1. There is a tendency in all markets for companies to move upmarket toward more complicated products with higher prices. Why is it difficult for established companies to enter markets for simpler, cheaper products? Identify two companies that have upscaled themselves out of business. How could they have avoided this?
The tendency for companies to move upmarket toward more complicated products with higher prices is common across all markets. Companies keep on improving their products and services to higher levels all the time with the expectations of higher values on the advanced and complicated products. In fact, Christensen argues that the companies producing most products have consistently displayed an inclination towards improving the performance of their products over time. However, as the companies seek expansion into new markets, they set certain thresholds below which they find it difficult to enter such markers ( Chesbrough, 2010) . In fact, large companies may not consider a business opportunity in a new market if the projected returns fall below their thresholds. For instance, a company that makes profits of over one hundred million dollars would ideally not venture into a new market that promises half a million dollars in returns. Much as the company still makes profit, the numbers prove inadequate for the company hence the inclination to not pursue the endeavor. As a result, this trend impedes most established companies from developing disruptive technologies.
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Nevertheless, this trend, prevents established companies from entering new markets in anticipation of other companies to build their position in the emerging market. In fact, Christensen notes that “as companies become large, they literally lose the capability to enter small emerging markets”. It becomes difficult for established companies to enter markets for simpler, cheaper products as their processes of investment have need of quantifying the market size as well as the profit margins beforehand. As such, these established companies face structural challenges when disruptive technologies emerge in their industry. As Christensen discusses, markets for simpler, cheaper products lack the necessary market data for making proper judgment on the way forward. He argues that “markets that do not exist cannot be analyzed”. In fact, delving into research for such data only proves counterproductive for the company. Furthermore, upon making judgments from projected financial returns, the lack of data renders the projections meaningless and may mislead a company. Similarly, if the structure in the company as well as its way of learning and venturing into markets affects the creation of simpler, cheaper products, then the company finds it difficult to enter the market.
Although continuous improvements have been constantly done by companies, some companies have upscaled themselves out of business. The failure of some of the established companies, as Christensen argues, is largely attributable to the upgrades and investments on cutting edge technology, manufacturing practices and product features that they deemed important for the market and the customers. Unfortunately, it turned out that although the customers wanted improvements on the features of the product, the entry of disruptive products led to market loss. The reason is that although the disruptive products had a smaller number features, they had a diverse value that extended usability to different customers. As such, the influence of the leading clienteles becomes a significant reason for companies to engage in product enhancements that go beyond the demands and needs of the mainstream markets. In this regard, two companies that have upscaled themselves out of business are Chrysler and Dunkin' Donuts. The two companies could have avoided bankruptcy by keeping their expansion gradual to align with the mainstream market. In other words, the improvements in product features as well as expansion to different states could have been controlled to ensure a steady but defendable position in their respective markets.
2. One of the hallmarks of disruptive technologies is that initially they underperform the current technology on the attributes that matter most to mainstream customers. The companies that succeed in commercializing them, therefore, must find different customers for whom the new technology’s attributes are most valuable. Identify two markets that are emerging today based on attributes or qualities that seemed unimportant to the mainstream markets when they were introduced? (If you can’t think of anything, consider the online education revolution as a topic to explore. Does anyone seriously believe that bricks and mortar schools will be the dominant power in twenty years?) When identifying the two markets, explain how older mainstream products or companies are threatened.
The online education revolution comes up as the major topic of exploration. Notably, the online education began with an underperforming trend as compared to the conventional schools made of bricks and mortar. Online courses and instructive avenues of learning that practically offer the same content as in the ideal classroom have continued to gain ground as time goes by. One of the major customer is the learner undertaking their undergraduate studies. Although not many learners have actually fallen into this sphere, the future is quite promising. The major reason is the unrestrictive and flexible nature of online courses largely satisfies the needs of most learners. Furthermore, the learner is granted access to the learning materials for as long as they wish and the instructive aspects continue undisturbed. This very nature of online courses offers the universal satisfaction to all learners in a manner that the brick and mortar classroom cannot realize. Additionally, the learner is in charge of the learning environment to keep it as stress-free and as conducive as possible. The unrestricted access to learning materials ensures an all-inclusive learning environment that leaves the learner to be in sync with their personal arrangements without adhering to a brick and mortar time table or schedule. The engaging environment enables the learner to consult professionals and experts in any profession and from highly reputable organizations ( Huynh et al., 2003) . As a result, the individual learner gains knowledge and skills that suit their own professional needs. Moreover, the learner can still obtain clarifications on the subject matter without having to make any particular arrangements as necessitated by the brick and mortar classroom.
