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Case Study on Disk Drive Industry. Adapted from Clayton, M. Christensen, The Innovator’s Dilemma: When New technologies Cause Great Firms to Fail, Harper Business, 2000. Primary Components of a Typical Disk Drive. Brief History.

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case study on disk drive industry

Case Study onDisk Drive Industry

Adapted from

Clayton, M. Christensen,

The Innovator’s Dilemma:

When New technologies Cause Great Firms to Fail,

Harper Business,

2000.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

primary components of a typical disk drive
Primary Components of a Typical Disk Drive

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

brief history
Brief History
  • 1952-56: IBM’s San Jose research laboratories developed RAMAC (random Access Method for Accounting and Control) which was the size of a large refrigerator incorporating 50 disks of 24 in. size. Total storage 5 MB.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

ramac the first disk drive
RAMAC: The first disk drive

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide5
1961: IBM introduced removable packs of rigid disks
  • 1971: IBM introduced the floppy disk drive
  • 1973: IBM introduced the Winchester architecture
  • In the 1960s: A few firms developed the plug-compatible-market (PCM) selling copies of IBM drives directly to IBM customers at discount prices. At the same time, IBM competitors (Control Data, Burroughs, and Univac) were integrated vertically into the manufacture of their own disk drives.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide6
In the 1970s: Smaller non-integrated computer makers such as Nixdorf, Wang and Prime developed OEM for disk drives.
  • In 1976: US$1 billion worth of disk drives were produced (50% PCM and 25% OEM). There were about 17 firms. All were relatively large and diversified corporations such as Diablo, Ampex, Memorex, EMM, and Control Data.
  • By 1995: Production rose rose to $ 18 billion, PCM almost vanished, and OEM became 75%. Almost all the 17 corporations except IBM failed or were acquired by IBM. Meanwhile, additional 129 firms entered, of which 109 failed (Fujitsu, Hitachi, and NEC survived).

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide7
During 1978 to 1993, the smallest available 20 MB drive shrank from 800 cubic inches to 1.4 cubic inches -- 35% annual rate of reduction.
  • During 1977 to 1994, the price per megabyte in 1982 dollars from $900 to 0.2

-- a reduction rate of 53% pa (although other microelectronic devices fell only at the rate of 70%).

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide8
Which technological developments contributed to this spectacular improvement in performance of disk drives?
  • Materials: Ferrite-oxide heads  Thin-film heads Magneto-resistive heads
  • Architecture: Removable disc-pack drives  Winchester Drives
  • Embedded servo systems
  • RLL and PRML recording codes
  • Higher RPM motors
  • Embedded interfaces

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide9

1. Innovations in Read-Write Head MaterialsIn the period 1975 to 1992, mainly ferrite-oxide heads were used. Incremental innovations within this technology such as - grinding the ferrite head to finer and more precise dimensions, and - more finely dispersed oxide particleshelped improve areal recording density from 1 to 30 terabyte per sq. in. This growth was approximately following the S-curve pattern(an initial accelerating growth followed by steady growth followed by saturation).

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide10
Around 1985, a new thin-film head technology was developed.

- Super-thin films of magnetic metal on aluminum was achieved by sputtering thin films of metal on recording head and then using photolithography to etch much finer electromagnets than could be achieved by ferrite technology. The technology was adapted from integrated-circuit industry. Burroughs and IBM led in this development.

- Meanwhile entrant firms such as Maxtor and Connor Peripherals continued to rely on refining ferrite technology.

- Established firms such as IBM, Control Data, Digital Equipment, Storage Technology, and Ampex -- each spent some $50 million in 8 years. Most new entrants perished.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide11
In the 1990s magneto-resistive heads were developed which accelerated the performance improvement.

IBM, Seagate, and Quantum led the race.

Established firms beat out entrants.

  • Moving up an S-curve is made possible through incremental innovations. Jumping from one S-curve to another is the result of radical innovations.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide13
Between 1976 and 1988: The number of established firms offering drives with thin-film heads increased from 0 to 22. Likewise, the corresponding number of entrant firms increased from 0 to 22.
  • Between 1984 and 1988: The number of established firms offering drives with thin-film disks increased from 0 to 12. Likewise, the corresponding number of entrant firms increased from 0 to 27.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

2 innovations in architecture
2. Innovations in architecture
  • In the period, 1965 to 1978, removable disk pack drives dominated. This trend followed an S-curve with regard to areal density.
  • Around 1978, 14-inch Winchester drive was substituted for the removable disk packs. This was a radical innovation (not incremental).

