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Big Bang Disruption

ACHE of MassachusettsMay 2013

Pinball not only survived the early period of arcade video games, it thrived…

New Wizards Flipping Out Over PinballPinball is back, after nearly dying in the mid-'80s as video games took over. In 1983, pinball accounted for only 5 percent of the amusement industry market. But by 1990, the number had jumped to 30 percent.March 10, 1994, San Francisco Chronicle

Units, hundred-thousands

Full-Tilt Comeback

“…I've played video games, but I like pinball

more… Sooner or later, you grow out of video

games. You never grow out of pinball.".

April 28, 1995, Tampa Tribune

Copyright © 2013 Accenture All rights reserved. 2

…but then along came a Big Bang Disruptor…

Pinball Units Sold(Hundreds of Thousands Per Year)

Playstation™ Units Sold(Millions Per Year)

1989 1992 1995 1998 2001 2004

0

0.5

1.0

1.5

0

10

20

30


…and then another appeared in travel…

Thousands Millions


… and another wiped out newspapers

Ad Revenue, $US, billions


Some examples by industry

• Manufacturing – The “Internet of Things” drives the supply chain from the bottom

• Health care – Biometric sensors demystify the shamanistic myth of medicine

• Finance – Money becomes just another form of information

• Government – Market pricing for public services

• Consumer Products – Market-led marketing takes over

• Energy – Practical fuel cells…launched on Kickstarter

• Education – The virtual ivory tower revolutionizes learning

• Utilities – Portable electricity networks mirror wireless communications

• Pharmaceuticals – Bespoke drugs based on your DNA

• Retail banking – The end of cash

• Retail – The disruptive force of the sharing economy

Where can we expect Big Bangs?


Disruption pending in the healthcare industryAdvances in telecommunications, precision diagnostics, and information management and decision-making tools could result in a variety of disruptions:

Where can we expect Big Bangs in healthcare?

Copyright © 2013 Accenture All rights reserved.Adapted from David Chase’s Forbes article “Healthcare CEO’s Guide to Avoiding Newspaper Industry Mistakes”

New curve of market adoption of innovation

Innovators(2.5%)

Early Adopters(13.5%)

Late Majority(34%)

Laggards(14%)

Early Majority(34%)

Trial Users

Everybody else

Big-Bang Market Segments


Three key characteristics of Big Bang Disruption

Time

Mar

ket

Penet

rati

on

Unencumbered Development

Undisciplined Strategy

Unconstrained Growth

Traditional Technology Product Adoption

Big Bang Disruption

9

Undisciplined Strategy: You can’t beat it

• BBDs begin life with better performance, lower price, and greater customization.

• Customers now expect new products to be better and cheaper.

• In fact, BBDs rarely come from traditional competitors – many are never intended to compete directly with the incumbents they disrupt.


Standalone GPS

•$100 - $300

•Intermittent update

•Little to no real time context

Smartphone Nav App

•Free

•Real time updates of data and software

•Integrated with contacts and search

How Google Maps Navigation Beta “Big Bang” disrupted personal navigation devices

“There’s been no market impact on the demand for standalone GPS devices”

- TomTom SVP regarding the smartphone market, in 2010

$US millions


They disrupt without even trying

From 2010 to 2011, TomTom’s:

•sales declined by 29%

•stock lost 60% of its value

•market cap fell from $2.3 billion to $1.3 billion

Technology costs are declining logarithmically, and it’s not just Moore’s Law


Cost of 1 GB of data storage

Cost of 1 MIPs of mainframe computing power

Cost of 1 Mbps of data transfer

How can something be better and cheaper?

How can something be better and cheaper?

When technology-driven deflation is greater than innovation costs

Deflationary pressures on innovation:

•Crowdsourcing

•Open source communities

•Open innovation

•Open markets

•Nonstop seamless channels

•Crowdfunding

Deflationary pressures on costs:

•Moore’s Law effects on

– Core technologies

– Sourcing

– Manufacturing

– Distribution

– Selling

– Servicing (!)

