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With the theory of disruptive innovation companies either find themselves either in sustaining circumstances and disruptive circumstance. When a company is sustaining circumstances they are developing innovative products that help increase the profit margins of their company. This can be gradual company progression, or ground breaking innovations that puts them ahead of the game, which is done to build a better product that can be sold for a higher profit (Jelassi, & Enders, 2008). Like Apple and its iPhone, its debut was grand with long lines awaiting a new product produced by apple. Its hay day was grand and sell were extreme making the company great profits. This would fall under a grand breaking innovation by Apple. We are currently at iPhone 4, which has the latest upgrades, more expansion and capability. This would be the gradual company progression (Preston, 2010).
When a company is focusing on disruptive innovations they are not focused on bring better products to existing high-end consumers, rather they usually tend to be significantly worse in the performance dimensions that traditionally were important in the industry. They usually focus on simplicity, convenience and lower prices, focusing on the less demanding customer (Jelassi, & Enders, 2008). One of the new products are the iPads for reading books in an easier cheaper way then off your computer. IPad's cost close to $500, making it more a sustaining circumstance, but other companies are making the disruptive innovations, by offering a cheaper product for those that wouldn't spend the $500 for the iPad (Gruener, 2010).
Essay Question 2 Why did Intel develop the Celeron chip? Can you explain this decision using the disruptive innovation logic?
The disruptive innovations for Intel were to develop an inexpensive chip in order to influence those consumers that were seeking a lower priced computer. They were not focusing on bringing a better product into existence but rather they to produce a product into the market to bring the focus on simplicity, convenience and lower prices, focusing on the less demanding customer (Jelassi, & Enders, 2008).
Intel developed a Celeron chip over the more powerful Itanium, because it delivered surprising bang for the buck, and consumed only 35 watts of power when running flat out. It didn't take off like they had thought due to people feeling that the performance of a Celeron was a disappointment, it was nothing new and it also came with problems. In order to bring it back to a possible product contender they realized that they had to clear out all the broken links, invalid paths, obsolete start-up items and auto-run programs that have accumulated in the operating system's internal database. The computer industry expects tune-up software to emerge as a whole new product category allowing the Celeron to make a comeback (Plugged up Tech., 2009).
My son is computer expert, and read the reviews of the Celeron when it came out. Like the article above he stated that it wasn't worth the money, due to the problems that it appeared to have. We against my sons reasoning bought a computer that was inexpensive with a Celeron chip and should have listened to my son. It was down half the time, making it not worth the savings of the computer.
Essay Question 3 consult www.innosight.com for up to date research findings and practical implications of the disruptive innovation theory. Report your findings.
A business model is nothing else than a representation of how an organization makes (or intends to make) money." This article defines a little more by stating a business model has to specify more than just how a company intends to make money. It also needs to include some information about why a customer would ever want to give the company any money (Johnson, 2010).
This article asks a series of questions one of them is, why would someone want to buy something from you? They answer this question suggesting that a company create a customer value proposition (CVP). This is done to identifying not only why they would want to buy it but also why they would want to buy it over the alternatives that they can buy instead. The next question is how will you make money selling it? To do this you need to specify your profit formula. You could do this evaluating the price minus your costs. The next question was what are the important things you need to do to pull off the plan? A company can do this by identifying which company resources and which processes are essential to delivering the customer value proposition.
This article claims that by following this framework you will become more efficient by employing certain key resources effectively through certain key processes. If you do you will go a long way toward understanding why your company is successful in what its doing. This review was simple and easy to figure out. When we were going to buy a business we went through a series of questions similar to these are realized that to bring it up to the point of making money would be more expensive when what the business was worth.
Essay Question 4 List the main cognitive frames that companies can adopt when facing a disruptive innovation? Why are these cognitive frames contradictory in nature?
