Technology as a strategic factor which helps in the development or dismissal of subsequent firms - Essay Example

?Strategic Management Contents Contents 2 Introduction 3 Concept of Disruptive Innovation 4 Disruptive Innovation and Organizations-Some Cases 7 Countering Pitfalls of Disruptive Innovation 12 Conclusions 12 References 14 Introduction The study of the causes for the failure of many successful firms is found to be increasingly related with the technological concept in use with such concern. Technology as a strategic factor which helps in the development or dismissal of subsequent firms can be studied mainly under two heads. Depending on the attributes of the technological concept in use they are divided into either sustainable or disruptive forms. It is observed that those technological concepts which help in the development of existing business processes and thereby augments the quality of products or services are mainly sustainable in nature. These set of technologies however are found to be either of continuous or of discrete nature. Thus the sustaining technologies are those which help to augment the value of the products produced in the market. However in the course of rendering innovations a second set of technological system emerge which is found to undervalue the performance and value of the products produced. These disruptive set of technologies are thus found to produce products which are relatively cheaper and are found in a frequent manner in different locations. Many examples of disruptive technologies can be observed along sectors like motorcycles where the former powerful Harley-Davidson bikes became increasingly replaced by more cheaply and increasingly available bikes like Yamaha and Honda. The concept of disruptive innovation is considered to undervalue the firm’s position for the features of the products produced are such as could be only marketed in developing markets and being cheaper render low margins to the operating firm. Thus such innovations brought about also invite low amount of investments to the companies (Christensen, 1997, p.15-17; Schwartz and Gorostiza, 2000, p.3). Concept of Disruptive Innovation The concept of disruptive innovation as rendered by Clayton M. Christensen is found to be dealt mainly on two aspects. He observed the emergence of disruptive technologies mainly along two ends-disruptions based along low ends and that emerging out from development of new markets. The first set of disruptive technologies is found to produce products which are much cheaper than those produced out of traditional technologies. Further adding to the cheapness of the product the usage of the same is also found to catch a simplistic note which is a little complex than such produced out of existing technologies. Hence products produced out of such disruptive technologies are generally found to gain market in lower economy areas. The second set of disruptive innovations is noted as such as would focus on the creation of new markets for the products which fail to be consumed by the existing market. Further such disruptive innovation helps to create a market for such people who fail to get used to the usage patterns of existing products. Thus this type of innovation helps to create a niche market for the products which were previously regarded as inconsumable. The reason for disruptive innovation practices for producing products at lower ends of the market as bringing in a holocaust for the manufacturing firm can be analysed as follows. It is found firstly that firms tend to invest more on products which are produced through the means of efficient technology and thus are expected to fetch higher returns for the company when being sold out in the market in large scales for their increasing demand. However it must be considered that the pace of emergence of new technology is much faster than that of the growth of market demands for the products. Thus secondly when the products produced out of disruptive innovation practices are rendered in the market in a spontaneous fashion the demand for such also starts rising. To this end it is found that the concern is not in a position to make considerable investments to produce more products out of disruptive innovation as the maximum amount has been expended on the former ones. This fact leads the firm to face considerable business losses for not being able to meet the demands of the consumers (Lee, 2010, p.1; Zhang, n.d.). The above fact can be diagrammatically represented as follows. Figure 1 (Source: Kameda, 2004, p.9) The second type of disruptive innovation reflected by Christensen also leads to the undervaluation of the products produced by the company for the existing markets. This type of disruptive innovation focuses on the development of new market zones in parlance with the existing market for products which were previously were not accessible by the consumer profile dwelling in the newer market zones owing to factors like cost, increasing complexity and the distance. Thus these products produced for the newer markets are found to be much cheaper and quite simpler for the people to effectively make use for meeting their needs. Further the scope of accessibility of the same enhanced helps the people to get a feel for such. However in catering for the low profile markets it is observed that such products move to reduce the earning of margins by the concern and also devalue the performances of the previous ones. Still such disruptive innovation helps to render a battle against the nonconsumption patterns found earlier (Kameda, 2004, p.7-12; Slater and Mohr, 2006, p.26). A diagrammatic representation of the same can be given as follows. Figure 2 (Source: Kameda, 2004, p.11) The concept of Disruptive Innovation is found to bear a strong linkage with the enhancement of the competitive position of the company amidst its several competitors. It is because the main tenets of disruptive innovation linkages with the reduction of the price of the products produced and also reduction of the complexities ingrained with the product. These two facts both help in creating large scale differentiation both in regards to the cost factor and also in regards to the product attributes. Differentiation rendered in the product attributes makes them act as category killers reducing the markets for the existing products and also creates a market for the simpler products. Thus the above facts help the firm to gain considerable competitive advantage of its competitors. Again the process of disruptive innovation helps the company to segment the total available market into areas which would help in the sales of such disruptive products. Thus the concept of disruptive innovation also helps to enhance the potential of the market by duly segmenting it (Acce, 2001, p.51-52). Disruptive Innovation and Organizations-Some Cases The concept of disruptive innovation being discussed further focus is rendered to the situation where such innovation was practiced in leading organisations. To this end, the case of Motorola can be evaluated which used to render highly efficient and scientifically complex gadgets for usage in regards to space and communication technologies. These products also helped the company in the initial stage to gain huge amount of market revenues and paved the way to leadership. Further the company decided to venture into the market of wireless communications where also in the initial stage the company produced mobile gadgets which were quite heavy and operated at around 400MHz. However it was noted by a person in the consumer research division of the company that such mobile gadgets failed to render any type of diverse applications. Thus the consumer research team of the company started working on new product paradigms which would work as radio-mobile sets and cater to the developed demands of the market. However the communication manger of the concern regarded such initiative as a