how can great firms fail
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8/6/2019 How Can Great Firms Fail
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How Can Great Firms Fail?
Presentation by Helge Döring
Insights from the Hard Disk Drive Industry by Clay Christensen
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Presentation by Helge Döring
How disk drives work:
How Can Great Firms Fail?
-A hard disk contains of platters, spindle, engine, actuator arm with a readand write head
-The components above work like a „record player“. Read and writehead on the actuator arm functions like the phonographic arm andneedle of a record player
-Today's engines spin the platters with an average of 10000 rpm(rounds per minute) in 0.05 µm height over the medium
-Binary Data is transferred into positive and negative magnetic force
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0,10
1,00
10,00
100,00
1.000,00
10 100 1000 10.000 100.000Price
perMegabyte
(Con
stant1982D
ollars)
Cumulative Terabytes Produced
Price Development in the Hard Drive Industry:
How Can Great Firms Fail?
Presentation by Helge Döring
1977
AverageComputer
808610 MB HDPrice 6000$
1980
AverageComputer 8028620 MB HDPrice 4000$
1985
AverageComputer 8038640 MB HDPrice 3000$
1990
AverageComputer 80486200 MB HDPrice 2500$
1994
AverageComputer Pentium1 GB HDPrice 3500$
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Presentation by Helge Döring
Price Development in the Hard Drive Industry:
How Can Great Firms Fail?
-The number of megabits (Mb) put in a square inch has increased by 35%per year. From 50 Kilobytes (Kb) in 1967 to more than 1 Gigabyte (Gb) in1995
-Today “seagate” manages to put 100 Gb on one single platter
-With each doubling of cumulative terabytes sold in the marketthe cost per megabyte fell by 53%. That`s an outstanding performanceno where else to be found.
-Dimensions:The average 3.5” Floppy Disk has a capacity of 1.44 Mb or 1.509.949 bytes / 100 Gb equal 107.374.182.400 bytesor 71111 of the above mentioned 3.5” Floppy Disks
-My own 160 Gb Samsung hard disk costs 0,0005$ per Mb ≈ 80$
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1975 1980 1985 1990 1995
10
100
1000
Presentation by Helge Döring
Year
ArialRecordingD
ensity
(Mill
ionso
fMegabitsper
Sq
uareInch
)
Improvements in Recording Density:
How Can Great Firms Fail?
Ferrite-oxide headsThin-film heads
Magneto-resistive heads
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Presentation by Helge Döring
Innovations in the recording industry:
How Can Great Firms Fail?
-In 1973 IBM develops the first hard disk of modern kind; the winchester 14”model based on “ferrite oxide heads”(incremental improvements are made by increasing the density)
-There is no other technique until 1985 when “thin film heads” emerge
(this can be named a radical new technology)-The performance data of “ferrite oxide heads” then is much higher,than the new “thin film heads”, but the last named has much morepotential (incremental improvements vs. radical improvements)
-By 1993 “magneto-resistive heads” emerge and outperform both other techniques after a short while (next radical step up the ladder)
-Today's tests base on glass fiber as the material of the future(a radical innovation again)
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How Can Great Firms Fail?
The technology mudslide hypothesis:
Presentation by Helge Döring
Leading Company
Market
Market development direction
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Behind the mudslide hypothesis:
How Can Great Firms Fail?
-Which companies lead, which stay behind?
-What have the leading companies got that enables them tolead the market?
-Which innovations lead to a revolution in the market (make theestablished firms fall behind and catapult the entrant firms in front)?
-Is market pace or a company’s ability responsible for success?
-Are passiveness, arrogance or a risk-averse strategy the reasons for failure in this economy?
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How Can Great Firms Fail?
Portfolio of the computer and disk drive evolution:
Presentation by Helge Döring
- uses 14“ drive
- later 8“ and smaller
- uses 8“ drive
- uses 5.25“ drive
- later 3.5“
- uses 3.5“ drive
- later 2.5“
Mainframe Computer Minicomputer
Portable / Notebook Desktop Computer
clockwise: the evolution
of the computer
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How Can Great Firms Fail?
Portfolio of the computer and leading disk drive manufacturers:
Presentation by Helge Döring
IBM / Western Digital /Micropolis / Seagate /Fujitsu / Hitachi / NEC
Mainframe Computer Minicomputer
Portable / Notebook Desktop Computer
clockwise: the evolution
of the computer
IBM / Diablo / Ampex /Memorex / EMM/ Wang /Western Digital /Read Rite / Control Data /Burroughs / Univac /
Micropolis…
Quantum / Connor /Maxtor / Samsung /Toshiba / Kalog /Mitsumi / IBM /
Western Digital /Seagate / Micropolis/Fujitsu / Hitachi /NEC
80 ´s90 ´s
Excelstore / IBM-Hitachi /Fujitsu / Maxtor /Samsung / Seagate /Toshiba / Western Digital
At first 129companies
only 20left
l a t e
r
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Boston Consulting Group Portfolio:
How Can Great Firms Fail?
Presentation by Helge Döring
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Disruptive Innovations vs. Sustaining Innovations:
How Can Great Firms Fail?
-Sustaining technologies foster improved product performance(be it a incremental, discontinuous or radical one)
-The disk in focus has a higher density, is faster, but still 5.25” in size
-An established product is being improved by sustaining technology
-Disruptive technologies are sometimes worse than the establishedproduct and under perform them in the near term
-Disruptive technologies are typically cheaper, simpler, smaller and sometimes more convenient to use
-The disk in focus here is smaller (2.5”), slower , needs less power andis used in a completely different market (portable computers)
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Evil Customers:
How Can Great Firms Fail?
-Disruptive Technologies are not wanted by today’s customers, butby tomorrows customers
-The market is usually ahead of customers needs
-Customers want the product they already know
-Markets that don’t exist today can’t be analyzed
-In 1980 a portable Computer wasn’t even in sight, in 2004 it’s a
common good
-If you stick to your customers you might miss the chance to enter tomorrows markets
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Presentation by Helge Döring
Established firms vs. entrant firms:
How Can Great Firms Fail?
Established firms:
Entrant firms:
-are independent-use mostly radical / disruptive innovations (to access new markets)
-have an unbiased outside view of the market
-are responsible for their customers-use mostly incremental / sustaining innovations (to keep customers happy)
-depend on their customers-have only a biased inside view of the market
“If you can’t beat your competitor on his own ground take the battle to
another level!”
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Presentation by Helge Döring
Critical inquiry:
How Can Great Firms Fail?
-129 companies in the past reduced to 20 at present; a familiar processof evolution that can be found in many other industries e.g. Software,Automobile, Brewery Business etc.
-The companies didn’t fade away but merged like Seagate/Connor or IBM/Hitachi (joint venture) or concentrated on different subjects andlater returned to the same market again like IBM, Wang and Mitsumi
-p.21 Quantum is still a significant manufacturer of hard disks and
didn’t perish
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Presentation by Helge Döring
Discussion:
How Can Great Firms Fail?
-Is it so easy to differentiate between disruptive and sustaining techs?
-Isn’t it poor management if you do the same mistakes your competitor did when you overtook him?