Over the last five years, online courses and training programmes have been on the rise due to the numerous advantages they have to offer ( Huynh et al., 2003) . The resourcefulness of having online classes is continuously being appreciated by organizations and institutions of learning around the entire globe. Similarly, companies have expressed the critical role played by online training in continuous professional development for their employees. Currently, it is common to find individuals taking at least one course unit as an online class although the scope remains unclear. All the same, projections show that online courses have the potential of becoming the norm in the coming years, being inclusive of the entire curriculum. The influence has grown to the extent that High Schools have taken up the challenge and are actually embracing online units for some of their classes. With such growth rate in the eLearning business, it is highly likely that the transition from brick and mortal classrooms to virtual ones may occur sooner rather than later. What is more is that the virtual nature of learning provides access to learning materials by individuals at any place in the world. The limitation of space and time is soon going to be a thing of the past as education continues to be more and more universal. In fact, it may become a requirement for individuals to undertake various online courses offered by different countries to make an all-round professional.
Along the line of eLearning are companies that offer online learning materials such as Amazon. Indeed Amazon has progressively grown in its capacity of books that are accessible to learners globally. Through incorporating applications such as the Amazon kindle app, all the learner needs to do is log in and acess volumes of books without any hindrances. Moreover, learners can still purchase the learning materials and read them offline at their own time. With the current trends, the situation can only get better for online and eLearning as more innovations continue to make up for any deficits experienced today. However, the businesses offering hardcopy reading materials are faced with a threat of extinction as learning becomes virtual.
3. Most people think that senior executives make the important decisions about where a company will go and how it will invest its resources, but the real power lies with the people deeper in the organization who decide which proposals will be presented to senior management. What are the corporate factors that lead midlevel employees to ignore or kill disruptive technologies? Should well-managed companies change these practices and policies?
As Christensen maintains, the importance of senior executives in the advancement of a business cannot be overlooked. However, the organizational protocol also plays a vital role in informing the corporate leadership on potential ways of advancing. Without an organizational approach to accomplish the characterized organizational aims and goals, the guidance towards development could be easily derailed. It is the role of the management to convey the entire organizational process to the employees, and with the information, the management can guide the accomplishment of the established corporate goals and objectives. As a result, the senior executives remain important to the business. However, in maintaining business executions, it is imperative that an organization makes use of its structures to concurrently exploit its existing products and management contributions while at the same time exploring new products and executives that could expand the business to new markets or clients. Such a move goes against the tendency to restrict the corporate objectives to the senior executives only.
From a developmental perspective, companies need to consider the input of the middle level managers as a way of advancing in their technologies. Moreover, having a direct association between the expected outcomes and the needed performance calls for the input of all employees in the organization. It is noteworthy that organizations have to engage in finding and making use of the most vital methods for striving to realize the business goals. Such measures entails keeping up with the state-of-the-art ways in use by effective organizations. To realize the best practices, an organization needs to gain from and via the experiences of other corporate bodies in the industry. Seat checking serves as an effective way of comparing and contrasting the current business practices with those of other effective companies to point out the areas where your company may possibly make developments.
Essentially, most companies apply similar approaches and strategies in addressing a sustaining technology as well as in dealing with disruptive technologies. For the disruptive technologies, the companies that take a lead role may gain particular advantages for venturing first into the new market. Nonetheless, sustaining the lead position requires the input of mid-level employees at deploying them to evaluate the market situation and the trends employed by competitors. Although disruptive technologies begin in the small markets, they at times grow into the mainstream market and pose substantial competition for the lead companies in the given industry. One of the corporate practices that lead midlevel employees to ignore the disruptive technologies is the thorough evaluation of the market. As the disruptive technologies begin at the micro level, most companies find it unworthy of investing and consequently, the disruptive technology is ignored. In fact, the traditional effective companies have the tendency to utilize deeply analytic methods of at looking at opportunities in new markets. Connected to this is the company’s structure and approaches that facilitated venturing into its prominent product. If the organization is adamant in taking up new dimensions provided by the midlevel employees, the potential to develop new products diminishes. Another corporate factor that leads midlevel employees to ignore or kill disruptive technologies is the technological approach of the company. If the company has the strategy of being the technological leader, midlevel employees could ignore potential openings for disruptive products. Similarly, companies that operate of the strategy of following the leading corporates may hinder midlevel employees from pointing out new markets that the lead firms have yet to explore.
