Disruptive change technologies have the following four characteristics:
# They create new markets by introducing a new kind of product or service.
# The new product or service from the new technology costs less than exist- ing products or services from the old technology.
# Initially, the products perform worse than existing products when judged by the performance metrics that existing mainstream customers value. Eventually, however, the performance catches up and addresses the needs of main- stream customers.
# The technology should be difficult to protect using patents.

Incumbents fail to exploit disruptive technologies not so much because they do not “get it,” as suggested by the architectural innovation model, but because they spend ''too much time listening to and meeting the needs of their existing mainstream customers, who initially have no use for products from the disruptive technology''
# The disruptive change model can be characterized by looking at an organisation:
## Process
### Processes are “patterns of interaction, coordination, communication, and decision making employees use to transform resources into products and services of greater worth
## Values
### The standards by which employees set priorities that enable them to judge whether an order is attractive or unattrac- tive, whether a customer is more important or less important, whether an idea for a new product is attractive or marginal.
## Resources
###  Assets such as product designs, brands, relationships with suppliers, customers, distribution, people, plants and equipment, technologies, and cash reserves
# Consider four products, A,B,C and D
## Producers of A—given their processes, values, and culture that rest partly on being good in offering A—focus their attention on satisfying the requirements of their key existing customers and therefore do not pay attention to developing the necessary capabilities, processes, and culture to build product C
## New entrants produce C and keep improving its performance. 
## Eventually, say in year 5, C’s performance has improved to a point where it also meets the needs of the market with demand B.
## By this time, it’s too late for producers of A to shed the processes, values, and culture that served them so well with the old technology to develop C and gain a product advantage.
## New entrants who did not have the old baggage—the processes, values, culture, and cost structures associated with producing A—have taken the leadership position in producing C.
<img src="/static/files/MBI/Module%205/disruptivechange.png" width = 400 />
# Management that faces a disruptive technology must create a new organizational space that is conducive to developing the new capabilities that they need. Three options proposed by Professor Christensen are to
## Create a group within the firm in which new processes can be developed; 
## Spin out an independent entity from the existing firm and develop new processes, values, and culture within this new entity; and 
## Acquire another entity whose processes and values are a close match for what is needed.
# The option that a firm chooses is a function of the extent to which the firm’s existing values and processes differ from the values and processes that are needed to exploit the disruptive technology.

<<tiddler [[Disruptive Innovation Video Illustration]]>>

Part of: [[M5-Strategy-S5 - Summary Afuah & Tucci - Chapter 5 - Models of Technological Change - 5 - Disruptive change model]]
Mon, 27 Sep 2010 15:46:45 GMT
Mon, 27 Sep 2010 15:46:45 GMT