One of the great irony of successful companies is how easily they can fail. New companies are founded to take advantage of some new technology. They become highly successful and but when the technology shifts, something new comes along, they are unable to adapt and fail. This is the innovator’s dilemma. Then there are companies that manage to survive. For example, Kodak survived two platform shift, only til fail the third. IBM has survived over 100 years. What do successful companies do differently?

1. LECTURE L10
THE INNOVATOR’S DILEMMA

2. OPPORTUNITY
THREAT

3. Source: (Christensen, 2000)
The Disruptive Innovation Theory
New organisation can use relatively simple, convenient,
low-cost innovations to create growth and triumph over
powerful incumbents

4. Resources, Processes and Values Theory
Resources (what a firm has),
Processes (how a firm does it´s work), and
Values (what a firm wants to do)
collectively defines an organisations strengths as well as
weaknesses and blind spots

5. Founded in 1880 Noted for their
pioneering technology
“You press the button,
we do the rest”
By 1975 they had 90%
of film and 85% of
camera sales in US

6. Eastman pioneered dry plate technology when
others use wet plate
Introduced the Brownie
camera in 1900
Used film rolls
Camera for $1, then sold films
The picture quality was inferior
to begin with, but consumers
loved the convenience
Leader in Photography

7. In 1935 Kodak introduced Kodachrome,
the first colour film
The picture quality was inferior
to begin with, but consumers
loved colours pictures
Initially available as 35 mm slides
Innovator in Photography

8. By 1976 Kodak accounted for
90% of film and 85% of camera
sales in America
Until the 1990s it was regularly
rated one of the world's five most
valuable brands
Revenues $16 billion in 1996 and
profits $2.5 billion in 1999
Market Leader
Form the Economist article

11. Form the Economist article

12. Economist article: The last Kodak moment?
Kodak is at death’s door; Fujifilm, its old rival, is thriving. Why?

13. 1. Where did Kodak fail?
2. What did Fuji do differently?

15. Kodak
Kodak knew that digital cameras would take over
In 1981, a team inside Kodak assessed the threat
The report said:
* The quality is not there
* The device is too expensive
* Consumer’s desire for print cannot be replaced
Source: Decisive

16. Culture
“suffered from the mentality of perfect products,
rather than the high-tech mindset of
make it, launch it, fix it.”
One company town
No criticism, changing leadership
Failed to capitalise on pharmaceutical assets
Source: Economist
Kodak

17. Fuji
To squeeze as much money out of the film
business as possible, to prepare for the switch to
digital and to develop new business lines
Brutal reorganisation
Launched a line of cosmetics and sold it
Source: Economist
Plan:

18. Shaigetaka Komori, Fuji boss, spent around $9 billion on 40
companies since 2000
He slashed costs and jobs
In one 18-month stretch, Fuji booked more than ¥250 billion
($3.3 billion) in restructuring costs for depreciation and to
shed superfluous distributors, development labs, managers
and researchers
Source: Economist
Fuji

19. Kodak’s Lack of Tripwire
The report said:
* The quality is not there
* Consumer’s desire for print cannot be replaced
* The device is too expensive
Source: DecisiveSource: Decisive
-> We will act when more than 10% of public is pleased with
digital images
-> We will act when more than 5% of public has some kind of
viewing system

20. Kodak’s Dilemma
“Wise businesspeople concluded that it was best not to hurry to
switch from making 70 cents on the dollar on film to maybe five
cents at most in digital.”
- Larry Matteson, former Kodak executive
Source: Economist

22. Van Halen’s Brown M&M
During their 1982 world tour the band demanded M&M back
stage but without the brown M&Ms
Source: Decisive

25. Tripwire
The timing is not now - remember the adjacent possible, but the time
will come
Set a tripwire that will tell you when it is time to act

26. Technology is
one of the major
factors in change

27. Surviving Technological Change
What is it that kills successful
companies?

28. Business models of the 21st century
may not support the organisational
structure of the 20th century
Surviving Technological Change

29. The Innovators Dilemma
Should we focus improving our products to
make them higher margin, with more
performance or look at this new technology
that is low performance with low margins?

