Assignment 3 harsha
Innovation Management
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Models of Innovation
Static Models
• Christensen’s Theory
• Abernathy-Clark Model
• Henderson-Clark Model
• Innovation Value-added Chain
• Roberts and Berry Model
Innovation Management
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• Christensen’s Theory
– Xerox vs. Canon
– Sears vs. Wal-mart
Why great firms fail when confronted with radical innovation?
– They listen to their customers carefully
– They track competitor’s actions carefully
– They invest resources to design and built higher
performance, higher quality products that will yield better
profits
Christensen Theory
Innovation Management
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• Sustaining Technologies
– Give customers something new or better in the attributes of a product they already value
– Established markets, loyal customers who are willing to pay premiums
– Stay close to customers
– Profit margins are high (cheap to retain loyal customers, ex: Nike shoes)
– Risk is relatively low
– Fast response time
– Minimal change in production processes
Christensen Theory
Innovation Management
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• Disruptive Technologies
– Existing customers do not value performance attributes of
the product
– They perform worse on certain attributes
– Financially unattractive: small markets, low profit margins
– Difficult to predict the growth rate of the market
– Requires new manufacturing processes
Christensen Theory
Innovation Management
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Christensen Theory
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• The slope of the technology trajectory is steeper than
the slope of the trajectory of customer need.
– How much time customer have to learn the new technology?
– Regulations
– Life styles
Christensen Theory
Innovation Management
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• Why incumbents fail to develop disruptive technologies?
– Rigid business model
– High ends of the market promise more profits
(ex: DuPont’s Kevlar, HP’s Kittyhawk)
– As companies grow big they become risk averse
– Managers short term oriented (stakeholder wealth)
– Habitual methods lead to new ideas similar to old ones
Christensen Theory
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• Successful incumbents..
– To develop disruptive technologies they create small
companies
– They plan to fail early and inexpensively
– They develop new markets for disruptive technologies rather
than introducing it to established markets.
Christensen Theory
Innovation Management
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• Basis of Competition
– Definition: product attribute for which customers will most readily pay a price premium
Functionality Reliability Convenience Price
Functionality Reliability Convenience Price
Apple iPOD
Ear implants from
Medtronic
Robot floor vacuum
Web browsers
Utility services
Insulin Pens
Xerox copiers
Cell phones
Pacemaker
DVD players
CD players
3M Post it notes
Christensen Theory
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• Capabilities of a company
– New entrants: reside in human resources
– As company moves toward sustaining technologies
capabilities reside in processes and procedures
Christensen Theory
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• Abernathy-Clark Model
– Incumbents may outperform new entrants with “radical innovation”
• Two kinds of knowledge that underpins technology: Technological and market knowledge
Regular Revolutionary
Niche Architectural
Preserved Destroyed
Preserved
Destroyed
Technical Capabilities
Market
Capabilities
Abernathy-Clark Model
Innovation Management
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Incremental Architectural
Modular Radical
Enhanced Destroyed
Enhanced
Destroyed
Architectural knowledge
Component
knowledge
Henderson-Clark Model Why some incumbents have difficulty innovating “incremental
innovation”? •Component knowledge and architectural knowledge (tacit knowledge)
Henderson-Clark Model
Innovation Management
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Innovation Value-Added Chain • What the innovation does to firm’s supplier, customer, and
complementary innovators
Value-Added Model
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Roberts and Berry model
– Familiarity matrix
• If technology and market are familiar to a firm (sustaining
technology) then the firm is better off developing the innovation
internally (has the capability)
• If both technology and market are new and unfamiliar (disruptive
technology) then the firm should look outside of its boundaries for
help (venture capitalism)
Roberts and Berry Model
Innovation Management
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Familiarity Matrix
Roberts and Berry Model