dynamic startegy

Disruptive strategies

Week 11 Workshop

MBA501 Dynamic Strategy and Disruptive Innovation

Boiling frogs

Play Video

• What does French poet-diplomat

Saint-John Perse mean when he says:

Small Group Discussion

The only menace is inertia.

Small Group Challenge Tokyo, Japan 1998

In groups, suggest a strategy that Mari could implement to improve her team’s chances of success.

Mari Matsunaga, senior designer at Japanese mobile phone

operator NTT DoCoMo, has a problem. Senior management has

grown increasingly nervous about the risks of disruptive innovation to

the company. DoCoMo is Japan’s predominant mobile phone

operator and telecommunications is a highly dynamic market. There

is a real threat that the company’s competitive advantage could be

jeopardised by a disruptor with a new mobile technology.

Mari also fears that the size and structure of NTT DoCoMo is an

obstacle to successful innovation. Nevertheless, her task is to

assemble and lead a team of designers who will be responsible for

developing a new mobile phone technology that will enable NTT

DoCoMo to maintain its position as market leader.

Disruptive innovation strategy

• Critics of disruptive innovation theory

argue that it can only explain market

disruption after it has already happened

and has little to no strategic value

• Let’s ask the question: ‘What essentially

would decide or contribute to an

organisations’ success in disruptive

innovation?’

Internal perspective

• The internal perspective examines

business models and organisational

challenges including:

1. human resources

2. organisational culture

3. resource allocation

4. organisational structure

Human resources

• Senior managers may not understand

the promise of disruptive innovation

because they were trained in

conventional business programs

• An additional team at the corporate

level is required to be responsible for

collecting disruptive innovation ideas

and implementing them

Organisational culture

• When great changes such as disruptive

innovation occur a sub-optimal

organisational culture can generate

inertia and resistance

• It is important then for incumbents to

prepare for and institute organisational

change and unlearn deeply entrenched

values that inhibit change

Resource allocation

• Resource allocation processes that have financial returns as the key evaluation factor can hinder the development of disruptive innovation

• One solution is to use strategic buckets to manage sustaining vs disruptive projects independently so potential disruptive innovation projects are allocated sufficient resources

Organisational structure

• The larger an organisation is the less

likely it will successfully develop and

implement disruptive innovation

• Organisations can modify their business

structure to promote flexibility by having

smaller business units so that decision-

makers stay enthusiastic and take

emerging opportunities seriously

NTT DoCoMo

• NTT DoCoMo set up their development

team as an autonomous entrepreneurial

organisation

• High risk takers were selected to join

the development team

• The team was also given strong

executive level support

i-mode

• The NTT DoCoMo team developed

i-mode, a wireless industry disruptor

that introduced interactive on-line

content to mobile telecommunications

• Within 18 months subscriptions to the

service exploded from 0 to 18 million

Rodriguez

Play Video

• What does American businessman

Jack Welch mean when he says:

Small Group Discussion

On the face of it, shareholder value is the

dumbest idea in the world.

Small Group Challenge Hangzhou, China 1993

Hong Liang Lu, entrepreneur and founder in telecommunications

company Unitech Telecom, has a problem. His company has

developed a cordless phone called the Personal Access System

(PAS) that he hoped would become a disruptive technology in

telecommunications.

Hong attempts to launch the PAS in Japan but quickly discovers

the regulatory environment and national culture do not encourage

entrepreneurship. The financing system is also too inefficient to

support disruptive ideas.

These environmental factors conspire to prevent PAS from gaining

traction in the marketplace and, much to Hong’s dismay, the

innovation fails.

In groups, suggest a strategy Hong could implement to realise his hopes for the PAS.

External perspective

• The external perspective examines the

organisation’s context and environment

and includes:

1. commitments and relationships

2. regulatory and economic conditions

Commitments

• Organisations are often locked into

commitments reflected in the

expectations of investors and analysts,

and existing relationships with resource

providers and suppliers

• Before entering such commitments

organisations should assess their

potential impact on innovative capacity

Apple

• Steve Jobs skillfully managed the

expectations of Apple’s shareholders by

letting them know they would not

interfere with Apple’s pursuit of its

original customer focused purpose: to

make a contribution to the world by

developing tools for the mind that

advance humankind

Regulation

• Disruptive innovation can be hindered

by regulations and cultures that fail to

encourage entrepreneurship

• Financial systems may also prove

inadequate to support the development

of disruptive ideas

Unitech Telecom

• In 1993 Unitech Telecom introduced a

disruptive innovation, the Personal

Access System (PAS), to Japan but it

failed to catch on

• One year later the exact same

innovation succeeded in China and

within 10 years the company’s revenues

had risen from $10 million to $2.7 billion

• Do you agree with Apple founder

Steve Jobs when when he says:

Small Group Discussion

Get closer than ever to your

customers. So close that you’ll tell

them what they need well before they

realise it themselves.

