Week 5: Disruptive
Technology and Organization
Innovation
MIS5001: Management Information Systems
David S. McGettigan
Agenda
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Prior Lecture Recap

Disruptive Technology
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Case study: RadioHead
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Next Week
2
Prior Lecture Recap

Web Services



What is a web service?
Why is it beneficial to business?
Standard Messaging

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What is standard messaging?
How does XML enable it?
Why is it beneficial to business?
3
Disruptive Technology
Any sufficiently advanced technology is
indistinguishable from magic.
Arthur C. Clarke
Definitions

Sustaining Technology

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Products advance as rapidly as basic
improvements in science permit and along the
lines desired by the customers of the company
Disruptive Technology

Improves a product or service in ways that the
market does not expect, typically by lowering price
or designing for a different set of consumers.
Source: http://en.wikipedia.org/wiki/Disruptive_technology and http://www.accesstoenergy.com/view/ate/s41p877.htm
5
Disruptive Technology

Characteristics



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Cost - usually simpler and cheaper than the sustaining
technology
Functionality- may offer less capability
Profit - They do not fit the sustaining market and,
typically, provide lower profit margins.
Reaction – (of well established companies) usually
shunned
“Disruptive technologies are often shunned by
well-managed companies - which are often later
destroyed by them.”
Source: http://en.wikipedia.org/wiki/Disruptive_technology and http://www.accesstoenergy.com/view/ate/s41p877.htm
6
Disruptive Technology: Examples
Innovation
Disrupted Market
Personal Computers
Mainframe Computers
Digital Photography
Instant Photography
Plastic
Wood, Metal and Glass
LCD (monitors / television)
CRT (monitors / television)

Corporate Examples

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
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Mobil Travel Guide: now the Forbes Travel Guide – paper vs. online
Speedpass: RFID vs. credit card
Reverse Auctioning: RFP vs. online
Pharmaceuticals – Biosimilars
Discussion question from the assigned reading:

Why are so many web based products “free”?
Source: http://en.wikipedia.org/wiki/Disruptive_technology and http://www.accesstoenergy.com/view/ate/s41p877.htm
7
Case Study: RadioHead

Discussion Questions:


From the perspective of the recording industry (record
labels), what are the advantages and disadvantages of
digital media compared to physical media?
What are the implications for Radiohead’s name-your-ownprice model in the relationships between artists and
consumers, artists and records labels, and consumers and
record labels?

Based on what you learned from this case, do are some of
the challenges and opportunities for constructing a longterm, successful business model for the online distribution
of digital media (music, movies, TV) over the Internet?

NEW: Which model is more profitable for RadioHead, the
iTunes model or their own name your price?
8
Organization Innovation
Civilization advances by extending the number
of important operations which we can perform
without thinking of them.
Alfred North Whitehead (1861- 1947)
Impact of Disruptive Technology
P
Product A

Porter’s Five Forces


Product B
Q
Note the Threat of Substitute Products
Substitute Products
 If Product B is a substitute, what happens to the quantity demanded of

both products if there is an increase in the price of Product A?
What are the implications of this for Product A’s firm?
Source: http://upload.wikimedia.org/wikipedia/commons/6/66/Porters_five_forces.PNG
10
Organizational Innovation

New ways work can be organized, and accomplished within an
organization to encourage and promote competitive advantage.

How organizations and individuals, manage work processes in such
areas as customer relationships, employee performance and
retention, and knowledge management.

Core Concept: the need to improve or change a product, process or
service.

All innovation revolves around change - but not all change is
innovative.

Encourages individuals to think independently by applying personal
knowledge to organizational challenges.

Requires a culture of innovation that supports new ideas, processes and generally
new ways of "doing business".
Source: http://ezinearticles.com/?What-is-Organizational-Innovation?&id=1573028
11
Benefits

Cross functional team building while discouraging silo building

Innovation is about change, therefore continuous learning is a
requirement of organizational innovation success.
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Risk taking by employees while lessening the status quo

Knowledge should be used for new ways of thinking, and as a
stepping stone to creativity and toward change and innovation.

If new organizational knowledge doesn't result in change, either in
processes, business outcomes, or increased customers or
revenues, then its value hasn't been translated into success.

Must deliver value to the bottom line.
Source: http://ezinearticles.com/?What-is-Organizational-Innovation?&id=1573028
12
Process of Organization Innovation

Establish a climate of innovation supported by senior management.

Managers routinely bring together those individuals more oriented
toward innovation those willing to think new ideas and act on them.

Establish a process in place monitoring innovation teams and
identifying what has and hasn't worked as a result of them.

Ensure organization remains focused on it goals yet builds and
develop an innovative culture.

Identify an important variable or ingredient that fuels an organization
toward an innovative culture.
Source: http://ezinearticles.com/?What-is-Organizational-Innovation?&id=1573028
13
Adapting to Change

Change Management – the “change
curve”
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
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Shock
Denial
Hostility
Negotiation
Depression
Trial
Acceptance
14
Discussion

Why do well managed and
established firms often misjudge
the disruptive technology?

Who is responsible for
awareness in the corporate
structure? How is this different
than tech firms?

Example: will subscription
based music work? Why or why
not?

What is Google with subscription
music? What should they do?
What should Sony Records do?
15
Next Week
Enterprise Applications