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Class 2: Strategic Issues in NPD August 31, 2004

Class 2: Strategic Issues in NPD August 31, 2004. Part II: Strategic Issues for NPD. The Pioneering Advantage: Myth or Reality? The Innovator’s Dilemma Sustaining vs. Disruptive Technologies How closely should you listen to your customers? Implications for Organizational Strategy

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Class 2: Strategic Issues in NPD August 31, 2004

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  1. Class 2:Strategic Issues in NPDAugust 31, 2004

  2. Part II: Strategic Issues for NPD • The Pioneering Advantage: Myth or Reality? • 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. Part II: Strategic Issues for NPD • The Pioneering Advantage: Myth or Reality?

  4. The Pioneering Advantage • Reasons Why It Should Exist • Consumer-Based Reasons • Producer-Based Reasons

  5. The Pioneering Advantage • Reasons Why It Should NOT Exist

  6. The Pioneering Advantage • Myth or Reality?

  7. Part II: Strategic Issues for NPD • The Pioneering Advantage - Myth or Reality • The Innovator’s Dilemma • Sustaining vs. Disruptive Technologies

  8. 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

  9. 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

  10. 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

  11. 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

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

  13. 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

  14. 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

  15. 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

  16. 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

  17. 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

  18. 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?

  19. Part II: Strategic Issues for NPD • The Pioneering Advantage - Myth or Reality • The Innovator’s Dilemma • Sustaining vs. Disruptive Technologies • How closely should you listen to your consumers?

  20. Part II: Strategic Issues for NPD • The Pioneering Advantage - Myth or Reality • 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

  21. 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

  22. 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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