Competitive Technology Strategy

Competitive
Technology Strategy
Dr. R.K. Mitra

ABV-IIITM Gwalior
2012 1
Competitive Technology
Strategy
Technology Diffusion and Adoption
• Technological Innovations are broadly 02
types
Nature of Value
Discontinuous or New
Market
Disruptive Innovation
How Value is Delivered?
Process
No significant
Incremental impact on
Distribution market
Innovation
Line Extensions
2
Strategy
It is observed that Incremental Innovations
are usually spearheaded by incumbents while
Disruptive Innovation can be driven by start-
up innovators as well.
A flow of line extensions to wrest away
market share by way of incremental
innovations is far different from the potentially
fundamental and far-reaching changes
brought about disruptive innovations.
3
Strategy
The Incumbent Vs. Start-ups (Innovators)
A ‘technology’, however, innovative it may be,
cant alone deliver market success, it needs a
host of ‘complementary assets’ and its here
incumbent firms hold key competitive advantage
over start-ups. At the same time, incumbents
are widely considered to be “innovation
challenged.” They are better followers than
leaders and, relative to their size, account for a
disproportionately small amount of non-process-
driven (e.g., disruptive) innovation.
Contd…. 4
Strategy
This is due to a variety of factors, including

organizational inertia, customer expectations, Wall
Street earnings commitments, and capital structure.
5
Strategy
In the early periods of an industry’s life cycle,

before product innovation reaches its peak,
innovators are likely to play a more significant
role than incumbents. In the mature phase,
once the new product paradigm has been
established, process-oriented incremental
innovation becomes more prevalent.
Contd…. 6
Strategy
As the industry moves toward the mature

phase, incumbents become the more capable
innovators. As Exhibit shows, disruptive
product-oriented innovation is paramount in
the pre-paradigmatic period; the paradigmatic
period is dominated by process-oriented
change. The transition occurs as a dominant
design takes hold.
7
Strategy
The Evolution of Industry Innovation
Dominant design
n
Rate of innovation
ti o
va
no
in
ct
du
o
Pr
n
io
at
v
no
in
sse
oc
Pr
Pre-paradigmatic period Paradigmatic period

8
Strategy
Confronting Disruptive Innovation: Incumbents are blessed or cursed?
Tushman and Anderson concluded that

industry veterans are most likely to pioneer a
breakthrough innovation. They believe that
even the innovations that threaten the
competencies of an incumbent firm are more
likely to be pressed forward by that firm,
which prefers to deal with the consequences
rather than be hunted down.
9
Strategy
More recently, Christensen has asserted that

incumbents are adept at managing sustaining
(process-related) technologies, but not so
adept at dealing with disruptive technologies,
since these
10
Strategy
disruptions often call into question the

underlying the value proposition of the firm
and its complementary assets.
11
Strategy
MIT’s James Utterback explains this critical

exception:
Identifying the path to the future is an important
requirement for survival and success when
discontinuities surface. For established firms, getting
off the path they are currently on is another, more
difficult challenge. The impulse for firms to continue
on the path of cash generating technologies
12
Contd….
Strategy
is powerful….Established firms are apt to

approach discontinuities and conflicting
corporate interests with compromise….Bridging
a technical discontinuity by having one foot in
the past and the other in the future may be a
viable solution in the short run, but the potential
success of hybrid strategies is diluted from the
outset compared to rivals with a single focus.
13
Contd….
Strategy
The conclusion is that even if an incumbent

pioneers a new technology, it may be
unwilling to press the technology as a
dominant design, and a general inability to
deal with disruptive change can lead to the
firm’s failure.
14
Strategy
While incumbents are often aware of

candidates for disruptive technology, the
organizational bias toward internally
developed incremental change may hinder
appropriate investigation.
15
Strategy
With no internal champion, continued

uncertainty, and the potential for the
innovation to disrupt the status quo, firms
may let the disruptive opportunity pass them
by in favor of more incremental change.
16
Strategy
Incumbent Adoption and Bandwagon Pressure
Whether or not an incumbent is truly excited

about an emerging disruption, the sheer
number of other organizations adopting the
innovation can cause bandwagon pressure.
Like the herding effect, the bandwagon effect
provokes organizations in the industry and
adjacent to it to adopt an innovation simply to
“keep up.” This helps drive dominant design
and propel movement up the S curve.
17
Strategy
Jump in S-Curve
The long-term view of industry evolution is

represented by overlapping technology S
curves (Exhibit 1). While one technology
delivers on its promise, incremental
improvement continues, and successful firms
profit, multiple candidates for the next big
thing are plotting the overthrow of the status
quo. The trajectories of these other new
technologies are shown as the emerging
candidate curves in Exhibit 2.
18
Strategy
Jump in S-Curve
Many of these new technologies never take

hold, either because the supporting
infrastructure, market demand, and
complementary industries don’t develop or
because the technology itself fails to deliver on
its promise.
19
Strategy
Jump in S-Curve
Nuclear energy presents an excellent example,

