Disk Drives

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Case Study
on
Disk Drive Industry
Adapted from
Clayton, M. Christensen,
The Innovator’s Dilemma:
When New technologies Cause Great Firms to Fail,
Harper Business,
2000.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
1
Primary Components of a Typical Disk Drive
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
2
Brief History
• 1952-56: IBM’s San Jose research
laboratories developed RAMAC (random
Access Method for Accounting and Control)
which was the size of a large refrigerator
incorporating 50 disks of 24 in. size. Total
storage 5 MB.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
3
RAMAC: The first disk drive
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
4
• 1961: IBM introduced removable packs of rigid
disks
• 1971: IBM introduced the floppy disk drive
• 1973: IBM introduced the Winchester architecture
• In the 1960s: A few firms developed the plugcompatible-market (PCM) selling copies of IBM
drives directly to IBM customers at discount
prices. At the same time, IBM competitors
(Control Data, Burroughs, and Univac) were
integrated vertically into the manufacture of their
own disk drives.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
5
• In the 1970s: Smaller non-integrated computer makers
such as Nixdorf, Wang and Prime developed OEM for disk
drives.
• In 1976: US$1 billion worth of disk drives were produced
(50% PCM and 25% OEM). There were about 17 firms.
All were relatively large and diversified corporations such
as Diablo, Ampex, Memorex, EMM, and Control Data.
• By 1995: Production rose rose to $ 18 billion, PCM almost
vanished, and OEM became 75%. Almost all the 17
corporations except IBM failed or were acquired by IBM.
Meanwhile, additional 129 firms entered, of which 109
failed (Fujitsu, Hitachi, and NEC survived).
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
6
• During 1978 to 1993, the smallest available
20 MB drive shrank from 800 cubic inches
to 1.4 cubic inches -- 35% annual rate of
reduction.
• During 1977 to 1994, the price per
megabyte in 1982 dollars from $900 to 0.2
-- a reduction rate of 53% pa (although
other microelectronic devices fell only at
the rate of 70%).
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
7
Which technological developments
contributed to this spectacular
improvement in performance of disk
drives?
• Materials: Ferrite-oxide heads  Thin-film heads 
Magneto-resistive heads
• Architecture: Removable disc-pack drives  Winchester
Drives
• Embedded servo systems
• RLL and PRML recording codes
• Higher RPM motors
• Embedded interfaces
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
8
1. Innovations in Read-Write Head Materials
In the period 1975 to 1992, mainly ferrite-oxide
heads were used. Incremental innovations within this
technology such as
grinding the ferrite head to finer and
more precise dimensions, and
more finely dispersed oxide particles
helped improve areal recording density from 1 to 30
terabyte per sq. in. This growth was approximately
following the S-curve pattern
(an initial accelerating growth followed by steady
growth followed by saturation).
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
9
• Around 1985, a new thin-film head technology was
developed.
Super-thin films of magnetic metal on aluminum was
achieved by sputtering thin films of metal on recording head
and then using photolithography to etch much finer
electromagnets than could be achieved by ferrite technology.
The technology was adapted from integrated-circuit industry.
Burroughs and IBM led in this development.
Meanwhile entrant firms such as Maxtor and
Connor Peripherals continued to rely on refining ferrite
technology.
Established firms such as IBM, Control Data, Digital
Equipment, Storage Technology, and Ampex -- each
spent some $50 million in 8 years. Most new entrants
perished.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
10
• In the 1990s magneto-resistive heads were
developed which accelerated the
performance improvement.
IBM, Seagate, and Quantum led the race.
Established firms beat out entrants.
• Moving up an S-curve is made possible
through incremental innovations. Jumping
from one S-curve to another is the result of
radical innovations.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
11
Magnetoresistive
heads
Terabits/sq.in
1000
100
Ferrite-oxide
heads
10
Thin-film
heads
1
1975
1980
1985
1990
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
1995
12
• Between 1976 and 1988: The number of
established firms offering drives with thinfilm heads increased from 0 to 22.
Likewise, the corresponding number of
entrant firms increased from 0 to 22.
• Between 1984 and 1988: The number of
established firms offering drives with thinfilm disks increased from 0 to 12. Likewise,
the corresponding number of entrant firms
increased from 0 to 27.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
13
2. Innovations in architecture
• In the period, 1965 to 1978, removable disk
pack drives dominated. This trend followed
an S-curve with regard to areal density.
• Around 1978, 14-inch Winchester drive was
substituted for the removable disk packs.
This was a radical innovation (not
incremental).
