The articles by Bower & Christensen (1995) and Markides (2006) discuss several types of innovation: disruptive technologies, radical innovations and business model innovations.a) Please describe in your own words (but based on the articles) what the following concepts mean: (i) business model innovation, (ii) radical innovation, and (iii) disruptive technologies. b) Please explain how according to Markides (2006) business model innovation differs from disruptive technologies? c) Please consider the following statements:- Nintendo’s Wii is a disruptive technology - Nintendo’s Wii is a radical innovation - Nintendo’s Wii is a business model innovation For each of these statements state whether it is true or false. Use examples from the case to support and explain your answer.
Assignment Question 2:In their article, Bower and Christensen (1995) make some statements regarding which organizations are more likely to come up with disruptive technologies.a) Bower and Christensen (1995) state that strong customer focus inhibits creating disruptive technologies. Do you agree with this statement? Explain why this statement is correct and/or wrong. How does this statement apply to the Nintendo case? Please support your answers with examples.
b) Bower and Christensen (1995) state that large companies are less likely to create disruptive technologies. Do you agree with this statement? Explain why this statement is correct and/or wrong. How does this statement apply to the Nintendo case? Please support your answers with examples.Assignment Question 3:Innovations can provide competitive advantages. Therefore, it is important to constantly innovate.
However, it is also essential to be prepared for the disruptions created by the competitors and strategically respond to them. Based on Bower & Christensen (1995) and Markides (2006), please answer the following questions:a) Explain why established organizations in the market may have difficulties noticing disruptive technologies. Also explain why established organizations in the market may have difficulties noticing business models innovations. Use arguments from Bower & Christensen (1995) and/or Markides (2006) to support your answers. b) When faced with disruptive technologies/business models, what are the available strategic responses for established organizations in the market according to Bower & Christensen (1995) and/or Markides (2006)? c) Imagine that you were managing Sony and were facing the introduction of the Nintendo Wii.
Please select the most appropriate strategic response for Sony from question b) and explain why this strategic response would be the best in this case.a) (i) Business model innovations are the conception of a new business model in an established market, according to Markides (2006). This business model has to be different at the core from the business models already in place, and has to address a larger market. (ii) Radical innovations are the conception and introduction of genuinely new products that did not exist beforehand (such as personal computers).
(iii) Disruptive technologies are part of a broader category encompassing both business model innovations and radical innovations. While there is no commonly accepted definition, disruptive technologies can be seen as new technologies disrupting the actual leaders and commonly accepted standards in an industry or market and replacing them with new entrants.b) According to Markides (2006), business model innovation differs from disruptive technologies from different aspects. Disruptive technologies are a process eventually growing to dominate the market (Christensen & Raynor, 2003); and they tend to be associated to the remplacement of incumbents by new entrants (Danneels, 2004). On the other hand, business-model innovations tend to profit from a fast growth and manage to capture a noticeable market share, but fail to completely take over the market (Markides, 2006). In this sense, disruptive technologies induce a more “complete” change.
c) Nintendo’s Wii is a disruptive technology: False The Wii is not a disruptive technology, because it did not completely replace the other technologies available. While Nintendo’s Wii has been a great success and took a significant part of market share (being the most sold gaming console in the world between September 2006 and June 2008, Exhibit 11), it did not replace the Xbox360, the PS2 and PS3. Nintendo’s Wii is a radical innovation: False/True for controllers The Nintendo’s Wii is not a radical innovation because it didn’t introduce a genuinely new product: the Wii is a gaming console and this already existed in the market place. However, components of the Wii (the movement detector controller, the Wii Board) did not exist and are radical innovations in the subfield of gaming controllers.
