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Recap of Upcoming Assignments

This message provides a recap of upcoming assignments and reminders to submit surveys after guest speaker sessions. It also includes important information about readings, grades, and working with the instructors outside of class.

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Recap of Upcoming Assignments

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  1. Recap of Upcoming Assignments • By Friday, Feb 7, 8 pm: submit (by uploading two files to SloanSpace, or emailing them to plapsley@sloan.mit.edu): file 1 - one-page business idea file 2 - one/two paragraph personal bio & photo • By Tue, Feb 11, 8 pm: have read and voted on one-page business ideas (vote via SloanSpace). voting: pick your 3 favorite plans. • On Wed, Feb 12 we will announce winners and form teams

  2. Reminder to Submit “Surveys” • After each guest speaker, you will find a survey posted on Sloanspace. • Your completion of these surveys is a key part of your class participation grade. • Please provide as much detailed feedback as possible… don’t be afraid to tell us what you like and don’t like about the speaker.

  3. Readings/Assignments • VISIT “SLOANSPACE” FREQUENTLYhttp://sloanspace.mit.edu/class/15.390a-new-enterprises/ We change the syllabus (the one printed in the reader is already out of date). SloanSpace is the final authority. (but don’t worry -- we’ll tell you in class if we make changes to assignment due dates) • Make sure you’re signed up for the class in SloanSpace to get class emails • Go buy a course packet at “copy-tech” in the basement of E52 -- all cases and readings are in the packet • The classroom powerpoints will be posted on SloanSpace

  4. Grades 25% Class participation. We expect you to:- attend and be punctual to every class- display a namecard in front of you- not use your laptop in class, especially when we have a guest speaker- read the assignments, study guests’ backgrounds - respond to speaker surveys (on Sloanspace) - contribute (we will cold-call you) 25% Written assignments (chapters of full plan) 25% Full Business Plan at end of semester 25% In-class exercise on last day of classes your fellow team members will grade your contribution to the team, used to “round up” or “round down” your grade

  5. Working With Us Outside Of Class • Every Monday, one of us will stay late after class. • Every month, we’ll hold a more fun version of this Q&A session at “The Muddy Charles.” (March 3, April 7, May 12) • We will man a “phone hotline” where one of us will be available to take calls during posted hours just before an assignment is due. We’ll post these hours/phone numbers as we approach the assignments. • We always respond to emails quickly, and welcome questions. • Office appointments are always available: just ask!

  6. Disruptive Technologiesand Technology Adoption Cycles

  7. Topics We’ll Discuss • Established companies have trouble embracing new technology, sometimes for good reason (Christensen) • New technologies take time to germinate: different people will buy at different phases of growth (Moore’s “chasm”) • As a technology matures, “dominant design” elements emerge (Utterback)

  8. Why Does This Matter to You? • This is the source of the attacker’s advantage • This is how you, as a tiny unknown startup, can compete against giants -- and use their own might to topple them • This is how you’ll get customers to pay attention to you

  9. Anybody Want Some Ice? • One of New England’s first great technology-based industry • Blades for cutting ice at just the right angles: blocks don’t melt as fast • Mastery of weather patterns and spots on the lake most likely to freeze • Insulated trucks for packing ice • Logistics and delivery expertise • A satisfied customer base • Brand recognition

  10. Along Comes Electricity • Unproven technology • Requires all new infrastructure • No brand recognition • No established customer base

  11. Defender’s Response • Improve service to customers • Speed up R&D, new blades and insulation Not so easy to... • Throw it all away and embrace something new • Ask “are we in the business of selling ice, or are we in the business of keeping people’s food cold”?

  12. Well Run Companies Have Invested Capital…. • Moving to disruptive technologies means writing off invested capital. • Means….Surprises • Means….Uncertainty

  13. Thesis: Good Companies Run Away from Disruptive Technologies • Well run companies are Financially Driven.. And are expected to make earnings and sales targets. • Disruptive Technologies ruin income statements and balance sheets – in the short run.

  14. Christensen • Why is it that companies can seem to be at the top of their game, the suddenly fall off the cliff? • The cause is good management!

  15. Two Types of Innovation • Enable a company to provide better service to their best customers (favors incumbents) telecom from analog to digital • Bring to the market something that’s simpler and not as good as what was historically available (favors attackers) Cisco's router vs. Lucent's circuit switched take root in a less demanding market, improve

  16. Christensen’s Framework standards --favors modularity acceptable to customers Innovation no standards -- favors verticalintegration

  17. Technical performance Cumulative R&D Effort Utterback’s S Curve • Pattern: • Initially increasing then declining R&D productivity within a given physical “architecture” • Examples: • Lightbulbs, disk drives, automobiles, even pharmaceuticals • What drives the dynamics? • Early Stage • Take Off • Growth • Plateau Physical limits

  18. What Drives the Dynamics of S-curves? • Initial Stage • Early returns are small and filled with failures, dead ends, and competing versions. • Takeoff • Dominant design, process innovation • Growth • R&D can be productive -- both focused and with few physical barriers • Plateau (diminishing returns?) • As “natural limits” are approached, progress becomes more expensive

  19. Disruptive Technologies Seen As One S-curve After Another television Performance S-curve as creative destruction radio Effort

  20. Dominant Designs • In the beginning: • Innovation focuses around product concepts, is led by small firms and is largely exploratory. • Competition is on features: profits are made through differentiation. • Smaller firms are more open to new ideas, more likely to experiment. • Consumers see past brand names and other “established” assets, prefer key technical merit -- value is created by genuine innovation

  21. Once a Dominant Design Emerges: • Innovation focuses around process, delivery, service • Most firms are forced out: the large firms that remain are increasingly structured, hierarchical. • Profits through product differentiation fall.

  22. Once a Dominant Design Emerges • Large firms that can exploit economies of scale and mass production, manage the process of incremental innovation, come to dominate the industry. • Brand/service more important.

  23. From Utterback’s 15.365J • Product - From high variety, to dominant design, to incremental innovation on standardized products • Process - Manufacturing progresses from heavy reliance on skilled labor and general purpose equipment to specialized equipment tended by low-skilled labor • Organization - From entrepreneurial organic firm to hierarchical mechanistic firm with defined tasks and procedures and few rewards for radical innovation • Market - From fragmented and unstable with diverse products and rapid feedback to commodity-like with largely undifferentiated products • Competition - From many small firms with unique products to an oligopoly of firms with similar products

  24. Moore’s Chasm:don’t confuse the “false start” s-curve for the real one bubble bursts the real industrybegins “false start”innovation and enthusiasm getsahead of itself

  25. Who is Your Market? • What personality does your buyer have? • What state of the industry, application are you selling to? • Do they need a product that works without fail, or are they willing to debug? skeptics visionaries key influencers, risk-takers techenthusiasts conservatives pragmatists

  26. Entrepreneurial Firms… • Have no installed base • Have no earnings history • Can take market share

  27. Entrenched Companies • Like new technology…. but would prefer that it come in at a measured rate • Disruptive Technologies come in a rush!

  28. Attackers… • LOVE disruptive technologies…. • VC’s love disruptive technologies • Defenders….. Pay LIP SERVICE to disruptive technologies…

  29. Defenders Response • Denial • Anger • Grudging Acceptance • Acquisition

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