2. Innovation
B290

3. Cement industry
Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly

4. Computers
Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly

5. Passenger Aircraft
Tushman, M. and P. Anderson, 1986, Administrative Science Quarterly

6. The Technology Cycle
Source: Anderson, P. and M. L. Tushman, 1990, Administrative Science Quarterly 35(4)

7. Technological change Discontinuity Technology breakthroughs
Competence enhancing
Transistors (for computer companies)
Float glass
Competence destroying
Transistors (for valve companies)
Plastic
Flash memory
Xerography

8. Types of Innovation
Incremental vs. Radical
Competence enhancing vs. competence destroying
Component vs. architectural
Sustaining vs. Disruptive

9. Incremental vs. Radical
Small changes that improve the performance of a product (or service)
Radical
Dramatic change in performance, an inflection point or discontinuity

10. Component vs. Architectural
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

11. Competence enhancing/destroying
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)

12. 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

13. Netflix Moved from physical distribution to the internet
Early mover in an ‘era of ferment’
Disruptive
Challenges the cable companies market dominance
Changes the entertainment delivery business model
Competence destroying
Video streaming replaces distribution logistics

14. Technological Discontinuity
Technology S curves
Technological
knowledge
Technological Discontinuity
Time

15. Three different technologies
Thin film heads
Metal in Gap heads
Areal Density
More recently:
Magnetoresistive
Giant Magnetoresistive
Tunneling Magnetoresistive
Ferrite heads
1950
1970
1990
1995

16. 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

17. 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…

18. …Fujitsu pushes on with Ferrite
Thin film heads
Metal in Gap heads
Areal Density
Ferrite heads
More recently:
Magnetoresistive
Giant Magnetoresistive
Tunneling Magnetoresistive
Ferrite heads
1950
1970
1990
1995

19. Technology S-curves
May be a function of a particular technology
Or may simply be a self-fulfilling prophesy

20. 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

21. The Hard Disk Drive Industry
“Of the seventeen firms in the industry in 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.

22. Supply exceeds demand “Old” technology Performance / price
Segment demand
“Disruptive” technology
Time

23. 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