MIS5102: Process Improvement and Innovation Systems Thinking

What do these have in common?

Disruptive Innovation Theory Low-end – Quality increasing faster than need – Opportunity for low- cost entrant New-market – Fits an emerging segment with an unmet need Low-end disruption

So how do companies innovate? New products for high-margin customersCheap alternatives to existing productsNew products for “nonconsumers” Your existing position What’s going on in the environment What to do

“Signals of Change” Undershot Customers When companies are filling up-market need i.e., new data analytics software to handle “big data,” gaming PCs Overshot Customers When companies are filling down-market need i.e., Netbooks, Kindle Fire Nonconsumers When new markets are being created i.e., Facebook, iPad Nonmarket Contexts Barriers to innovation are changing i.e., Government regulation Source: Anthony, S., and Christensen, C. (2005). How You Can Benefit from Predicting Change. Financial Executive, 21(2), pp

Systems Thinking Considering the system as a collection of integrated processes Synthesize and optimize Process Thinking Considering the system as a collection of independent processes Decompose and optimize

Thinking about the system as a whole Consider the “boundaries” of each component – What other components affect this component? – What other components is this affected by? R = reinforcing B = balancing + = increases - = decreases

A stock-flow diagram Both diagrams show essentially the same thing… …cause-and- effect relationships

Connecting Systems Thinking to Disruptive Innovation What processes did the Kindle affect? What processes affect the Kindle? What were the secondary effects on society? The Kindle as a disruptive innovation…

Connecting Systems Thinking to Business Processes Grocery Store Checkout What processes are inputs? What processes are outputs? How would adoption of self- serve checkout change the system dynamics?