Conference on Disruptive Technologies: Strategies and Policies

1. The Six Countries’ Conference on Disruptive Technologies DISRUPTIVE TECHNOLOGIES,FIRMS’ STRATEGIES, AND GOVERNMENT POLICIESProfessor Y.L. DozThe Timken Chaired Professor of Global Technology and InnovationINSEAD, Fontainebleau, SingaporeVANCOUVER, CANADA, June 5th 2003 Professor Y. Doz

2. Three core questions • What is a disruptive technology? • What are its strategic implications, for incumbents? For challengers? • Why does it matter to governments? Technology, Innovation, Discontinuity, Radical Innovation, Architectural Innovation, Transilience, Competence enhancing, destroying…… Professor Y. Doz

3. What is a disruptive technology? Performance Third technology Second technology First technology Time / Resources devoted Source: Adapted from Foster (1986) and from Christensen (1992) Professor Y. Doz

4. What the technology offers What the market needs First technology Second technology Third technology What is a disruptive technology? Performance (log. Scale) Time Source: Adapted from Christensen (1993) Professor Y. Doz

5. A well researched example: hard disk drives Intersecting Trajectories of Capacity Demanded versus Capacity Supplied in Rigid Disk Drives Source: Christensen, 1993 Professor Y. Doz

6. Supportive or disruptive? Winchester Mainframe Mini Desktop Portables 2.5” 14” 8” 5.25” 3.5” . Architectural vs modular / elemental . Same or different technological trajectory Disruptive, or not? Some key questions • Innovation or Technology? . Social “technologies” (low cost airlines) . Value innovations (regional jets) 3. Radical / substitutive or incremental / complementary? . Bio technology and pharmacy Professor Y. Doz

7. Disruptive, or not? Some key questions new • For Whom? (e.g., small office copiers) XEROX base market access Same new CANON competence Same Professor Y. Doz

8. Disruptive, or not? Some key questions • How fast: Tornado or mild breeze? - Dynamics of diffusion: Network effects and critical mass - Misguided incumbent response • “Happening” or “created”? • - Innovations are “created” • - Creative destruction • - Strategic innovation • - New technologies are resources / tools for innovation Professor Y. Doz

9. Why are incumbents (often) sitting ducks? • Economic interest . Better-off funding incremental supportive innovation . Risk of accelerating substitution and destroying value . Increasing returns to competence/installed base, trajectory lock-in • Organizational logic . Structural “fit”, interaction routines, collective tacit skills . Successful strategies grow into mindless recipies . Orthodoxies, rigidities, cultural homogeneity . Internal resource allocation processes . Lack of relevant, and well-located absorptive capacity • Social heritage . Network embeddedness (customers, suppliers, partners) . “Ties that Bind”, unwillingness to challenge past commitments . “Value networks” require collective agreement on change across firms Professor Y. Doz

10. The incumbent's weak response • Late, slow, half-hearted, tentative and ineffective • On the “wrong” trajectory (accelerate their own, ignore the new) • Lacking critical mass, under funded, under supported • Expensive . Time compression diseconomies . Lasting stalemate • Often strategically flawed . Transfer of “old” value creation system Professor Y. Doz

11. Tochallengers, disruptive technologies open a window of opportunity: • They are disruptive for incumbents, supportive for challengers • They mix technical , social and value innovations, making them difficult for incumbents to emulate … • They create / open vast new “low-end” markets to use a staging areas... • They originate and spread below / beyond the radar screen of incumbents • They draw on distant and diverse sources of knowledge • They rely on new, or hard to enter, social networks Professor Y. Doz

12. Incumbents that respond successfully • Widely distributed prospecting for and active sensing of new knowledge, worldwide, including emerging / latent market needs • Cultivating absorptive capacity and knowledge melding Professor Y. Doz

13. Mobilizing Globally Dispersed Knowledge Prospecting and accessing distant innovative competencies and lead market knowledge LOGIC: Discovery & Reconnaissance Melding dispersed capabilities and lead market opportunities to pioneer new solutions LOGIC: Entrepreneurship & Mobilization Optimising the scale and configuration of Operations LOGIC: Efficiency, Flexibility, & Financial Discipline (Source: Doz, Santos, Williamson - "From Global to Metanational” - HBS Press, 2001) Professor Y. Doz

14. Customers’ Manufacturing:Singapore, and other Far East sites STMicroelectronicsin HDD electronics Engineering and Design skills in fast microprocessors: Bristol, U.K. Process Technology R&D in BICMOS (mixed) and CMOS (digital); Manufacturing(Front End): Grenoble, France Joint Design center with Seagate:Scotts Valley, CA Engineering and Design skills in digital servo controllers: (JV) SSD - Dublin, Ir. Process Technology R&D in Bipolar and BCD; Design competence on analog and mixed chips: Milano, Italy Lead Customers R&D and Engineering: Seagate, Western Digital (California,Colorado, ...) Competence on R/W technology: (JV) EXAR, CA Coordination and strategic capability: Geneva, Switzerland Engineering and Design Capability / Close understanding of customer application / Design Center: S. Jose CA Design of ‘packaging’, testing and final assembly (Back End) capability: Malaysia, Singapore

15. MetaCorp 29 The Innovation Turbine Sensing Magnet Magnet Crucible Crucible Attracting Relay Relay Leveraging Professor Y. Doz

16. Tapping the world for new knowledge (Shiseido in Fragrance) Carita Sensing “Les Salons” French Suppliers GienPlant(France) Zouari Beaute Prestige International Chantal Roos Issey Miyake Jean-Paul Gaultier Melding Product Development Process Yokohama: Product Strategy Managers Worldwide Distribution Ofuna (Kamakura) Plant Leveraging Professor Y. Doz

17. Incumbents that respond successfully • Widely distributed prospecting for and active sensing of new knowledge, worldwide, including emerging / latent market needs • Cultivating absorptive capacity and knowledge melding • Sustaining a pluralistic dialogue, internally and externally • Creatively challenging existing orthodoxies and business models • Letting “autonomous” strategic processes flourish, and select, at various levels, from their outcomes • Fostering Internal differentiation of organization Professor Y. Doz

18. Why should disruptive technologies matter to governments? • Open, close opportunities for local industries, obsolete some, create new ones • Geographically displace knowledge bases of given industries, markets … • May change the rootedness of underlying knowledge, and, hence, the need for knowledge clusters • May call for new knowledge networks, and hence new knowledge “hubs” (co-located core, global links) • May change the social regime of an industry (e.g., from products to networks), and its value creation and value capture points and drivers Professor Y. Doz

19. PixTech: A Metanational Start Up Research & Development Futaba Motorola Raytheon US FinancialMarket TI F.E.D. Alliances Capital Research LETI Materials Tech. PixTech Rhone-Poulenc Nichia Manufacturing Distribution Unipac Sumitomo SAES Getters Professor Y. Doz

20. Small and medium entreprises • What is “selected” by new “disrupted” conditions: - cultural “memes” - strategic initiatives, proposals, commitments - individual firms - networks _Creating an internal strategic ecology does not work when you are small! • Are SMEs more or less adaptive than larger firms? • Can global knowledge prospecting, sensing, accessing and melding be achieved by SMEs? How? • Are networks adaptive mechanisms or straightjackets? Professor Y. Doz