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
14
Terabits/sq.in
Winchester
drives
10
Removable
Disk-pack
drives
1.0
0.1
1965
1970
1975
1980
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
1985
15
• Between 1974 and 1979: The number of
established firms offering drives with with
Winchester architecture increased from 2 to
9. Likewise, the corresponding number of
entrant firms increased from 0 to 19.
• Between 1984 and 1988: The number of
established firms offering drives with RLL
recording codes increased from 4 to 20.
Likewise, the corresponding number of
entrant firms increased from 5 to 31.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
16
All the disk-drive innovations described thus far
were of the sustaining type irrespective of whether
they were incremental or radical, expensive or cheap,
software or hardware, component or architecture, or
competence-enhancing or competence-destroying.
A major characteristic of a sustaining
innovation is that leading practitioners of
prior technology continue to dominate. The
business is not disrupted. Progress happens
along historically anticipated lines.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
17
Further architectural improvements
aimed at shrinking the drive size
(from 14-inch to 8-inch to 5.25-inch
to 3.5-inch to 2.5-inch to 1.8-inch)
turned out to be disruptive, i.e., they
displaced the industry leaders
(irrespective of they were wellmanaged or not)
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
18
14-inch Winchester Drives
• Until the mid-70s, 14-inch removable disk packs
accounted for all disk drives.
• Then 14-inch Winchester drive emerged to sustain
performance.
• Most were used for mainframes.
• In 1974, typical median-priced mainframe had a drive
of 130 MB. This increased for 15 years at 15% per
year. At the same time, the capacity of average drive
increased at 22%. Capacity was outstripping demand
and reaching beyond mainframe into scientific and
super computers.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
19
The advent of 8-inch drives
• Between 1978 and 1980, Shigart Associates,
Micropolis, Priam, and Quantum developed 8-inch
drives with 10, 20, 30, 1nd 40 MB capacity.
• These were of no interest to mainframes which, at
that time, asked for around 40MB.
• These disruptive innovations were however suited
for minis used/produced by DEC, Data General,
Prime, and HP.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
20
• Partly because of the availability of suitable disk drives,
minis gained over mainframes. A median-priced mini
shipment grew at 25% per year.
• Meanwhile 8-inch saw further innovations that resulted in
capacity growth at the rate of 40% year although the
computer requirements themselves grew at about 20%.
Again, capacity outstripped demand.
• Cost per MB of 8-inch became lower than that of 14-inch
and other advantages became apparent, e.g. less vibration
sensitive.
• Hence, established 14-inch manufacturers began to fail. 2/3
never introduced 8-inch. The 1/3 were 2 years behind new
entrants.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
21
Why did 8-inch disrupt the dominance of
the established 14-inch suppliers?
• 14-inchers were not toppled by technology
because the 8-inch drives mainly used off-theshelf components.
• The reason for failure was delay in making the
strategic commitment to switch to 8-inch. This
was because mainframes did not need 8-inch
drives as told by their established (mainframe)
customers. It appears listening to current
customers is not always good.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
22
A similar story was repeated
when 5.25 gave way to 3.5 to 2.5
to 1.5. All were disruptive.
• As the size reduced minis gave way to
desktops which in turn partly gave way to
portables and then Palms.
• Newer versions were not superior in the
established market whereas they were
attractive to fringe customers interested in
an emerging technology.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
23
A disruptive innovation:
The 5.25 inch drive (1981)
Capacity (MB)
8-inch drive
(Mini-computer
market)
60
5.25-inch drive
(desktop computer
market)
10
Volume (cubic inches)
566
150
Weight (pounds)
21
6
Acess time (ms)
30
160
US$ per MB
50
200
US$ per unit
3000
2000
Attribute
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
24
Product Performance
The Impact of Sustaining and Disruptive Technological Change
Performance demanded
at the high end of the market
Performance demanded
at the low end of the market
Disruptive
Technological
Innovation
Time
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
25
What are the typical characteristics
of disruptive innovations?
• Worse product performance at least in the near term
• Other attractive features that a few fringe (often new)
customers value
• Simpler and cheaper.
• Architectural: New functionality achieved through a clever
arrangement of ‘off-the shelf’ components or technologies.