– Other costs


Innovation costs = technology savings

Better, but more expensive here

Better andcheaper here

Per unit cost of innovation

Per unit cost of technology

TimeCost

+

-

14

Four eras of disruptive innovation theory

Copyright © 2013 Accenture All rights reserved.

Blue Ocean Strategy

Big Bang Disruption

Innovator’s Dilemma

Traditional Product

Innovation

Unconstrained Growth: You can’t stop it

• Near-perfect market information eliminates market segmentation –there are only “trial users”and “everyone else”

• Unconstrained growth causes once-healthy businesses to die off almost overnight.

• Uptake and abandonment slopes are nearly vertical.

* Estimated based on annual report unit sales and revenuesCopyright © 2013 Accenture All rights reserved. 15

The shifting model of innovation adoption and industry change

Old Model of Industry Change New Model of Industry Change

Perf

orm

ance

Time

The Innovator’s “Dilemma Zone”

“Sudden Death” Line

Big Bang“Disruption Zone”Big Bang disruptors demolish industries before S-curves have reached maturity.

Perf

orm

ance

Time


Unencumbered Development: You can’t see it

• BBD innovations are born of rapid, low-cost experiments in the market, and use ubiquitous platforms.

• Failed experiments are conducted cheaply and quickly, built on the Internet, cloud computing, and fast cycling mobile devices.

• When the winning BBD arrives, its succeeds suddenly.

20031993 1996 19991998

20071992 1998 20062004

Napster

iTunes Music StoreInternet

Underground Music Archive

Ritmoteca.com, eMusic

Cductive

Kindle™Expanded

books

Rocket eBook, SoftBook

Librié

iLiad, Reader


Big Bang Disruption upends conventional wisdom

Conventional Wisdom Big-Bang Wisdom

Focus on only one strategic “discipline” or “generic strategy” – low cost, product innovation, or customer intimacy.

First target a small group of early adopters and later enter the mainstream market.

Seek innovation in lower-cost, feature-poor technologies that meet the needs of underserved customer segments.


The New Shape of Diffusion


The accelerating pace of Nintendo® game systems

Nintendo Console Sales: Accelerating Sales, Accelerating Declines


Four stages of Big Bang Disruption


1. See it coming

2. Slow innovation long enough to better it

3. Get closer to the exits, ready for a fast escape

4. Try a new kind of diversification

Strategic Imperatives by Stage

SingularityBig Bang

BigCrunch

Entropy

SingularityBig Bang

BigCrunch

Entropy

Some strategy implications by stage


Risk Management

No prize for second place

Catastrophic success; business interruption in supply, delivery

Instant obsolescence; return on residual assets (RORA)

How to win the endgame

Pricing Design to a target price

Exploit optimal market-saturating prices

Discount to create optimal competitor delay and profits

Return to pricing power as last player standing

M&A Even-more-openinnovation

Optimize virtual and vertical integration

Partners to collar risk; strategic abandonment

Consolidation in the endgame

EntropyBig CrunchBig BangSingularityStrategy

Stage

Disruption pending in the healthcare industryAdvances in telecommunications, precision diagnostics, and information management and decision-making tools could result in a variety of disruptions:

Where can we expect Big Bangs in healthcare?

Copyright © 2013 Accenture All rights reserved.Adapted from David Chase’s Forbes article “Healthcare CEO’s Guide to Avoiding Newspaper Industry Mistakes”

Questions


For more details about this report go to:

http://www.accenture.com/us-en/Pages/insight-surviving-big-bang-disruption.aspx

DISCLAIMER: “This document makes descriptive reference to trademarks that may be owned by others. The use of such trademarks herein is not an assertion of ownership of such trademarks by Accenture and is not intended to represent or imply the existence of an association between Accenture and the lawful owners of such trademarks.”

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About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.

About the Accenture Institute for High Performance

The Accenture Institute for High Performance creates strategic insights into key management issues and macroeconomic and political trends through original research and analysis. Its management researchers combine world-class reputations with Accenture’s extensive consulting, technology and outsourcing experience to conduct innovative research and analysis into how organizations become and remain high-performance businesses.

Copyright © 2013 Accenture All rights reserved.

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