30. When disruptive technology makes it
possible to create products cheaper, should
a company stop making high-margin, high-
end product for their best customers, or use
the disruptive technology to make cheaper
products that none for their current
customers are asking for at the moment.
The Innovators Dilemma

31. Disruptive Innovation

32. Disruptive Innovation

33. The Innovator’s Dilemma
Clayton Christensen
professor at Harvard Business School

35. Source: Yang, Harvard
Traditional Concept of
Good Management
Focus on your best customers
Focus on your highest margin products

37. Reason for Failure?
If you become wildly successful
because you do everything right,
you're doomed

38. Source: (Christensen, 2000)
The Innovators Dilemma means
Firms thatsucceed in one generation of
innovation almost inevitable become
hamstrung by their own success and thus
doomed to lose out in the next wave of
innovation

39. Resources, Processes and Values Theory
Resources (what a firm has),
Processes (how a firm does it´s work), and
Values (what a firm wants to do)
collectively defines an organisations strengths as well as
weaknesses and blind spots

41. WHEN
PLATFORM
SHIFTS HAPPEN,
COMPANIES FIND
IT HARD TO MOVE
TO NEW
GENERATION OF
TECHNOLOGY

42. Image Source Page: http://www.teach-ict.com/wp/archives/264
Only ONE established firm
managed the transition from one
generation to the next

43. Why did they fail?

44. They listened to their customers

45. Case Study
Betware transformed
from custom software
development to product
development – from
technology to service

46. “If I’d asked my
customers what they
wanted, they’d have
said a faster horse”
- Henry Ford

47. We tend to view technology based on
past usages
but not the future potential

48. The Resistance Corollary
Even outdated things that
should “disappear” don’t
due to supposed importance

49. It is hard to move on since
people will fight you
The Resistance Corollary

50. Where is the C-drive?
Where are the files?
The Resistance Corollary

51. What!?! No CD drive?
And no Ethernet port?
MacBook Air 2008
The Resistance Corollary

52. The hardest things when you are trying to affect change
Steve Jobs Insult Response, WWDC 1997

54. Source: Yang, Harvard
Traditional Concept of
Good Management
Leads successful companies to ignore
disruptive innovations with deadly
consequences

55. “In the history of business, things happen only once”
- Peter Thiel
Traditional Concept of
Good Management

56. "The next Bill Gates will not build an operating
system. The next Larry Page or Sergey Brin won’t
make a search engine. And the next Mark Zuckerberg
won’t create a social network. If you are copying these
guys, you aren’t learning from them."
- Peter Thiel
Traditional Concept of
Good Management

57. “We listen to our best customers”
The Innovation Trap
Assumed cash
stream resulting from
doing nothing

58. Assumed cash
stream resulting from
doing nothing
“Our customer is asking for the
new product, but we don’t have it
and its to late the enter the
market”
A more likely cash
stream resulting
from doing nothing
The Innovation Trap

59. Assumed cash
stream resulting from
doing nothingA more likely cash
stream resulting
from doing nothing
“Our customer are starting to
ask for our new product.”
Projected cash stream
from investing in innovation
The Innovation Trap

60. It is very difficult for incumbent
companies to disrupt themselves,
so usually others will do it

61. Waves of technologies are pretty predictive
but the most difficult thing to master is
timing of waves

62. Two Reasons Companies Fail—and How to Avoid Them
Knut Haanæs

64. “Markets that do not exist
cannot be analysed”
- Clayton Christensen

65. Adjacent Possible
...a kind of shadow future,
hovering on the edges of
the present state of things,
a map of all the ways in
which the present can
reinvent itself
Steven Johnson

66. Next
The Broadcast Century