The cognitive frames are made up of two opposing sides, one is framing during resource commitment and the other is the framing during implementation. Both of these frames have threat and opportunity which can be accomplished during the commitment and the implementation. When the threat of both commitment and opportunity are aligned, it is said to be a rigid plan with a high commitment. When the threat of implementation aligns with the opportunity of commitment it is also a rigid plan with a low commitment. When the threat of the commitment aligns with the opportunity of implementation it is said to be a flexible plan, with a high commitment, and when the opportunity commitment meets up with the opportunity of implementation it is said to be a flexible plan with a low commitment.
A company that is in an implementation process would also have to focus on the needed resources. Without one you can not have the other successfully. A OptumHealth was implementing the contract they tried to remain flexible in order to find the problems at hand, as well as the needed open communication of the problems that would occur with any new system. They tried to have the opportunity in both the implementation as well as the commitment. This helped in some areas, but without a rigid process to handle the communication and show that they were working and process through it they weren't able to manage the threat of complaints to the state. That put OptumHealth into a serious crisis mode, which the focus then turned to threat on both commitment as well as a threat in the implementation, which in turn went form one corner of the cognitive frames to the drastic opposite as they worked through the crisis mode.
As stated in the book, a mental frame is used that focuses primarily on the opportunities that are opened up by the disruptive technology, there will be plenty of freedom for line managers to experiment with innovative ideas, but in order to get resources moving it becomes difficult. On the other hand a mental frame focusing on the threat is used the importance of technology will be higher. But because of the importance of technology centralization of decision making and lack of experimentation will result in a poor implementation within the corporation (Jelassi, & Enders, 2008). This is exactly what happened to OptumHealth, their technology failed to perform leaving the ability to be flexible behind to move into a crisis mode to pick up the pieces.
Essay Question 5 Go to www.innovationzen.com where they provide a detailed overview of different management theories dealing with innovation. Give you report
The Teece Model was written by David Teece and he clarifies that two factors, imitability and complementary assets have a strong influence in determining who will ultimately profit from innovation. Imitability refers to how easily competitors can copy or duplicate the technology or process underpinning the innovation. There are many examples of barriers a company could use to protect itself from imitation, including intellectual property rights, complex internal routines or tacit knowledge (Teece, 2006).
Many products that are introduced to the market are quickly copied and are pushed out by competitors. An example would be the iPad, the imitations are hitting the market as quickly as they care be produced, and using their complementary assets they appropriated all the profits of the segment. Complementary assets, therefore, are equally important. They include any activity that gravitates around the core innovation such as distribution channels, reputation, marketing capabilities, strategic alliances, customer relationships, licensing agreements, among others (Teece, 2006).
Analyzing the two dimensions we conclude that if imitability is high and complementary assets are freely available or unimportant it will be difficult to make money out of the innovation. If instead complementary assets are tightly held and important and imitability is once again high, the holder of such assets will be the one profiting on the innovation, independently of who developed it like in the iPad case. If imitability is low the innovator will find him in a much better position. When complementary assets are not controlled by other economic actors he will be able to collect most of the profits being generated. When, on the other hand, complementary assets are important and tightly held negotiation will take place, profits will be shared in proportion to bargaining power of the parts involved (Teece, 2006).
The Teece model can be used not only to predict who will profit from an innovation but also to understand what company will have higher incentives to invest in certain innovations. The threat of imitation and the importance of complementary assets had already being used under other frameworks, but usually they were employed individually or were used to dissect the overall market structure and not the innovation dynamics. The major flaw one can find with this theory is the lack of empirical evidence, which results from the difficulty to isolate the imitability and the complementaity effects from other factors (Teece, 2006).
The man that made the wall walkers made a statement, anything that you make can be copied and the copy right is easy to get around. So if you want to put out a product, start out big, give it all you got, and see how quickly a copy cat will follow. This model tries to figure out the inevitable imitations of products. It has great idea's and thoughts that a company should think about, prior to the release of a big product, but like the wall walker, it doesn't take long before someone copies it and the competition has begun.