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Angela Ferrara
Angela Ferrara

This document summarizes key concepts about disruptive innovation from Clayton Christensen's work. It defines disruptive innovation as creating a new market and value network that eventually disrupts existing markets. Disruptive innovations often have lower performance initially but eventually meet customer needs. Established companies struggle with disruptive innovation because their processes, values, and culture are optimized for sustaining innovations that appeal to existing customers. However, startups can more easily pursue disruptive innovations due to fewer resources but lower cost structures and ability to embrace new markets. The document provides strategies for large companies to develop capabilities for disruptive innovation through creating new internal teams, spinout organizations, or acquisitions.

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Ufficio Valorizzazione Ricerche UVR-SSSA Meeting the challenge of DISRUPTIVE INNOVATION Clayton Christenses Michael Overdorf GROUP A Angela, Chiara, Laura, Tommaso, Ilaria, Agostina
Creates an entirely NEW market through the introduction of a new kind of product or service Makes a product or service perform better in ways that customers have already evaluated in the mainstream market Sustaining Innovation Disruptive Innovation   
DISRUPT-IVE INNOVATION: LITERALLY CREATING CHAOS IN THE MARKET! 1) It is an innovation that creates a new market and value network, and eventually disrupts the existing market and value network displacing an earlier technology 2) The new product or service costs less than existing products or services, and therefore is priced less, and may not appear as attractive as existing solutions 3) Initially, the new product performs worse than existing products when judged by the performance metrics that mainstream existing customers value. Eventually, however, the performance catches up and addresses the needs of mainstream customers
SUSTAINING vs DISTRUPTIVE
WHY IS IT IMPORTANT? Companies nowadays are more and more involved in sudden changes and innovations NEED FOR MANAGERS THAT ARE ABLE TO HANDLE THEM! ESPECIALLY ESTABLISHED FIRMS WHERE SUCCESSFUL PROCESSES AND BUSINESS MODELS MAY AFTERWARDS DOOM THEM TO FAILURE GOOD MANAGERS SHOULD - understand abilities and disabilities of the organization as whole and.. -recognize what types of change the existing organization is capable or incapable of handling IN ORDER TO MAKE APPROPRIATE ORGANIZATIONAL RESPONSE TO THE OPPORTUNITIES THAT ARISE FROM DIFFERENT KIND OF CHANGE
Factors that affect what an organization can or cannot do  Question for mangers: how each factor might affect the capacity to change? RESOURCES: What can this company do? Tangible assets: people, equipment, technologies Intangible assets: brands, product design, relationship with suppliers PROCESSES: Patterns of interaction, coordination, communication and decision making that employees use to transform resources into products and services of greater worth
Two sets of values whose evolution makes companies progressively less capable of addressing disruptive change 1) The way the company judges acceptable gross margins for a new idea  eg: Adding new features to the product can attract new customers but also increase overhead costs 2) How big a business opportunity has to be before it can be considered interesting  eg: Small business opportunity are not interesting for big companies VALUES: setting priorities Standards by which employees set priorities that enables them to judge whether - an order is attractive or unattractive, - a customer is more important or less important, - an idea for a new product is attractive or marginal Where is the threshold value for the company?
IN THE END, PEOPLE, PROCESSES AND VALUES BECOME A CULTURE IN THE START-UP STAGES OF AN ORGANIZATION MUCH OF THE SUCCESS DEPENDS ON PEOPLE  Founder’s role in shaping initial processes and hiring devoted people OVER TIME, PROCESS AND VALUES ENHANCE THEIR IMPORTANCE  Eg: McKinsey change its hundreds of MBAs every year but it keep on working with the same processes and values IN CASE OF SUCCESS, MATURATION LEADS PEOPLE TO ASSUME THAT THE PROCESSES AND PRIORITIES THEY’VE USED SO SUCCESSFULLY ARE THE RIGHT WAY TO DO THEIR WORK AS LONG AS THE ORGANIZATION CONTINUES TO FACE THE SAME SORTS OF PROBLEMS THAT ITS PROCESSES AND VALUES WERE DESIGNED TO ADDRESS, MANAGING THE ORGANIZATION CAN BE STRAIGHTFORWARD. BUT THESE FACTORS REPRESENT ALSO DISABILITIES WHEN THE PROBLEMS THAT THE COMPANY FACE CHANGE!
