The S-Curves and Technological Strategy

Henry C. CoTechnology and Operations Management, California Polytechnic and State University

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Recapitulation Technology -- A process, technique, or methodology

-- embodied in a product design or in manufacturing/service -- which transforms inputs of labor, capital, information, material, and energy into outputs of greater value.

Technology Change -- A change in one or more of the inputs, processes, techniques, or methodologies that improves the measured levels of performance of a product or process.

Many growth phenomena in nature show an “S” shaped pattern -- Any single technical approach is limited in its ultimate performance by chemical and physical laws that establish the maximum performance that can be obtained using a given principle of operation.

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Recapitulation (continued)

Slope of technological trajectory > slope of trajectories of customer need.

Intel: microprocessor speed increases about 20% per year. Eli Lily: Purity of insulin improved from 50,000 ppm in 1925 to 10

ppm in 1980 (by about 14% per year). Manufacturers of hydraulic excavators increased by 15% per year

the amount of earth their machine could heft in a single scoop; from 0.25 cubic yard in 1948 to 10 cubic yards by 1974.

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Component v. Architectural-Design Improvements Engineers manage improvements in overall

product performance: by interactively affecting the capabilities of

components, and by refining or overhauling the product’s

architectural design. To keep up with the industry’s pace of

improvement, technology managers monitor improvement trajectories of present and potential architectural technologies and the extent to which individual component technologies constitute actual or potential bottleneck.

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A Relative Concept A read-write head can be viewed at one level

as a complex system architecture, comprising component parts and materials that interact with each other within an architectural design.

The head is a component in a disk drive. The disk drive is a component in a computer,

in which a CPU, semiconductor memory, rigid and floppy drive, and I/O peripherals interact within a design architecture.

The computer a component in an information-processing system architecture.

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Read-Write Head (Disk Drive) Technology Substitution

First Technology: incremental improvements to the original ferrite-head/oxide disk technology enabled manufacturers to grind the heads to smaller, more precise dimensions.

Second Technology: thin-film photolithography displaced ferrite-heads in most disk drives between 1979 and 1990.

Third Technology: magneto-resistive heads.

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Prescriptive S-Curves Strategy

Becker & Speltz (1983), and Foster (1986) urged strategists to track S-curves and to acquire or develop new technologies in time to switch to it when its performance surpasses the capabilities of the present technology.

Hypothesis 1: The industry’s leading incumbent firms were generally more aggressive in switching to new component technology S-curves, but there is no evidence that they gained any sort of strategic advantage.

Hypothesis 2: In the disk drive industry, the technological change in which attackers (first to switch S-curves) have demonstrated strategic advantage have been architectural in nature.

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Hypothesis 1 Ferrite/oxide technology S-curve

Disks coated with microscopic particles of magnetic metal oxide.

Efforts to improve density within the particular oxide approach involved making the particles smaller and more uniform and dispersing them so that the maximum possible surface area on the disk was coated with magnetic media.

Thin-film technology S-curve When disk engineers felt they had reached the limits of

fineness, uniformity, and dispersion, they turned to thin-film deposition technology, attempting to coat substrates with extremely thin, continuous coatings of metals.

Fujitsu and Control Data Corporation (CDC) launched development efforts to switch from the ferrite/oxide S-curve to the thin-film technology S-Curve in 1980 and 1977, respectively.

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S-Curves For Ferrite/Oxide Technologies at Fujitsu and CDC

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Little Evidence That First-Movers Enjoy Sustained Advantages.

Actual or perceived limits can be circumvented through advances in less mature elements of the product’s design. Since thin film deposition technology was not quite

ready yet when CDC and Fujitsu launched the development efforts of thin film technology, both firms pushed the ferrite/oxide technology to about 3 times the original perceived limits.

IBM moved to thin film technology at 3.5 mbpsi in 1979. Hitachi and Fujitsu rode the ferrite/oxide technology S-curve far longer (1987) and achieved 27 and 30 mbpsi respectively.

IBM, Memorex, Storage Technology, NEC, CDC, and Rodime switched to the thin film technology S-curve early, but there is little evidence that these firms enjoyed sustained first-mover advantages.

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From Ferrite/Oxide to Thin-Film

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From Ferrite/Oxide to Thin-Film (continued) Order of Adoption of Thin-Film Technology Versus Areal

Density of Highest Performance 1989 Model.

The combined share of the total world market held by the early adopters of thin-film technology fell from 60% in 1981 to 37% in 1989.

The firms that switched later (Priam, Micropolis, Miniscribe, Seagate, HP, Quantum, Toshiba, Hitachi, DEC, and Fujitsu) saw their combined world market share rise from 10% in 1981 to 33%.

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Hypothesis 2 When new architectures emerged in the disk drive

industry, entrant firms and first movers that adopted the new technology early enjoyed a decided advantage over industry’s incumbent firms and generally were able to ride the new architectural technology to positions of industry leadership.

Between 1973 and 1990, five successive architectural technologies emerged in the disk drive industry: 14-, 8-, 5.25-, 3.5-, and 2.5 inch diameter Winchester drives. The drives have become smaller, with less parts per unit.

The advent of new architectural technologies in disk drives precipitated the downfall of the industry’s leading firm.

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Leading Firms Downfall CDC, the dominant 14-inch producer in the OEM

market, was upstaged by entrants Micropolis, Priam, and Shugart in the 8-inch architecture.

Seagate, Miniscribe, and Tandon entered to dominate the 5.25-inch generation, eclipsing the former leaders.

Conner Peripherals and Quantum achieved similarly dominant positions in the market for 3.5-inch drives relative to the leaders in the in the 5.25-inch architecture.

Why were the established drivemaker able to lead the industry in developing component technology, while they were dethroned at points of architectural technology change?

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Architectural Innovation The principal customers for the 14- and 8-inch

architectures were makers of mainframe and minicomputers, respectively. Performance measures: total capacity and access time. The 5.25-inch drives that emerged in 1980 had capacity

of 5 mb and access time of 160 ms. The 14- and 8-inch drives had capacity of 100-500 mb

and access time of 30 ms. Industry leaders focused on component-level

improvements that drove performance within the 14- and 8-inch architectural framework.

Along other dimensions of performance (capacity per cubic inch and cost), 5.25-inch drives was superior. In the emerging market application for disk drive (the

desktop PC), the new dimensions of performance measures were important.

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Architectural Innovation (continued) Once the new 5.25-inch architectural technology became

established in its new market, the 5.25-inch drivemakers found they were able to increase the capacity and speed of their drives at much faster annual rates than were demanded in the desktop market. Within a few years, 5.25-inch drives became able to compete with earlier-architecture drives in the minicomputer and mainframe markets on the original bases of performance measures (total capacity and access time).

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A Different S-Curve Model of Architectural Innovation

The new technology (2) is deployed in a new application (B) wherein performance is defined differently than it had been in the established market, Application A.

Technology 2 is in fact the superior performer in Application B and achieves a measure of commercial maturity there.

At some point in this progression the new architecture becomes capable of addressing the performance demanded in the original market more effectively than the established technology.

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Intersecting Performance Trajectories of Successive Disk Drive Technologies

Average areal density of all models introduced, in millions of bits per square inch. Bold entry indicates year in which the architecture captured over 50% of total industry shipments in 30-100 mb drives. Underlined entry indicates year in which the architecture captured over 50% of total industry shipment in 100-300 mb.