Small Group Challenge Minnesota, US 1995

Livio D. DeSimone, President and CEO of multinational

conglomerate 3M, has a problem. He is concerned that too much of

the company’s growth is coming from changes to existing products

and too little from innovative breakthroughs.

Sales in one particular product range, surgical drapes, have

stagnated. Preliminary research indicates that the drapes are failing

to provide fool-proof protections against microbes. They are also too

expensive for markets in developing countries. And they are not very

effective in hotter conditions.

Livio is eager for 3M to develop a breakthrough technology in

surgical drapes but does not know how to achieve this.

In groups, suggest a strategy Livio could use to develop a breakthrough technology in surgical drapes.

Marketing perspective

• The marketing perspective examines

how an organisation can find emerging

markets and understand potential

customer needs including:

1. customer visit programs

2. empathic designs

3. lead-user processes

Customer visit programs

• Customer visit programs help

organisations to gain customer insights

• Managers not only visit customers

individually but also as members of

cross-functional teams including

marketing and R&D

Hewlett-Packard

• At Hewlett-Packard marketing

managers and R&D managers hear the

same information from customers at the

same time

• This helps the company to overcome

the conflicts, implicit assumptions, and

poor communications that can exist

between marketing and R&D

Empathic designs

• Empathic design is a user-centred

design approach that pays attention to

the user's feelings toward a product

• The goal is to identify latent customer

needs in order to create products the

customers didn’t even knew they

desired

Continuum

• Design consultancy firm Continuum

successfully designed a series of baby

bottles by using empathic design

techniques

• A team of designers collected data on

user needs by observing infants in child

care centres and conducting research in

the homes of first time mothers

Lead user processes

• Lead users are early adopters of new

products or technology that is expected

to eventually receive widespread use

• A lead user process collects information

about needs and solutions from lead

users rather than users at the centre of

the target market

3M

• To develop a breakthrough technology

in surgical drapes 3M assembled a

team of lead users including a

veterinarian surgeon, a Hollywood

makeup artist, doctors from developing

countries, and military medics

• The team developed a proposal for

three major new product lines

• Do you agree with Hungarian

physiologist Albert Szent-Györgyi when

he says:

Small Group Discussion

Innovation is seeing what everybody has

seen and thinking what nobody has thought.

Small Group Challenge Korolyov, Soviet Union 1969

Vasily Pavlovich Mishin, Chief Designer of the Soviet Space

Program, has a problem. His team is responsible for designing and

building Luna 16, a robotic probe that will land on the moon and

return a sample of lunar soil to Earth.

Vasily and his team have worked under immense pressure and

tight deadlines since the Americans beat them in sending the first

manned spaceflight around the moon the year before.

The Luna 16 spacecraft has a camera but requires a light source to

be able to capture and relay images. The project has been stalled for

months because Vasily and his engineers have not been able to

design a light bulb that can survive take off and landing.

In groups, suggest a strategy that Vasily could use to solve the problem of the spacecraft camera light bulb.

Technology perspective

• The technology perspective examines

the technological strategies for

disruptive innovation

• To date there has been little research

into how organisations may

systematically approach the

identification or creation of potential

disruptive technologies

Challenges

• It may seem as though all an

organisation needs to do is be vigilant

and quick to spot a disruptive

technology opportunity

• However, the creation of some

disruptive technologies may be

extremely challenging, especially if they

are based on new scientific discoveries

TRIZ

• TRIZ is a problem solving, analysis and

forecasting tool that could help identify

new disruptive innovation opportunities

• It is a framework made up of 39

features, 40 principles, and 8 trends

• The nine box technique can be used to

look outside – and inside – the original

problem to find lateral solutions

Basic TRIZ framework

Luna 16

• Soviet engineers applied the nine box

technique to their need to design a light

bulb that would survive take off and

landing aboard spacecraft Luna 16

• The TRIZ exercise led them to the

realisation that the bulb, required to

keep oxygen away from the element,

was entirely unnecessary in space

Patent analysis

• Patent analysis is traditionally used by

organisations to gauge their current

technical competitiveness and plan

against potential competition

• But it could also be used to forecast

technological trends and identify

technologies from other areas that

could be incorporated into their own

Scint-X

• Swedish company Scint-X has adapted

an advanced technique used for

miniaturising space hardware to create

an x-ray camera so small that it can be

inserted into a dentist patient’s mouth to

take x-rays of their teeth

Playtime

Week 12 Workshop

MBA501 Dynamic Strategy and Disruptive Innovation

Preparing a disruptive strategy report for the InFocus board turns out to be

a much more challenging task than you anticipated. You spend the entire

night before the board meeting at your desk reading through a small

mountain of InFocus departmental reports, industry research, and the

scribbled transcripts of the thirty odd interviews you held with key personnel

over the past four weeks.