WHEN THE ORGANIZATION CAPABILITIES RESIDE PRIMARILY IN ITS PEOPLE, CHANGES TO ADDRESS THE NEW PROBLEMS ARE RELATIVELY SIMPLE WHEN THE CAPABILITIES HAVE COME TO RESIDE IN PROCESSES AND VALUES AND ESPECIALLY WHEN THEY HAVE BECOME EMBEDDED IN CULTURE CHANGE CAN BE EXTRAORDINARILY DIFFICULT  Addressing Disruptive Innovation may be a problem 
Why do established industry leaders never introduce DISTRUPTIVE INNOVATION BUT USUALLY DEVELOP JUST SUSTAINING ONES? - They are organized to develop and introduce sustaining technologies - They launch new and improved products to gain an edge over the competition - Investment in sustaining technology also fits in with the values of leading companies due to the higher margins from better products sold to mainstream customers - This is what has historically helped them succeed! In case of DISRUPTIVE INNOVATION • DIs occur so intermittently that no company has a routine process for handling them • Disruptive products nearly always promise lower profit margins per unit sold and are not attractive to the company’s best customers • So, they are inconsistent with the established company's values
• They are more capable of pursuing emerging growth markets • They lack resources, <<but that doesn't matter>> • Their values can embrace small markets, and their cost structures can accommodate low margins The «DISRUPTIVE» winners: START-UPs These advantages add up to the ability to embrace and even initiate DISRUPTIVE CHANGE
1. Creating New Capabilities Internally Creation of «HEAVYWEIGHT TEAMS» (Revolutionizing Product Development, The Free Press, 1992) These teams are entirely dedicated to the new challenge, team members are physically located together and each member is charged with assuming personal Managers need to pull the relevant people out of the existing organization and draw a new boundary around a new group How can a large company develop capabilities to cope with change?
How can a large company develop capabilities to cope with change? 2. Creating Capabilities Through a Spinout Organization Managers have to spin out an independent organization from the existing one and develop within it new processes and values required to solve the new problem • A new physical location isn't always necessary • The development of a new operation doesn’t necessarily mean abandoning the old one Generally companies need to run the two business in tandem Only the attentive oversight of the CEO can ensure that the new organization gets the required resources and creates appropriate processes and values NO EXCEPTIONS TO THIS RULE!
3. Creating Capabilities Through Acquisition How can a large company develop capabilities to cope with change? Managers have to acquire a different organization whose processes and values closely match the requirements of the new task  difficult task!! POSITIVE EXEMPLE Cisco Systems' acquisitions Process has worked well because it has kept resources, processes and values in the right perspective UNSUCCESFUL FUSIONS Financial analysts have a better intuition about the value of resources than they do about the value of processes
CONCLUSIONS Important questions for managers coping with a change • Does the organization have the processes and values it needs to succeed in this new situation? • Are the processes by which work habitually gets done in the organization appropriate for this new problem? • Will the values of the organization cause this initiative to get high priority or to languish? They employ highly capable people and then set them to work within organizational structures whose processes and values weren't designed for the task at hand MAIN PROBLEM FOR INNOVATION FOR ESTABLISHED FIRMS Ensuring that capable people are ensconced in capable organizations: This is a major responsibility of managers in a transformational age such as ours! NEED FOR
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Hvbt team a

  • 1. Ufficio Valorizzazione Ricerche UVR-SSSA Meeting the challenge of DISRUPTIVE INNOVATION Clayton Christenses Michael Overdorf GROUP A Angela, Chiara, Laura, Tommaso, Ilaria, Agostina
  • 2. Creates an entirely NEW market through the introduction of a new kind of product or service Makes a product or service perform better in ways that customers have already evaluated in the mainstream market Sustaining Innovation Disruptive Innovation   
  • 3. DISRUPT-IVE INNOVATION: LITERALLY CREATING CHAOS IN THE MARKET! 1) It is an innovation that creates a new market and value network, and eventually disrupts the existing market and value network displacing an earlier technology 2) The new product or service costs less than existing products or services, and therefore is priced less, and may not appear as attractive as existing solutions 3) Initially, the new product performs worse than existing products when judged by the performance metrics that mainstream existing customers value. Eventually, however, the performance catches up and addresses the needs of mainstream customers
  • 5. WHY IS IT IMPORTANT? Companies nowadays are more and more involved in sudden changes and innovations NEED FOR MANAGERS THAT ARE ABLE TO HANDLE THEM! ESPECIALLY ESTABLISHED FIRMS WHERE SUCCESSFUL PROCESSES AND BUSINESS MODELS MAY AFTERWARDS DOOM THEM TO FAILURE GOOD MANAGERS SHOULD - understand abilities and disabilities of the organization as whole and.. -recognize what types of change the existing organization is capable or incapable of handling IN ORDER TO MAKE APPROPRIATE ORGANIZATIONAL RESPONSE TO THE OPPORTUNITIES THAT ARISE FROM DIFFERENT KIND OF CHANGE
  • 6. Factors that affect what an organization can or cannot do  Question for mangers: how each factor might affect the capacity to change? RESOURCES: What can this company do? Tangible assets: people, equipment, technologies Intangible assets: brands, product design, relationship with suppliers PROCESSES: Patterns of interaction, coordination, communication and decision making that employees use to transform resources into products and services of greater worth
  • 7. Two sets of values whose evolution makes companies progressively less capable of addressing disruptive change 1) The way the company judges acceptable gross margins for a new idea  eg: Adding new features to the product can attract new customers but also increase overhead costs 2) How big a business opportunity has to be before it can be considered interesting  eg: Small business opportunity are not interesting for big companies VALUES: setting priorities Standards by which employees set priorities that enables them to judge whether - an order is attractive or unattractive, - a customer is more important or less important, - an idea for a new product is attractive or marginal Where is the threshold value for the company?