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide16
Between 1974 and 1979: The number of established firms offering drives with with Winchester architecture increased from 2 to 9. Likewise, the corresponding number of entrant firms increased from 0 to 19.
  • Between 1984 and 1988: The number of established firms offering drives with RLL recording codes increased from 4 to 20. Likewise, the corresponding number of entrant firms increased from 5 to 31.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide17

All the disk-drive innovations described thus far were of the sustaining type irrespective of whether they were incremental or radical, expensive or cheap, software or hardware, component or architecture, or competence-enhancing or competence-destroying.

A major characteristic of a sustaining innovation is that leading practitioners of prior technology continue to dominate. The business is not disrupted. Progress happens along historically anticipated lines.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide18

Further architectural improvements aimed at shrinking the drive size (from 14-inch to 8-inch to 5.25-inch to 3.5-inch to 2.5-inch to 1.8-inch) turned out to be disruptive, i.e., they displaced the industry leaders (irrespective of they were well-managed or not)

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

14 inch winchester drives
14-inch Winchester Drives
  • Until the mid-70s, 14-inch removable disk packs accounted for all disk drives.
  • Then 14-inch Winchester drive emerged to sustain performance.
  • Most were used for mainframes.
  • In 1974, typical median-priced mainframe had a drive of 130 MB. This increased for 15 years at 15% per year. At the same time, the capacity of average drive increased at 22%. Capacity was outstripping demand and reaching beyond mainframe into scientific and super computers.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

the advent of 8 inch drives
The advent of 8-inch drives
  • Between 1978 and 1980, Shigart Associates, Micropolis, Priam, and Quantum developed 8-inch drives with 10, 20, 30, 1nd 40 MB capacity.
  • These were of no interest to mainframes which, at that time, asked for around 40MB.
  • These disruptive innovations were however suited for minis used/produced by DEC, Data General, Prime, and HP.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide21
Partly because of the availability of suitable disk drives, minis gained over mainframes. A median-priced mini shipment grew at 25% per year.
  • Meanwhile 8-inch saw further innovations that resulted in capacity growth at the rate of 40% year although the computer requirements themselves grew at about 20%. Again, capacity outstripped demand.
  • Cost per MB of 8-inch became lower than that of 14-inch and other advantages became apparent, e.g. less vibration sensitive.
  • Hence, established 14-inch manufacturers began to fail. 2/3 never introduced 8-inch. The 1/3 were 2 years behind new entrants.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

why did 8 inch disrupt the dominance of the established 14 inch suppliers
Why did 8-inch disrupt the dominance of the established 14-inch suppliers?
  • 14-inchers were not toppled by technology because the 8-inch drives mainly used off-the-shelf components.
  • The reason for failure was delay in making the strategic commitment to switch to 8-inch. This was because mainframes did not need 8-inch drives as told by their established (mainframe) customers. It appears listening to current customers is not always good.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

a similar story was repeated when 5 25 gave way to 3 5 to 2 5 to 1 5 all were disruptive
A similar story was repeated when 5.25 gave way to 3.5 to 2.5 to 1.5. All were disruptive.
  • As the size reduced minis gave way to desktops which in turn partly gave way to portables and then Palms.
  • Newer versions were not superior in the established market whereas they were attractive to fringe customers interested in an emerging technology.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

a disruptive innovation the 5 25 inch drive 1981
A disruptive innovation: The 5.25 inch drive (1981)

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide25

The Impact of Sustaining and Disruptive Technological Change

Progress due to

sustaining technologies

Performance demanded

at the high end of the market

Performance demanded

at the low end of the market

Product Performance

Disruptive

Technological

Innovation

Progress due to

sustaining technologies

Time

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

what are the typical characteristics of disruptive innovations
What are the typical characteristics of disruptive innovations?
  • Worse product performance at least in the near term
  • Other attractive features that a few fringe (often new) customers value
  • Simpler and cheaper.
  • Architectural: New functionality achieved through a clever arrangement of ‘off-the shelf’ components or technologies.
  • Promise lower margins
  • First commercialized in emerging insignificant markets
  • Generally not wanted by leading firms’ most profitable customers (hence listening exclusively to one’s best customers may not always be good)

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide27

Fitting Innovation’s Requirements with Organizational Capabilities

Who should be responsible

Autonomous

Organization

is required

Mainstream

organization

is responsible

Heavyweight

teams

New

D

A

Lightweight

teams

Structureofdevelopmentteam

Fit with organizational processes

Functional

teams

C

B

Customary

Poor fit

(disruptive)

Strong fit

(sustaining)

Fit with Organization’s values

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide28

Characteristic Cost Structures of Different Value Networks

100

60

%

80

56

%

25

to

30

%

41

%

60

40

%

34

%

40

20

0

Desktop

OEMs

Mainframe

OEMs

6-inch disk

drive makers

14-inch disk

drive makers

Minicomputer

OEMs

5.25-inch disk

drive makers

Mainframe

Computing

Value Network

Minicomputer

Value Network

Desktop PC

Value Network

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

difference in valuation of attributes across different networks 1988
Difference in Valuation of Attributes Across Different Networks (1988)

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide30

The basis of competitive success

Market

need

Innovations with

regard to every

performance variable

have saturated.