considerable wastage and thus did not cater to rendering of significant investment in that direction. However later on during the 1970s it was found that market demand for the previous mobile gadgets were seemingly falling which required the introduction of the new ones. It was found that the later introduction and failure to render considerable investment failed to make a potential stand for the cellular products produced by Motorola than that of its competitors like Nokia. This is a clear example of disruptive innovation in which Motorola because of its failure to visualise the future of mobile gadgets had to face considerable market losses. Another case of disruptive innovation is reflected in the case of IBM. It is found that the endeavour of IBM to venture into the market for the preparation of Personal Computers whose market was mainly covered up by companies like Apple called for a significant failure. Thus the Chief Executive Officer of the company decided to engage its production staffs to produce the same type of personal computers as produced by Apple. However to his utter dismay he found that the personal computers produced by IBM failed to meet the demands of the market for being considerably highly priced than produced by Apple. Howsoever trials were run IBM still failed to capture the consumer hype. Still the chief executive officer carried on with his plans and thereby worked for the creation of a separate computer making unit which would focus on the development of low priced and simper products. The product manager of this team however to produce such cheap products largely took the help of companies like Intel and Microsoft to help in the assembling of the same. Personal Computers produced by such means reflected a large market hype making the company sales earn considerable numbers. To this end the company head again decided to draw the production system of such products in the mainstream of IBM. This decision failed to render any significant impact wherein the companies like Microsoft and Intel went on to cover the market space in a significant manner. The decision failed to gain a stand for the production team at IBM considered the production of Personal Computers as an example of disruptive innovation for which they did not desire to relegate the technical resources and expertise of the company in such matters. This fact shows how the market leadership of IBM was gradually taken over by other firms like Apple, Microsoft and Intel in the field of generation of markets for Personal Computers. Citing another case of disruptive innovation the case of Kodak Films can be evaluated. The Chief Executive Officer of this company like the former companies studied like IBM and Motorola also envisioned moving into the realm of digital technology than depending on the films for the production of photography. This vision was gained owing to the increased threat of the film market being ruled over by the digital technology. To this end the chief officer of the company desired to gain the expertise of a person worked in the digital industry. However it was found that shifting over to the production of films using the digital interface countered large problems for not being able to get imbued within the existing organisational culture. Focusing on this problem the company head along with the expert person decided of taking over other firms who are efficient in the production of digital films. This practice gained a practical note with the taking over of a firm producing digital imagery for medical purpose. Further the company also engaged Intel which has gained considerable expertise in the realm of digital film production. However these endeavours were found to be conducted in the backroom of the company without informing the team members. Even the allocation of financial and technological resources in such direction was made on a secret note. This reveals that it was difficult for the Kodak Chief to ingrain such business practice into the main routine of the business and was carried out largely in a secret manner. Thus though the production of digital films gained huge appreciation yet the main problem of the management team was rolling out such in a routine framework of the concern. Hence owing to disruptive innovation the product failed to gain considerable hype and was considered as a normal product of the company (Macher and Richman, 2004, p.10-18). However it is also observed in this direction that the concept of disruptive innovation is quite relative in nature. It is observed that innovation strategies which were considered to be disruptive for one company were considered sustainable for the other. In this note it is found that the development of internet turns out to be sustaining for Dell while it turns disruptive for Compaq. For Dell the use of internet helps to gain large amount of consumers while in case of Compaq the use of internet is found to increasingly dilute the value of the products produced by Compaq (Kim, 2008, p.13). This can be shown diagrammatically as follows. Figure 3 (Source: Kim, 2008, p.13) In regards to Toyota it is found that the introduction of the Corona model in North America considered as an activity of disruptive innovation rendered huge impact in eating up the margins of the company for gaining increasing competition with other players in the Honda and Nissan. Thus to counter the threat of falling margins the company further focused on production of high priced models like Camry and Lexus. Though the latter activity had an impact on the operational cost yet gaining market through disruptive innovation helped to gain more profits and en enhanced market base (Christensen and Overdorf, 2000, p.69; Christensen, 1999, p.3). Countering Pitfalls of Disruptive Innovation The main policy actions that can be taken by the company management to counter the pitfalls of disruptive innovation is that essential markets should be created for the products that are countered to be produced on a disruptive innovation note. This fact would help the company to get potential revenues from the development of the new markets focusing more on a niche customer base constituted by low profile people. Again the company must also envision setting aside large amount of funds which would help in the considerable production of large volumes of such products counted on disruptive innovation. Further the company management needs to render large amount of encouragement for the production of such products through disruptive innovation system (Kim, 2008, p.20). It is observed that the introduction of disruptive innovation systems by the company managers face large amount of conflicts from the internal sphere. The best strategy that the firm can adopt to counter such strategies is to create huge amount of awareness for the same in the mass market so that a tornado of demand can be generated for the same. This tornado would help to cause a shift in the market paradigm as consumers would be observed to reflect a feeling for gaining possession of the new product duly introduced. The above strategy would thus help the internal people to get motivated to produce such products without any conflict (Thomond and Lettice, 2002, p.3; Christensen, Raynor, and Anthony, 2003, Christensen, 2001). Conclusions The emergence of Disruptive Innovation is considered as harmful to the healthy operation of a business organisation for it tends to lower down the prices of the products and undervalues such by making its use simpler. The above fact deters investors from rendering money to the development of such for they consider such products as would affect the margins of the firm. However such products are found to enhance the competitive advantage of the firm in that it helps the company in creating a niche market and also enhance the competitive advantage of the company through the differentiation mode. 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