  • 8. IN THE END, PEOPLE, PROCESSES AND VALUES BECOME A CULTURE IN THE START-UP STAGES OF AN ORGANIZATION MUCH OF THE SUCCESS DEPENDS ON PEOPLE  Founder’s role in shaping initial processes and hiring devoted people OVER TIME, PROCESS AND VALUES ENHANCE THEIR IMPORTANCE  Eg: McKinsey change its hundreds of MBAs every year but it keep on working with the same processes and values IN CASE OF SUCCESS, MATURATION LEADS PEOPLE TO ASSUME THAT THE PROCESSES AND PRIORITIES THEY’VE USED SO SUCCESSFULLY ARE THE RIGHT WAY TO DO THEIR WORK AS LONG AS THE ORGANIZATION CONTINUES TO FACE THE SAME SORTS OF PROBLEMS THAT ITS PROCESSES AND VALUES WERE DESIGNED TO ADDRESS, MANAGING THE ORGANIZATION CAN BE STRAIGHTFORWARD. BUT THESE FACTORS REPRESENT ALSO DISABILITIES WHEN THE PROBLEMS THAT THE COMPANY FACE CHANGE!
  • 9. WHEN THE ORGANIZATION CAPABILITIES RESIDE PRIMARILY IN ITS PEOPLE, CHANGES TO ADDRESS THE NEW PROBLEMS ARE RELATIVELY SIMPLE WHEN THE CAPABILITIES HAVE COME TO RESIDE IN PROCESSES AND VALUES AND ESPECIALLY WHEN THEY HAVE BECOME EMBEDDED IN CULTURE CHANGE CAN BE EXTRAORDINARILY DIFFICULT  Addressing Disruptive Innovation may be a problem 
  • 10. Why do established industry leaders never introduce DISTRUPTIVE INNOVATION BUT USUALLY DEVELOP JUST SUSTAINING ONES? - They are organized to develop and introduce sustaining technologies - They launch new and improved products to gain an edge over the competition - Investment in sustaining technology also fits in with the values of leading companies due to the higher margins from better products sold to mainstream customers - This is what has historically helped them succeed! In case of DISRUPTIVE INNOVATION • DIs occur so intermittently that no company has a routine process for handling them • Disruptive products nearly always promise lower profit margins per unit sold and are not attractive to the company’s best customers • So, they are inconsistent with the established company's values
  • 11. • They are more capable of pursuing emerging growth markets • They lack resources, <<but that doesn't matter>> • Their values can embrace small markets, and their cost structures can accommodate low margins The «DISRUPTIVE» winners: START-UPs These advantages add up to the ability to embrace and even initiate DISRUPTIVE CHANGE
  • 12. 1. Creating New Capabilities Internally Creation of «HEAVYWEIGHT TEAMS» (Revolutionizing Product Development, The Free Press, 1992) These teams are entirely dedicated to the new challenge, team members are physically located together and each member is charged with assuming personal Managers need to pull the relevant people out of the existing organization and draw a new boundary around a new group How can a large company develop capabilities to cope with change?
  • 13. How can a large company develop capabilities to cope with change? 2. Creating Capabilities Through a Spinout Organization Managers have to spin out an independent organization from the existing one and develop within it new processes and values required to solve the new problem • A new physical location isn't always necessary • The development of a new operation doesn’t necessarily mean abandoning the old one Generally companies need to run the two business in tandem Only the attentive oversight of the CEO can ensure that the new organization gets the required resources and creates appropriate processes and values NO EXCEPTIONS TO THIS RULE!
  • 14. 3. Creating Capabilities Through Acquisition How can a large company develop capabilities to cope with change? Managers have to acquire a different organization whose processes and values closely match the requirements of the new task  difficult task!! POSITIVE EXEMPLE Cisco Systems' acquisitions Process has worked well because it has kept resources, processes and values in the right perspective UNSUCCESFUL FUSIONS Financial analysts have a better intuition about the value of resources than they do about the value of processes
  • 15. CONCLUSIONS Important questions for managers coping with a change • Does the organization have the processes and values it needs to succeed in this new situation? • Are the processes by which work habitually gets done in the organization appropriate for this new problem? • Will the values of the organization cause this initiative to get high priority or to languish? They employ highly capable people and then set them to work within organizational structures whose processes and values weren't designed for the task at hand MAIN PROBLEM FOR INNOVATION FOR ESTABLISHED FIRMS Ensuring that capable people are ensconced in capable organizations: This is a major responsibility of managers in a transformational age such as ours! NEED FOR