By sunrise, you finally feel you have all the relevant information you need

to prepare your report and begin by jotting down the most important points

on a notepad.

You start with InFocus’s general lack of capacity to embrace disruptive

innovation because of a lack of understanding at the senior management

level and a cultural resistance to change, evidenced by the cost and

inefficiency of past process change initiatives.

There is also the annual budgeting process that focuses almost

exclusively on financial performance and the organisational structure itself:

InFocus is a very large organisation with most departments working across

every business portfolio and even product lines.

Then you note down how Sergey’s managerial style and overemphasis on

shareholder value has created expectations among the shareholders for

demonstrable links between corporate strategy and investment returns. Also

of relevance here are the Australian government’s generous tax incentives

for Research & Development and the current willingness of the major

financial institutions to offer finance on favourable terms for innovation

projects.

Next you write about InFocus’s customer focus group program, operated

and managed exclusively by the marketing department, and based solely on

traditional market research methodologies.

And, finally, you note that the company’s approach to the identification or

creation of new technologies has been sporadic, random, and ad hoc.

What a mess!

You check the time and realise you have only twenty minutes left before

the board of directors expect you to present your report and

recommendations…

Group One

In your group, prepare a disruptive strategy report for

the InFocus board

Focus on the following:

• Explain why an internal perspective can help

InFocus

• Discuss, from an internal perspective, InFocus’s

current prospects for successfully implementing

disruptive strategies

• Recommend four changes InFocus could make to

better position itself for disruptive innovation

success

Group Two

In your group, prepare a disruptive strategy report for

the InFocus board

Focus on the following:

• Explain why an external perspective can help

InFocus

• Discuss, from an external perspective, InFocus’s

current prospects for successfully implementing

disruptive strategies

• Recommend three changes InFocus could make to

better position itself for disruptive innovation

success

Group Three

In your group, prepare a disruptive strategy report for

the InFocus board

Focus on the following:

• Explain why a marketing perspective can help

InFocus

• Discuss, from a marketing perspective, InFocus’s

current prospects for successfully implementing

disruptive strategies

• Recommend three changes InFocus could make to

better position itself for disruptive innovation

success

Group Four

In your group, prepare a disruptive strategy report for

the InFocus board

Focus on the following:

• Explain why a technological perspective can help

InFocus

• Discuss, from a technological perspective,

InFocus’s current prospects for successfully

implementing disruptive strategies

• Recommend three changes InFocus could make to

better position itself for disruptive innovation

success

Group One Group Two

Group Three Group Four

Present your disruptive innovation report and recommendations to

the board of directors.

Exactly twenty minutes later you enter the boardroom just as everybody is

taking their seats.

Dustin starts the board meeting and invites you to present your disruptive

innovation report and recommendations.

Dustin thanks you for your presentation and addresses the directors.

‘We will now cast our votes by show of hands on whether we accept these

recommendations regarding disruptive innovation. All those in favour please

raise your hands. Thank you. All those against please raise your hands.

Thank you.’

Dustin tallies the votes.

‘The decision is …’

You collect your presentation papers and turn to leave.

‘Would you mind sticking around while we resolve the next agenda item?’

Dustin asks you.

You nod and take a seat at the boardroom table.

He continues, ‘We will now cast our votes by show of hands on which of

our two final candidates will be offered the position of InFocus CEO. All

those in favour of Candidate A please raise your hands. Thank you. All those

in favour of Candidate B please raise your hands. Thank you.’

Dustin tallies the votes.

‘The unanimous decision is … Candidate A.’

Dustin asks if you believe the board has made the right choice.

‘I don’t know who Candidate A is,’ you reply.

‘You’re Candidate A,’ Dustin says.

The directors break into applause taking great pleasure in your obvious

shock and bewilderment. Dustin is beaming with satisfaction.

‘Thank you,’ you finally say, choking back tears, ‘I accept.’