The product has

become

a Commodity

Established

Disruptive

Market

need

Capacity

Established

Disruptive

Physical Size

Market

need

Established

Time

Phase 1

Competition based

upon capacity

Disruptive

Reliability

Time

Market need

Phase 2

Competition based

upon physical size

Price

Sustaining technologies

Time

Phase 3

Competition based

upon reliability

Time

Phase 4

Competition based

upon price

Changes on the Basis of Competition in disk drive industry

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

slide31

Strategy 1: Push Upmarket Towards Higher-End Customers

Performance Reliability

Technology Trajectory

Strategy 3:

Change Market’s

Demand for

Functionality

Need in Tier 3

Performance Reliability Convenience

Functionality

Need in Tier 2

Performance Relaibility Convenience Price

Strategy 2: Stay with Customers

Need in Tier 1

Time

Managing Changes on the Basis of Competition

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

discussion

DISCUSSION

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 12
See Slide 12

In the period, 1975-1990, terabits/sq. in improved from 1 to 12 owing to improvements in ferrite.oxide technology.

Is this due to

 incremental innovation?

 radical innovation?

 disruptive innovation?

 sustaining innovation?

 process innovation?

 product innovation?

 architectural innovation?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 121
See Slide 12

Around 1990, ferrite oxide technology started being replaced by thin film technology.

Can this be classified as

 incremental innovation?

 radical innovation?

 disruptive innovation?

 sustaining innovation?

 process innovation?

 product innovation?

 architectural innovation?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 122
See Slide 12

Around 1994, thin film technology started being replaced by thin magneto-resistive technology.

Can this be classified as

 incremental innovation?

 radical innovation?

 disruptive innovation?

 sustaining innovation?

 process innovation?

 product innovation?

 architectural innovation?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 14
See Slide 14

In the period, 1965 to 1978, removable disk pack drives dominated. Around 1978, 14-inch Winchester drive was substituted for the removable disk packs.

Can this be classified as

 incremental innovation?

 radical innovation?

 disruptive innovation?

 sustaining innovation?

 process innovation?

 product innovation?

 architectural innovation?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 15
See Slide 15

Around 1976, removal disk-pack drives were replaced by Winchester drives.

Can this be classified as

 incremental innovation?

 radical innovation?

 disruptive innovation?

 sustaining innovation?

 process innovation?

 product innovation?

 architectural innovation?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 7
See Slide 7

During 1977 to 1994, the price per megabyte in 1982 dollars from $900 to 0.2.

Was this due to market pull? 

Was this due to technology push? 

Was this due to competition? 

Name five technologies that contributed to this development.

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

see slide 18
See Slide 18

Architectural improvements aimed at shrinking the drive size (from 14-inch to 8-inch to 5.25-inch to 3.5-inch to 2.5-inch to 1.8-inch) turned out to be disruptive.

  • Why are these labeled as ‘disruptive’?
  • Whose businesses were ‘disrupted’?
  • Why is the continued development of ferrite oxide technology not viewed as being ‘disruptive’?
  • Why should it be viewed as ‘sustaining’?
  • Whose businesses were sustained?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

some broad and open ended questions
Some Broad and Open-ended Questions
  • The companies ‘disrupted’ were large and having a good R&D as well as marketing infrastructures and cultures. Yet they were ‘disrupted’ by smaller players. Why?
  • Listening to customers is the basic precept in the era of quality. Does this suffice when one transits to the era innovation?
  • What are the general characteristics of disruptive innovations?
  • What steps could the large and established companies take to avoid being ‘disrupted’?

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

further questions
Further Questions
  • Can small firms hope to engage in incremental innovation? No!! No! Yes! Yes!!
  • Can small firms hope to engage in radical innovation? No!! No! Yes! Yes!!
  • Can small firms hope to engage in architectural innovation? No!! No! Yes! Yes!!
  • Can small firms hope to engage in disruptive innovation? No!! No! Yes! Yes!!

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study

what type of innovation is best suited for hong kong s manufacturing sector
What type of innovation is best suited for Hong Kong’s manufacturing sector?

Insert a preference rating between 1 to 5 (5 for highest preference and 1 for lowest preference).

 incremental innovation

 radical innovation

 disruptive innovation

 sustaining innovation

 process innovation

 product innovation

 architectural innovation

KV Patri, Mgmt of Tech Inn., Disk Drives Case Study