The Comparative Success of Leaders and Followers

1. The Comparative Success of Leaders and Followers PRODUCT INNOVATOR FOLLOWER WINNER Jet Airliners De Havilland (Comet) Boeing (707) Follower Float glass Pilkington Corning Leader X - Ray Scanner EMI General Electric Follower Office P.C. Xerox IBM Follower VCRs Ampex/Sony Matsushita Follower Diet Cola R.C. Cola Coca Cola Follower Instant Cameras Polaroid Kodak Leader Pocket Calculator Bowmar Texas Instruments Follower Microwave Oven Raytheon Samsung Follower Plain Paper Copiers Xerox Canon Follower Fiber Optic Cable Corning many companies Leader Video Games Players Atari Nintendo/Sega Followers Disposable Diapers Proctor & Gamble Kimberly-Clark Leader Internet Browser Netscape Microsoft Follower

2. New performance trajectory Performance trajectory Of present tech driven By sustaining improvements Performance the market can absorb Disruptive Technologies Performance Disruptive technology Time

3. Disruptive Steel Mini-mill Technology Sheet Steel Steel Qualtiy Structural Steel Quality of minimill-produced steel Other bars and Rods Rebar 1975 1980 1985 1990 1995 Time

4. Strategic Decisions in Commercializing Disruptive Technologies Should we push or stretch the technology until we can use it in existing market segmentsand applications, with existing customers? Disruptive Technology Should we find or create a new market segment in which the attributes of the disruptive technology, as it exists today, are valued?

5. Catching the Wave • Determine the nature of the technology • Define the strategic significance of it • Locate the initial market for the disruptive technology • Place responsibility in an independent organization, and keep it independent

6. Approaches to Managing a Disruptive Attack “Face the Facts and Create a New Creosote Bush” Launch Separate Organizations Control Data: 5.25-inch Quantum: Plus Development HP: Inkjet Printers IBM: PC Division General Motors: Saturn Acquire Disruptive Firms Early(and keep them separate) Johnson & Johnson Intel “We Ought to Be Able to Do This Inside” Control Data: 8-inch Quantum: 5.25-inch Seagate: 1.8-inch DEC: Desktop Computers Apple: Palmtops

7. Judging Potential Disruptions Source: Rafii & Kampas, HBR, 11/02

8. Dealing with Disruptive Change • How you frame the disruption matters • Separate new venture from the core • Fund in stages • Cultivate outside perspectives • Identify an integrator • Modularize integration • Consider acquisitions

9. What is a high-velocity environment? • Rapid product life cycles • Diverse competitors and unpredictable moves • Competitive advantages are less sustainable and subject to undermining and imitation • Both technological/strategic uncertainty is high • New entrants and startup strategies • Disruptive technologies and strategies

10. Sources of Uncertainty • Unpredictable environmental events (e.g. disruptive technologies) • customer or stakeholder demands • competitors’ moves • actions of buyers and suppliers • managerial actions • employee behavior • governmental actions (or lack of them)

11. This business is intensely, vigorously, bitterly, savagely competitive. - Robert Crandall, CEO, American Airlines Major sustainable competitive advantages are nearly non-existent in the field of financial services. - Warren Buffett I don’t believe in friendly competition. I want to put them out of business. - Mitchell Leibovitz, CEO, Pep Boys Declare business war. This is the enemy.- statement over a photo of Northern Telecomm CEO Paul Stern, on posters at an AT&T plant in Denver

12. Hypercompetition • Rapidly escalating competition based on price/quality positioning • Competition to create new knowledge, first-mover advantage, and protect/invade markets • The frequency, boldness, and aggressiveness of competitors accelerates to create a condition of constant disequilibrium and change • Market stability is threatened by short product life/design cycles, new technologies, frequent entry, repositioning by incumbents, and redefinitions of industry boundaries • Firms actively work to disrupt their own advantages and those of competitors • Competitive advantages are fleeting and unsustainable

13. Sources of Inertia • Cognitive Inertia • Framing lock-ins • Dangerous analogies • Emotional traps • Action Inertia • Sticky routines • Ingrained culture • Leadership failures

14. Strategy as Simple Rules • Greatest opportunities for competitive advantage lie in market confusion • Advantage comes from successfully seizing fleeting opportunities • A focus on key processes • How-to Rules – spell out key process features • Boundary Rules – guidelines for choosing opportunities • Priority Rules – heuristics for ranking opportunities • Timing Rules – synchronize processes with the pace of opportunities • Exit Rules – help decide when to pull out of failing/decaying projects

15. What explains Google’s early success? • Is search a “winner take all” category? Why? • How does Google create value? • What is the basis for Google’s competitive advantage? • Is it sustainable? • What should Google do…. • About Yahoo – Cartel/All In • About Apple – Gains, E-Town • About Amazon – Gold Medal, Dash • About Microsoft – Emerge, Excelr8