Meeting the Challenge of Disruptive Change

1. Meeting the Challenge of Disruptive Change

2. Contents 1 Where the Capabilities Reside The migration of Capabilities 2 Sustaining versus Disruptive innovation 3 Creating Capabilities to Cope with Change 4

3. Where the Capabilities Reside Resources Processes Values

4. Where the Capabilities Reside Resources • Tangible - People, Equipment, Technologies, Cash • - Intangible - Product design, Information, Brands Processes - The Patterns of Interaction, Coordination, Communication, and Decision making that lead to the company’s output - Process that creates the capability to execute one task concurrently defines disabilities in executing other tasks

5. Where the Capabilities Reside Values - Organization's values as the standards by which you judge one customer or market opportunity to be more important than another - First value – the way the company judges acceptable gross market - Second value – how big a business opportunity has to be before it can be interesting

6. Where the Capabilities Reside Values (Example) • Toyota’s Case • As Companies add features • and functions to their prod- • ucts and services, trying to • capture more attractive customers in premium • tiers of their markets, they often add overhead cost

7. The migration of Capabilities Avid Technology - Customers loved the product, but Avid's lack of effective processes for consistently developing new products and for controll- ing quality, delivery, and service ultimately tripped the company

8. The migration of Capabilities McKinsey & Company • The processes and values have become so • powerful that it almost doesn't matter which • people get assigned to which project teams • Its core capabilities are rooted in its processes • and values rather than in its resources

9. Digital’s Dilemma • - Digital equipment’s fall from grace was not • the result of misreading the market. • - Digital adopted process that sought • incremental improvement • - Digital’s mainstream organization simply • was incapable of succeeding at the new job

10. Sustaining Versus Disruptive innovation Sustaining Innovations • Make a product perform better for mainstream • customers • Ex) Compaq’s early adoption of • Intel’s 32-bit 386 microprocessor Disruptive Innovations - Create entirely new markets through introduction of a new kind of product or service Ex) Charles Schwab’s initial entry as a bare-bornes discount broker

11. Creating Capabilities to Cope with Change • Creating New Capabilities Internally • Creating Capabilities Through a Spinout Organization • Creating Capabilities Trough Acquisitions

12. Creating Capabilities to Cope with Change Creating New Capabilities Internally • - Create new organizational structures within • corporate boundaries in which new processes • can be developed • - Managers need to Pull the relevant people • out of the existing organization and drawing • a boundary around the new group

13. Creating Capabilities to Cope with Change Creating New Capabilities Internally(Ex) • - Chrysler(Component -> automobile platform) • - IBM’s disk drive • - EliLilly’s new blockbuster drug • - Heavyweight team -

14. Creating Capabilities to Cope with Change Creating Capabilities Through a Spinout Organization - Spin out an independent organization from the existing organization and develop within it the new processes and values required to solve the new problem Ex)

15. Creating Capabilities to Cope with Change Creating Capabilities Trough Acquisitions - Acquire a different organization whose processes and values closely match the requirements of the new task Ex) - Daimler + Chrysler - IBM + Rolm ( Failed ) - Cisco System + Strata Com ( Success )

16. Fitting The Tool To The Task Poor Fit with Organization’s Processes Good Good Poor (sustaining innovation) (disruptive innovation) Fit with Organization’s Values

17. Conclusion - Managers should be always aware these contents and their capabilities that make their organization effective also define their disabilities. By these, they could prevent their company from stumbling and probably cope with disruptive innovations.