Nuclear fission was once expected to be one of
the greatest disruptive technologies of our
time. Light water uranium-based fission
reactors originally promised to offer a clean
and unlimited source of electricity, expected to
be “too cheap to meter.”
20
Strategic Management of
Technology
Industry Evolution from One Technology to the Next
Product
Performance
Time
21
Strategic Management of
Technology
Emerging Candidates for a Disruptive S Curve
Product
Performance
Time
22
Strategy
Jump in S-Curve
From the late 1960s to the early 1970s, the cost

data and growth rates for nuclear power
suggested a disruptive change that would end
U.S. dependency on coal. Between 1970 and
1980, coal-generated power dropped from
roughly 55 percent of electricity production to
45 percent, while nuclear power rose from 2
percent to 12 percent.
23
Strategy
Jump in S-Curve
From all early indications, the coal industry and

power plant construction and management
industry were facing major discontinuity, and
both would need to retool for uranium or face
extinction. Except in a few countries, that isn’t
at all what occurred.
24
Strategy
Jump in S-Curve
In the United States, nuclear power generation

topped out at roughly 20 percent of total
energy capacity, and almost half of that
capacity was brought on line in order to fulfill
existing contracts established in the early
1970s.
25
Strategy
Jump in S-Curve
No nuclear plants have been ordered in the

United States since 1978, and more than 100
reactors have been canceled, including all of
those ordered after 1973. Construction costs,
operating costs, regulatory compliance, waste
disposal, security concerns and public opinion
have all created a far different scenario than
that envisioned at the start of the nuclear age,
while continued incremental change in
conventional plants raised the bar further.
26
Strategy
Jump in S-Curve
A number of other potential new technologies-

including co-generation, fuel cells, and
photovoltaic nanotechnology- may turn out to
represent disruptive S curves for power
generation, but light water fission-based
technology has not proven to be one of them.
27
Strategy
Jump in S-Curve
In the much different world of computer

operating systems, OS/2 is an example of a
potentially disruptive technology that didn’t
climb the S curve, exhibiting its own melt-down
of sorts. In the 80s, IBM’s OS/2 was expected
to be the disruptive successor to DOS and the
“future” of computing.
28
Strategy
Jump in S-Curve
IBM ran into a series of problems, however, as

users found early versions of the software slow
and clunky. Venture capitalist Stuart Alsop
went so far as to say in 1991 that “every single
decision [IBM has] made about operating
systems so far has been wrong.”
29
Strategy
Jump in S-Curve
As a result, Microsoft was able to press its

installed base leverage and position the
Windows rather than the IBM operating system
as the dominant technology.
30
Strategy
Jump in S-Curve
This cycle may repeat itself. Linux, although

much touted as an open, secure, and stable
replacement for Windows, suffers from
disputes over ownership and evidence that it
may not offer a lower total cost of ownership.
31
Strategy
Jump in S-Curve
Several analysts (much as the Meta Group),

pointing to Linux’s rapid growth in market
share, predict that open source Linux will
capture more than 50 percent of the market
and change the economics of software.
32
Strategy
Jump in S-Curve
Others (such as IDC) believe that rather than

disrupting the software industry, Linux may
merely be replacing UNIX, Microsoft’s other
major challenger. The cite Microsoft’s
continued dominance in market share and a
drop-off in UNIX’s sales that has matched
Linux’s rise.
33
Strategy
Error of Commission
Continuously plotting the potential trajectories

from the high-growth portions of candidates’ S
curves, as shown in Exhibits, would create an
alarmist attitude toward virtually every new
technology that emerged. The hype cycle
reinforces this alarmist posture. In the OS/2
case, Lotus, Borland, Ashton-Tate, and other
software makers that committed heavily to
OS/2 were not against change, but merely
“rode the wrong horse.”
34
Strategy
Error of Commission
Anticipating a high-growth trajectory and

