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Managing Technological
InnovationIEOR 4998, Tuesdays 1:10PM - 3:40PM
1127 Seeley W. Mudd Building
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What I hope you learn today
Sustaining Innovation
Disruptive Innovation
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Case Study: Google
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Indexers
CURATION
ARCHIE
(FTP)
W3CATALOG
YAHOO!
YEAR
1990 1993 1995
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Full Text Search
YEAR
BREADTH+R
ELE
VANCE
WEB CRAWLER
ALTA VISTA
LYCOS
1994 1995 1996
INKTOMI
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Technology S Curve
from Murrae J. Bowden, Moores Law and the Technology S-Curve,
Current Issued in Technology Management, Winter 2004, Issue 1
Volume 4
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1990 1994 1998
Indexers
Google, et al
Full-text Search
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Technology Strategy of Firms using Sustaining Innovation
Christensen, The Evolution of Innovation in Technology
Management Handbook, edited by Richard Dorf. Boca Raton, Fla.: CRC
Press, 1998.
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Sustaining Innovation
[S]uccessful innovators usually have a pretty clear idea of the
kind of
competitive edges theyre seeking. Theyve thought long and hard
about whats
practical in their particular businesses...
- Andrall E. Pearson (former president of PepsiCo and a Managing
Director at McKinsey before joining the
faculty of HBS), Tough-Minded Ways to Get Innovative, Harvard
Business Review, May-June 1988
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from Managing Your Innovation Portfolio, by Bansi Nagji and
Geoff Tuff in the Harvard Business Review,
http://hbr.org/2012/05/managing-your-innovation-portfolio
70%
10%
20%
Allocation
ofResources 70%
10%
20%
ReturnonInvestment
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Who benefits from sustaining innovation?
How do you find good, concrete ideas? ... your best backdrop for
spurring
innovation is knowledge--knowing your business cold. Good ideas
most often
flow from the process of taking a hard look at your customers,
your
competitors, and your business all at once. So, in looking for
ways to innovate,
Id concentrate on:
Whats already working in the marketplace that you can improve on
and
expand.
How you can segment your markets differently and gain a
competitive
advantage in the process.
How your business system compares with your competitors.
...most of PepsiCos major strategic successes are ideas we
borrowed from the
marketplace--often from small regional or local competitors.
- Andrall Pearson, op cit
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Christensens Model of DisruptiveInnovation
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QUALITYVA
LUED
BYE
XISTING
MARK
ET
TIME
Value Network
SUSTAIN
INGINN
OVATION
CUSTOMERNEED
S
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QUALITYVA
LUED
BYE
XISTING
MARK
ET
SUSTAIN
INGINN
OVATIO
N
DISRUP
TIVEINNOVA
TION
CUSTOMERNEED
S
Value Network
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QUALITYVA
LUED
BYE
XISTING
MARK
ET
QUALITYVALUEDBYNEW
MARKET
SUSTAIN
INGINN
OVATIO
N
DISRUPTIVE
INNOVATIO
N
CUSTOMERNEED
S
Value Network
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Disruptive Innovation
In every market there is a rate of improvement that
customers
can utilize or absorb
In every market there is a distinctly different trajectory
of
improvement that innovating companies provide as theyintroduce
new and improved products
Disruptive innovations dont attempt to bring better products
to established customers in existing markets. Rather, they
disrupt and redefine that trajectory by introducing productsand
services that are not as good as currently available
products. But disruptive technologies offer other benefits
typically, they are simpler, more convenient, and less
expensive
products that appeal to new or less-demanding customers
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Disruptive Production
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Was Google disruptive?
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What changed in 2002?
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Googles Customers
Google
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Googles Customers
GoogleSEARCHER ADVERTISER
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Googles Customers
GoogleSEARCHER
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Googles Customers
Google ADVERTISER
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What is Quality to an
Advertiser?
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Googles Advertiser Innovations
Content of marginal quality Very low cost
Low reach Finely targeted
Text-only ads Low production costs
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Disruptive?
Lower cost
Lower on old quality dimension
Establish a new quality dimension
Find a new market
Improve along old quality dimension
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Shorter recap
When the initial basis of competition is
commodified, competition occurs along another
basis
When the old basis and the new basis require a
tradeoff, disruptive innovation can occur
The disrupting company can follow the existing
improvement path in the old basis until that basisis commodified
then compete on the new basis--
then the sustaining company can no longer
compete
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Non-disruptive
innovation possible,even for startups
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Proven
Technology
New
Technology
EstablishedMarket New firms: 43%Success: 8% New firms:
18%Success: 0%
EmergingMarket
New firms: 29%Success: 36%
New firms: 10%Success: 37%
Disk drive industry
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Proven
Technology
New
Technology
EstablishedMarket
MarketSegmentation
Productdifferentiation
Emerging
MarketDisruption
Market
Evangelism
A market without a dominant playerdoesnt need to be
disrupted
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Blanks Four Market Types
ExistingMarket Resegmented Market(niche or low-cost) NewMarket
CloneMarket
Customers Existing Existing New/New Usage New
Customer
Needs
Performance 1. Cost
2. Perceived need/
problem
Simplicity and
convenience
New idea already
proved overseas
Product
Performance
Better/Faster 1. Good enough at the
low end
2. Good enough for
the new niche
Low in traditional
attributes,
improved by new
customer metrics
Good enough for
local markets
Competition Existing
incumbents
Existing incumbents Non-consumption/
other startups
None, foreign
originators
Risks Existing
incumbents
1. Existing incumbents
2. Niche strategy fails
Market adoption Cultural adoption
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Readings for Next WeekChristensen, Intro to Part II, Chapter 7,
Chapter 8
Carlota Perez, Technological revolutions and techno-economic
paradigms, http://
www.carlotaperez.org/papers/PerezTRsTEPsTUTWP20.pdf
http://steveblank.com/2009/03/26/supermac-war-story-4-repositioning-supermac-market-type-at-
work/
Chris Dixon, The Idea Maze,
http://cdixon.org/2013/08/04/the-idea-maze/
Steve Johnson, Where Do Good Ideas Come From (video),
http://www.youtube.com/watch?
v=NugRZGDbPFU
Tina Seelig, A crash course in creativity,
http://www.youtube.com/watch?v=gyM6rx69iqg
First Round Capital, 90% of Feedback is Crap,
http://firstround.com/article/90-of-feedback-is-
crap-how-to-find-the-next-big-startup-idea#
Wesley Tansey, How to Find Startup Ideas,
http://wesleytansey.com/how-to-find-startup-ideas/
Neil Stephenson, Innovation Starvation,
http://www.worldpolicy.org/journal/fall2011/innovation-
starvation
James Altucher, How to Become an Idea Machine,
http://www.jamesaltucher.com/2012/10/how-
to-become-an-idea-machine/
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All unattributed slides about disruptive innovation from:
Christensen, Clayton M. (2012): Disruptive Innovation. In:
Soegaard, Mads and Dam, Rikke Friis (eds.).
"Encyclopedia of Human-Computer Interaction". Aarhus, Denmark:
The Interaction Design Foundation.Available online at
http://www.interaction-design.org/encyclopedia/disruptive_innovation.html