As a result, well-managed companies need to change these practices and policies to incorporate the input of midlevel employees. In most of the time, company representatives are well situated to recognize pertinent areas where improvements to working practices can be implemented. Consequently, the staff in every area of the corporation has a chance to learn the new developments in the markets and incline them to embracing the same. Moreover, utilizing the information that includes perspectives from the representatives in forming improved approaches for working makes the workforce feel well-regarded in implementing changes. Therefore, administration in the business needs to stretch out across the existing and potential ventures in the industry.
4. What do the findings in this book suggest about how companies will be organized in the future in order to encourage the development and support of disruptive technologies? Should large organizations with structures created around functionalities redesign themselves into interconnected teams, as some management theorists currently believe? Or, recognizing that different technologies and different markets have differing needs, should they try to have distinct organizational structures and management practices for different circumstances? Is this realistically possible?
From the perspective brought out in the book, disruptive technologies have a significant effect on any industry to the extent of toppling the leaders in the given industry. In the case of the hard drives, the leading companies in making the drives ignored and failed to introduce the 8-inch drives that had become the disruptive technology. Through the application of thorough marketing investigations, the companies failed to take a step in venturing into the new market. As Christensen presents, the companies had all the technological capabilities of developing the drives but they took the market to be insignificant and not in line with most of their customers. In other circumstances, companies displayed the fear of price wars in defending their leading products and as a result, opted to delay before venturing into the disruptive technologies. The major interest was drawn into sustaining technologies that they saw to be needed by the customers. By advancing their existing product features, companies often view it as the best approach of preventing cannibalization of the sales of its products.
However, through the example of the Seagate-Conner experience, Christensen illustrates that if disruptive technologies facilitate the emergence of new market applications, introducing new technology could be a gain rather than a threat. On the other hand, if the established companies delay in venturing into the new technologies, the wait may prove costly as the company has to fight for market share. In the long run, price wars may set in and lead to the demise of the company. Christensen suggests that established companies need to successfully confront flexibility from the perspective of the trajectory map. Discovering novel applications as well as the markets for the new products appears to be in the capability of the established companies as they exhibited it during entry into the industry. Therefore, companies need to keep up with the disruptive technologies and avoid being held captive by the main clients. In fact, they need to consider the mainstream market first as it offers the volumes of sales of its products. This approach is necessary for firms in every industry to prevent the enabling environment brought about by the delays that sustain the rival entrant companies to eventually knock down the incumbent leaders in the industry for every time that disruptive technologies emerge.
In keeping up with emerging technologies, large organizations with structures created around functionalities should redesign themselves into interconnected teams to monitor the progress in the industry. Data from Christensen’s book demonstrates that established companies faced with disruptive technologies had no trouble in creating the disruptive technology. In fact, companies had prototypes in place already as the company’s senior executives weighed on whether or not to launch the product. With interconnected teams, the process of decision making can be more expeditious to avoid the costly delays in launching the new technologies. Moreover, the various structures created around functionalities could monitor any shifts in the market as a result of disruptive technologies. Since companies have scarce resources that have to be used prudently, working as interconnected teams could shed more light on the projects to invest in and projects to stall ( Lavie, 2006) . Such a mechanism would ideal make it hard for the entrant firms to set profitable prices for their products and thus avoid price wars among the leading companies.
References
Chesbrough, H. (2010). Business model innovation: opportunities and barriers. Long range planning, 43(2), 354-363.
Christensen, C. M. (2013). The innovator's dilemma: when new technologies cause great firms to fail. Harvard Business Review Press .
Huynh, M. Q., Umesh, U. N., & Valacich, J. S. (2003). E-learning as an emerging entrepreneurial enterprise in universities and firms. Communications of the Association for Information Systems, 12(1), 3.
Lavie, D. (2006). The competitive advantage of interconnected firms: An extension of the resource-based view. Academy of management review , 31(3), 638-658.