disruption, they all placed large bets on OS/2,
with disastrous consequences. As mentioned in
Chapter 3, former Intel CEO Andy Grove, using
an engineer’s vocabulary, described the
ambiguity underlying the potential disruptors
as a signal versus noise issue.
35
Strategy
Error of Commission
He cited the use of x-rays to produce

semiconductors as an example of a case where
Intel was unable to determine whether a new
technology was going to create wholesale
changes in the industry. Over-commitment to
x-ray-based production innovation would have
damaged Intel severely.
36
Strategy
Overreaction and Overconfidence Errors
Overreaction: Projections of performance Overreaction: Current value gap does not
based on early gains do not materialize. indicate eventual performance
Product Performance Product Performance
Projected trajectory Eventual

based on early slope curve
Current industry Current industry
S curve S curve
Eventual curve Current value
gap
Disruptive candidate Disruptive candidate
Time Time
37
Strategy
The S Curve Jump
Eventually, a disruptive technology from

among the candidates does take hold, creating
magnitudinal rather than steady changes in the
nature of the category. This gives rise to
secondary inflection points, as apparently
mature and stable sectors jump from one
flattening S curve to the next high-growth one.
As the current S curve flattens, the successor
technology takes hold.
38
Strategy
The S Curve Jump
The new paradigm represented by the

successor technology can potentially change
the entire go-to-market strategy, economics,
competencies, complementary assets, and/or
internal organization necessary for success.
Over time, a market may jump S curves
several times, as shown in Exhibit.
39
Strategy
Jumping S Curves
Product Performance
Time
40
Strategy
Ambidextrous Organizations
The ideal incumbents are ambidextrous

organizations; that is, they are capable of
generating and mainstreaming radical
innovation- and, thus, of capturing markets for
themselves-while still maintaining the
organizational architecture necessary to build,
protect, and capitalize on the complementary
assets that drive incremental success.
41
Strategy
Unlike early vertical startup entrants,

incumbents can use well-established
infrastructure to dominate markets. While they
are not immune to mistakes, these firms have
the high level of organizational resilience
necessary to adapt to changing environments.
42
Strategy
Many pharmaceutical companies partner in

order to acquire drugs to keep their pipeline
full when necessary, but also work on internal
development that will make their own products
obsolete before others do so for them.
43
Strategy
IBM provides manufacturing and engineering

assistance to fabless semiconductor
companies, while also supporting internal R&D.
44
Strategy
Sony has been able on occasion to make

internally generated innovation the winning
technology. It maintains a group called CSL
(Computer Science Lab), whose researchers
fiercely guard their right to pursue pure science
without pressure to work on projects with
obvious practical implications.
45
THANK YOU
46

Competitive Technology Strategy

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Competitive Technology Strategy

Uploaded by

Copyright:

Available Formats

Competitive

Dr. R.K. Mitra

This is due to a variety of factors, including

In the early periods of an industry’s life cycle,

As the industry moves toward the mature

Pre-paradigmatic period Paradigmatic period

Tushman and Anderson concluded that

More recently, Christensen has asserted that

disruptions often call into question the

MIT’s James Utterback explains this critical

is powerful….Established firms are apt to

The conclusion is that even if an incumbent

While incumbents are often aware of

With no internal champion, continued

Whether or not an incumbent is truly excited

The long-term view of industry evolution is

Many of these new technologies never take

Nuclear energy presents an excellent example,

From the late 1960s to the early 1970s, the cost

From all early indications, the coal industry and

In the United States, nuclear power generation

No nuclear plants have been ordered in the

A number of other potential new technologies-

In the much different world of computer

IBM ran into a series of problems, however, as

As a result, Microsoft was able to press its

This cycle may repeat itself. Linux, although

Several analysts (much as the Meta Group),

Others (such as IDC) believe that rather than

Continuously plotting the potential trajectories

Anticipating a high-growth trajectory and

He cited the use of x-rays to produce

Projected trajectory Eventual

Disruptive candidate Disruptive candidate

Eventually, a disruptive technology from

The new paradigm represented by the

The ideal incumbents are ambidextrous

Unlike early vertical startup entrants,

Many pharmaceutical companies partner in

IBM provides manufacturing and engineering

Sony has been able on occasion to make

You might also like