Nintendo’s Wii is a business-model innovation: TrueIt is indeed a business-model innovation because it refers to a new business-model servicing a broader market (mothers, people from every age) and according to Miyamoto, “rather than just picking new technology, we thought about what a game console should be”.a) The statement “strong customer focus inhibits creating disruptive technologies” is correct. With the insights given by both Bower and Christensen (1995) and Markides (2006), we can affirm that disruptive technologies, by the essence of their name, are not driven by customers’ inputs. The reason is that they are disruptive to both the consumers and producers, changing currently accepted assumptions and models.
A customer focus enables companies to better serve and listen to current customers, scaling up production and services, but does not put the company on its path to the next disruptive innovation’s development.This analysis applies to the Nintendo case, because Nintendo has a strong customer focus and listens to the needs of a broader video-game audience, until now unserved by video-game manufacturers. Following our assumption, Nintendo does not come up with a disruptive technology because it does not take other the market and replaces previous technologies, but it manages to make a place for itself and establish its new business-model innovation. Moreover, the disruptive innovation such as the motion-detecting controller, the Wii Board etc do not come from the company’s customer focus, but rather from Nintendo’s vision.
b) The statement “large companies are less likely to create disruptive technologies” is correct, for different reasons: - disruptive technology business is best managed by SBUs (separate business units), and the disruptive organization is best kept independent (Markides, 2006). This has proven to be hard to manage by established organizations - the disruptive technologies’ market size is often hard to evaluate; and disruptive technologies are usually considered financially unattractive or are mistakenly thought to not contribute significanctly to corporate growth (Bower and Christensen, 1995).In the Nintendo case, this does not apply because the company is not trying to set up an SBU to develop a disruptive technology, but it is trying to come up with a business-model innovation by addressing a broader market. Satoru Iwata believed that the video game industry was neglecting non-gamers and wanting to create a console for the whole family, which is an innovation of the business model and does not involve any SBU, but is rather a clear shift in the company’s strategy.a) Established organizations can have difficulties noticing business models innovations because their focus is too narrow and directed to their target market only. As Christensen (1995) writes: “the processes and incentives that companies use to keep focused on their main customers work so well that they blind those companies to important new technologies in emerging markets”.
Christensen also names this “the danger of staying too close to the customer”. Established organizations can also have troubles noticing business model innovations for similar reasons; that is because new business models attract different customers from those that established companies focus on (Markides, 2006). We note that in both cases the problem comes from a too narrow focus on the firm’s environment.b) In his article, Markides (2006) describes the need for finer disruptive innovation categories, partly because according to him different types of innovations require different responses. For business model innovations, strategic responses by incumbents include: - Making the existing competition model more competitive compared to the disruptive innovation - Counterattacking with the “disrupt-the-disruptors” strategy (as used by Swatch) For disruptive technologies, a possible strategy is given by Markides and Geroski (2005), stating that big established companies should not attempt to create a disruptive innovation themselves, for they do not have the appropriate skills and resources, but they should focus on taking the technology to mass markets by way of strategic alliances or capital funding to the start-ups coming up with the disruptive technologies.
c) In question 1, we argued that the Wii was not a disruptive technology but was a business-model innovation. From the knowledge derived in question 3b, and according to Markides (2006), Sony would have 2 solutions: making its business model more competitive compared to the disruptive innovation, or counterattacking Nintendo. It is fair to argue that the best strategy to choose here is not clear-cut. Sony could implement a “disrupt-the-disruptors” strategy.
It is probable that teenagers and young adult gamers would like to be able to use body-motions to control games that appeal to them, as the Wii does not serve this segment.Sony could thus stay true to its customer base while bringing innovation and life into its gaming experience. However, the case also mentions the fact that Nintendo is able to profit from console sales while Sony incurs a loss due to their manufacturing process. Thus, remodeling the manufacturing process of Sony to make the price more attractive and diminish losses on new console sales seem an unavoidable step on the way to a greater profitability. We thus argue that Sony’s best response need not be clear-cut and could strategically implement aspects of both strategic answerts as suggested by Markides (2006).
Sony would adapt its response according to Nintendo’s first mover experience.