Ever wondered what disruptive innovation is all about? It is not about web services, it is not about digital, (even though it could be!) but rather about gross margins and growth opportunities.
4. During the 50ies the first hydraulic operated
excavators entered the market
5. Only four dominant players in the cable operated
business still exists today…
…while all current dominating companies were entrants to the business in the 50ies!
7. The logic was that ”The bigger the bucket, the
better the excavator!”
Bucket size
Product performance
Time
8. The new kind of excavator did not fit the current
market place very well!
Less suitable for
Small bucket heavy duty work
Smaller body
Relatively robust
Relatively weak
More manouverable
…But that does not mean that it was sub par, just that it was different from status quo!
9. The market for the different types of companies
was essentially very different
Market for cable operated Market for hydraulic
• Big building sites • Small building sites
• Earthmoving • Garden work
• Mining • Ditching and och drainage
• Road work • Private users
• …. • …
Characteristics of business Characteristics of business
• Bulk sales • Sales of individual machines
• Whole sales towards big end users • Retail sales
• Big customers preferred with • Rental based
• Big volumes and big margins • Small customers with
• Economies of scale • Low volumes and low margins
Why on earth would you ever wanna go into the hydraulic market?
10. Because market characteristics are not static and
neither is the performance disruptive technology!
Bucket size
Hydraulic excavators Cable operated excavators
Need for ”high-end” users
Need for mainstream users
Product performance
Need for locala contractors
Need for private persons
Hydraulic excavators
Time
11. Why didn’t the incumbent companies manage to
transition into the new technology?
By using the RPV framework do describe why companies act in a specific way we can understand this better
Impact on decisions
Values
and capabilties
Processes
Resources
Difficulty to change
12. Values define the common sense for investment
decisions within a company
There are two main parameters that a company
consider before making an investment
Gross Margins
Growth volume
13. Values define the common sense for investment
decisions within a company
There are two main parameters that a company
consider before making an investment
Gross Margins
Incumbent technology
Incumbent
overhead
Incumbent costs
gross margins
Net margins
14. There are two main parameters that a company
consider before making an investment
Gross Margins
Disruptive technology
Disruptive
overhead
Disruptive costs
gross margins
Net margins
15. There are two main parameters that a company
consider before making an investment
Gross Margins
Combining disruptive technology gross margins with incumbency
overhead costs creates a net loss rather than a profit
Incumbent Disruptive
overhead gross margins
costs
Net loss
When considering disruptive technologies incumbent companies will not see the benefits
16. Values define the common sense for
investment decisions within a company
There are two main parameters that a company
consider before making an investment
Growth volume
Disruptive technologies can’t fulfill the growth need for a big company
Demanded
revenue
growth
Incumbent
current
revenue
Disruptive revenue
possibilities
Disruptive
current revenue
17. Incumbent companies do not have
the values to invest in disruptive
technologies due to the very reason
that makes them succesful!
18. Some Swedish disruptors
• SKF Förlänger livstiden 2000 ggr!
• IKEA Skär bort något som ansågs nödvändigt
• HM Prefabricerar istället för individuellt
• Claes Ohlson Någon som sett några järnhandlare nyligen!
• Skype Prata gratis!
• The Pirate Bay Skall vi byta grejer med varandra?
19. Examples of possible disruptive innovations
Incumbent technology Disruptive technology Affected industry
Software sector
Installed office software Online cloud applications
20. Examples of possible disruptive innovations
Incumbent technology Disruptive technology Affected industry
Telco sector
Proprietary operator centric Open source user centric telco
telco model model
21. Examples of possible disruptive innovations
Incumbent technology Disruptive technology Affected industry
Fredrik
Kansli
Public sector
Sjukvård Skola Polis
Department centric public Citizen centric public services
services
Editor's Notes
The resources that reside within a given organisation. Could be people or any other type of resources. Could rather easily change to manufacture and sell new type of technologyHow resources interact in order to perform the activities needed to add value. Not as easy to change as resources. Processes in place to sell new technology probably not in placeValues define the common sense in investment decisions within a company, i.e. what is worth doing and not. Values define what a company can do but more importantly, what it can not do
The growth problem: The bigger the company, the bigger NEW revenuestream must be addedeveryyear to ensure the demandedgrowth from shareholders. This leads to lowacceptance for investements with lowprojectedvolumes