Wednesday, March 11, 2009

Disruptive Innovations create assymwtric competition

Clayton discussed that if you graph Performance Over Time, technology progresses faster than our ability to use it. Example is 286 intel was too slow to keep pace with typing, but 3Ghz pentium is faster than most user's typical applications need.

And 'Incumbents nearly always win' over time.

Then talked about disruptive innovation and how with disruptive innovations 'Entrants nearly always win'.

Talked about Digital Equipment Corporation, and how people often describe it's failure as 'bad management'.

But the problem w the 'stupid manager hypothesis' is that all the other computer companies were failing as well, like Wang.

So Digital made 45% margin on $250,000.

And over time, looking at potential products with 60% on 500,000.

But people said 'look at Personal computers'.

And Digital looked and the early PCs were terrible and did not matter to their current business customers.

On the disruptive innovation graph, PCs offered 40% margin on $2000.

So 'if you always listen to your customers' it can guide you well up your innovations trajectory, but you might not uncover disruptive innovation.

Now everyone says 'healthcare is different'. Every industry says their industry is different.

The reason I think it applies is because I'm getting to the essence of the phenomenom. Looking at the fundamentals.

sent from my treo


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