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Class 2: Strategic Issues in NPD January 23, 2007

Class 2: Strategic Issues in NPD January 23, 2007. Strategic Issues for NPD. The Innovator’s Dilemma Sustaining vs. Disruptive Technologies How closely should you listen to your customers? Implications for Organizational Strategy Coping with Change

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Class 2: Strategic Issues in NPD January 23, 2007

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  1. Class 2:Strategic Issues in NPDJanuary 23, 2007

  2. Strategic Issues for NPD • The Innovator’s Dilemma • Sustaining vs. Disruptive Technologies • How closely should you listen to your customers? • Implications for Organizational Strategy • Coping with Change • Within existing structures (inside and outside corp. boundaries) • Acquisition

  3. Strategic Issues for NPD • The Innovator’s Dilemma • Sustaining vs. Disruptive Technologies

  4. The Innovator’s Dilemma • Sustaining Technologies • Those that foster improved product performance • Disruptive Technologies • Those that foster worse product performance, at least in the near-term

  5. The invasion of disruptive steel minimill technology into progressively more sophisticated steel markets Steel Quality Sheet Steel Structural Steel Other Bars & Rods Quality of Minimill Produced Steel Rebar 1985 1990 1975 1980

  6. Product Generation 14 in 1973 8 in 1978 5.25 in 1981 3.5 in 1986 2.5 in 1990 1.8 in 1994 Leading Firm Control Data Priam, Shugart Seagate, Miniscribe Conner, Quantum Conner, Quantum Integral Changes in Market Leadership - Hard Drives

  7. A Disruptive Technology Change: The 5.25-inch Winchester Disk Drive Attribute Capacity (megabytes) Physical volume (cubic inches) Weight (pounds) Access time (milliseconds) Cost per megabyte Unit cost 8-Inch Drives (Minicomputer Market) 60 566 21 30 $50 $3000 5.25-Inch Drives (Desktop Computer Market) 10 150 6 160 $200 $2000

  8. The Innovator’s Dilemma What tends to happen over time?

  9. The Impact of Sustaining and Disruptive Technological Change Performance demanded at the high end of the market Product Performance Performance demanded at the low end of the market Time

  10. The Impact of Sustaining and Disruptive Technological Change Performance demanded at the high end of the market Progress due to sustaining technologies Product Performance Performance demanded at the low end of the market Time

  11. The Impact of Sustaining and Disruptive Technological Change Performance demanded at the high end of the market Progress due to sustaining technologies Product Performance Disruptive technological innovation Progress due to sustaining technologies Performance demanded at the low end of the market Time

  12. Barriers to Downward Mobility • The promise of up-market margins • The up-market movement of main customers • Difficulty in cutting costs to move downmarket profitably

  13. Case Study: Business Schools • “Harvard Business School is the next likely victim of a disruptive technology… It has become a finishing school for consultants and investment bankers” - Clayton Christensen, HBS Tenured Professor

  14. Case Study: Electronic Vehicles • How much should Ford, Toyota, GM, BMW, Daimler Chrysler, and the other major manufacturers worry about electronic cars? • Are electronic vehicles a disruptive technology?

  15. How closely should you listen to your consumers? • “Successful teams that drive winning new product projects pay special attention to the voice of the customer.” - Cooper Product Leadership (2000)

  16. How closely should you listen to your consumers? • If I’d asked people what they wanted, they would have said, “a faster horse” ---- Henry Ford

  17. How closely should you listen to your consumers? • “Precisely because these successful companies listened to their customers…, they lost their positions of leadership.”- Christensen The Innovator’s Dilemma (1997,2000)

  18. Strategic Issues for NPD • The Innovator’s Dilemma • Sustaining vs. Disruptive Technologies • How closely should you listen to your customers? • Implications for Organizational Strategy • Understand your firm’s capabilities • Cope with change • Within corporate boundaries • Outside corporate boundaries (spin-off) • Acquisition

  19. Understand Your Firm’s Capabilities • Resources • People, technology, equipment, cash, brands, supply chain relationships, product design • Processes • Patterns of interaction, communication, & decision-making • Values • Acceptable gross margins • Size of the hurdle for new business opportunities Harder to Change

  20. Cope with Change • Within corporate boundaries: • Use “heavyweight” teams • Outside corporate boundaries: • Spin out an independent organization • Acquisition: • Decide whether assimilation is prudent

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