The Comparative Success of The Comparative Success of Leaders and Followers Leaders and Followers
PRODUCT INNOVATOR FOLLOWER WINNER
Jet Airliners De Havilland (Comet) Boeing (707) Follower
Float glass Pilkington Corning Leader
X - Ray Scanner EMI General Electric Follower
Office P.C. Xerox IBM Follower
VCRs Ampex/Sony Matsushita Follower
Diet Cola R.C. Cola Coca Cola Follower
Instant Cameras Polaroid Kodak Leader
Pocket Calculator Bowmar Texas Instruments Follower
Microwave Oven Raytheon Samsung Follower
Plain Paper Copiers Xerox Canon Follower
Fiber Optic Cable Corning many companies Leader
Video Games Players Atari Nintendo/Sega Followers
Disposable Diapers Proctor & Gamble Kimberly-Clark Leader
Internet Browser Netscape Microsoft Follower
Disruptive TechnologiesDisruptive Technologies
Perf
orm
an
ce
Time
Disruptivetechnology
Disruptive Steel Mini-mill Disruptive Steel Mini-mill TechnologyTechnology
Ste
el Q
ualt
iy
Time1975 1980 1985 1990 1995
Rebar
Other bars and Rods
Structural Steel
Sheet Steel
Quality o
f min
imill-
produce
d steel
Strategic Decisions in Strategic Decisions in Commercializing Disruptive Commercializing Disruptive TechnologiesTechnologies
Disruptive Technology
Should we push or stretch the technology until we can use it in existing market segments
and applications, with existing customers?
Should we find or create a new market segment in which the
attributes of the disruptive technology, as it exists today,
are valued?
Catching the WaveCatching the Wave
Determine the nature of the technologyDefine the strategic significance of itLocate the initial market for the
disruptive technologyPlace responsibility in an independent
organization, and keep it independent
Approaches to Managing a Disruptive Approaches to Managing a Disruptive AttackAttack
“We Ought to Be Able to Do This
Inside”
Control Data: 8-inchQuantum: 5.25-inchSeagate: 1.8-inchDEC: Desktop ComputersApple: Palmtops
“Face the Facts and Create a New Creosote
Bush”
Launch Separate OrganizationsControl Data: 5.25-inchQuantum: Plus DevelopmentHP: Inkjet PrintersIBM: PC DivisionGeneral Motors: Saturn
Acquire Disruptive Firms Early (and keep them separate)Johnson & JohnsonIntel
Judging Potential Judging Potential DisruptionsDisruptions
Source: Rafii & Kampas, HBR, 11/02
Dealing with Disruptive Dealing with Disruptive ChangeChange
How you frame the disruption matters
Separate new venture from the coreFund in stagesCultivate outside perspectivesIdentify an integratorModularize integrationConsider acquisitions
What is a high-velocity What is a high-velocity environment?environment?
Rapid product life cyclesDiverse competitors and unpredictable
movesCompetitive advantages are less sustainable
and subject to undermining and imitationBoth technological/strategic uncertainty is
highNew entrants and startup strategiesDisruptive technologies and strategies
Sources of UncertaintySources of Uncertainty
Unpredictable environmental events (e.g. disruptive technologies)
customer or stakeholder demandscompetitors’ movesactions of buyers and suppliers managerial actionsemployee behaviorgovernmental actions (or lack of them)
This business is intensely, vigorously, bitterly, savagely competitive.
- Robert Crandall, CEO, American Airlines
Major sustainable competitive advantages are nearly non-existent in the field of financial services.
- Warren Buffett
I don’t believe in friendly competition. I want to put them out of business.
- Mitchell Leibovitz, CEO, Pep Boys
Declare business war. This is the enemy.- statement over a photo of Northern Telecomm CEO Paul
Stern, on posters at an AT&T plant in Denver
HypercompetitionHypercompetition
Rapidly escalating competition based on price/quality positioning
Competition to create new knowledge, first-mover advantage, and protect/invade markets
The frequency, boldness, and aggressiveness of competitors accelerates to create a condition of constant disequilibrium and change
Market stability is threatened by short product life/design cycles, new technologies, frequent entry, repositioning by incumbents, and redefinitions of industry boundaries
Firms actively work to disrupt their own advantages and those of competitors
Competitive advantages are fleeting and unsustainable
Sources of InertiaSources of InertiaCognitive Inertia
◦Framing lock-ins◦Dangerous analogies◦Emotional traps
Action Inertia◦Sticky routines◦Ingrained culture◦Leadership failures
Strategy as Simple RulesStrategy as Simple Rules
Greatest opportunities for competitive advantage lie in market confusion
Advantage comes from successfully seizing fleeting opportunities
A focus on key processes How-to Rules – spell out key process features Boundary Rules – guidelines for choosing opportunities Priority Rules – heuristics for ranking opportunities Timing Rules – synchronize processes with the pace
of opportunities Exit Rules – help decide when to pull out of
failing/decaying projects
What explains Google’s early success? Is search a “winner take all” category? Why?How does Google create value?What is the basis for Google’s competitive
advantage? Is it sustainable?What should Google do….
◦ About Yahoo – Cartel/All In◦ About Apple – Gains, E-Town◦ About Amazon – Gold Medal, Dash◦ About Microsoft – Emerge, Excelr8