress may allow technology to ‘leap’ from

one market to another

The Hard Disk Drive Industry

• “Of the seventeen firms in the industry in 1976--all except IBM's disk drive operation had failed or had been acquired by 1995”

• (…and IBM sold it’s operation to Hitachi in 2003)• “all of the producers remaining by 1996

had entered the industry after 1976”• (Clayton Christiansen, HBS)

• Despite established firms' technological prowess, the firms that led in developing new, disruptive technologies were new entrants, not incumbents.

Supply exceeds demand

Time

Perf

orm

ance

/ p

rice

Segment demand

“Old” technology

“Disr

uptive” t

echnology

The Value Network

• New products are needed for new markets– Different set of CSFs

• Smaller form factor disks

• Incumbents consider the technology for this market inferior to that needed for their major customers/markets– New entrants fill the gap– Technology price/performance improves

• faster than the small (new) market needs• Enough to surpass incumbent’s technology

• New entrants supplant incumbents