• Promise lower margins
• First commercialized in emerging insignificant markets
• Generally not wanted by leading firms’ most profitable
customers (hence listening exclusively to one’s best
customers may not always be good)
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
26
Fitting Innovation’s Requirements with Organizational Capabilities
Who should be responsible
Autonomous
Mainstream
Organization
organization
is required
is responsible
Heavyweight
New
D
A
teams
Lightweight
teams
Functional
C
B
Customary
teams
Poor fit
Strong fit
(disruptive)
(sustaining)
Fit with Organization’s values
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
27
Characteristic Cost Structures of Different Value Networks
100
Desktop PC
Value Network
40
%
Minicomputer
Value Network
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
56
%
60
%
Mainframe
OEMs
20
0
41
%
Minicomputer
OEMs
6-inch disk
drive makers
40
34
%
25
to
30
%
Desktop
OEMs
80
60
Mainframe
Computing
Value Network
28
Difference in Valuation of Attributes
Across Different Networks (1988)
Value network
Shadow price (US$) of
an incremental MB of
capacity
Shadow price (US$) of
incremental reduction of 1
cubic inch in size
Mainframe
1.66
-0.1
Minicomputer
1.5
-0.14
Desktop PC
1.45
0.17
Portable
Computer
1.17
0.24
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
29
Time
Phase 2
Competition based
upon physical size
Time
Phase 3
Competition based
upon reliability
Price
Phase 1
Competition based
upon capacity
a Commodity
Reliability
Time
Innovations with
regard to every
performance variable
have saturated.
The product has
become
Physical Size
Capacity
The basis of competitive success
Time
Phase 4
Competition based
upon price
Changes on the Basis of Competition in disk drive industry
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
30
Strategy 1: Push Upmarket Towards Higher-End Customers
Functionality
Strategy 3:
Change Market’s
Demand for
Functionality
Time
Managing Changes on the Basis of Competition
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
31
DISCUSSION
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
32
See Slide 12
In the period, 1975-1990, terabits/sq. in improved from 1 to
12 owing to improvements in ferrite.oxide technology.
Is this due to
•
incremental innovation?
•
radical innovation?
•
disruptive innovation?
•
sustaining innovation?
•
process innovation?
•
product innovation?
•
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
33
See Slide 12
Around 1990, ferrite oxide technology started being replaced
by thin film technology.
Can this be classified as
•
incremental innovation?
•
radical innovation?
•
disruptive innovation?
•
sustaining innovation?
•
process innovation?
•
product innovation?
•
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
34
See Slide 12
Around 1994, thin film technology started being replaced by
thin magneto-resistive technology.
Can this be classified as
•
incremental innovation?
•
radical innovation?
•
disruptive innovation?
•
sustaining innovation?
•
process innovation?
•
product innovation?
•
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
35
See Slide 14
In the period, 1965 to 1978, removable disk pack drives
dominated. Around 1978, 14-inch Winchester drive was
substituted for the removable disk packs.
Can this be classified as
•
incremental innovation?
•
radical innovation?
•
disruptive innovation?
•
sustaining innovation?
•
process innovation?
•
product innovation?
•
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
36
See Slide 15
Around 1976, removal disk-pack drives were replaced by
Winchester drives.
Can this be classified as
•
incremental innovation?
•
radical innovation?
•
disruptive innovation?
•
sustaining innovation?
•
process innovation?
•
product innovation?
•
architectural innovation?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
37
See Slide 7
During 1977 to 1994, the price per megabyte
in 1982 dollars from $900 to 0.2.
Was this due to market pull? •
Was this due to technology push? •
Was this due to competition? •
Name five technologies that contributed to
this development.
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
38
See Slide 18
Architectural improvements aimed at shrinking the
drive size (from 14-inch to 8-inch to 5.25-inch to
3.5-inch to 2.5-inch to 1.8-inch) turned out to be
disruptive.
• Why are these labeled as ‘disruptive’?
• Whose businesses were ‘disrupted’?
• Why is the continued development of ferrite oxide
technology not viewed as being ‘disruptive’?
• Why should it be viewed as ‘sustaining’?
• Whose businesses were sustained?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
39
Some Broad and Open-ended Questions
• The companies ‘disrupted’ were large and having a good
R&D as well as marketing infrastructures and cultures. Yet
they were ‘disrupted’ by smaller players. Why?
• Listening to customers is the basic precept in the era of
quality. Does this suffice when one transits to the era
innovation?
• What are the general characteristics of disruptive
innovations?
• What steps could the large and established companies take
to avoid being ‘disrupted’?
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
40
Further Questions
• Can small firms hope to engage in incremental
innovation?
No!! No! Yes! Yes!!
• Can small firms hope to engage in radical
innovation?
No!! No! Yes! Yes!!
• Can small firms hope to engage in architectural
innovation?
No!! No! Yes! Yes!!
• Can small firms hope to engage in disruptive
innovation?
No!! No! Yes! Yes!!
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
41
What type of innovation is best suited for
Hong Kong’s manufacturing sector?
Insert a preference rating between 1 to 5 (5 for
highest preference and 1 for lowest preference).
•
incremental innovation
•
radical innovation
•
disruptive innovation
•
sustaining innovation
•
process innovation
•
product innovation
•
architectural innovation
KV Patri, Mgmt of Tech Inn., Disk
Drives Case Study
42
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