DISRUPTIVE TECHNOLOGY

A disruptive strategy is a strategy in which an organization uses a disruptive innovation or disruptive technology to introduce a modified product or service with a different package of attributes often to a niche segment during the inception stages. This strategy is often observed in the domain where there is high scope of continuous innovation in technology or product, although these innovations may be minor or in a nascent stage and are continuous in nature.
The disruptive innovation strategy is generally characterized by offering the product or service with a set of values and attributes which differ from the benchmark product that customers value and may even might not be valued by the current customers. It generally serves to a niche segment of customers who value the changes more, like mew markets or new customers i.e. in other words disruptive technologies do note serve to current customers.
A disruptive technology differs from a potentially sustaining technology, because sustaining technology caters to the large base of current customers and is expected to be around for a long period of time.

Disruptive technology – an example in hard disk drive industry

The diameters and size of hard disk drive decreased continuously due to continuous innovations and the new designs provided more disk storage than the earlier ones. It was such a volatile industry that in a very short period many new firms came up with a disruptive technology providing a more spacious and smaller sized hard disk drive. And the established market leaders of this industry who did not recognize this prospect and were very much engaged in serving their current markets suffered huge loss. Even the market was so volatile that every new firm with a disruptive technology gave way to another new firm which replaced it with a better product, and thus numerous players emerged and exited the market in a very short span of time.

Why Firms miss the opportunity of investing in disruptive technology?

Front line companies with a high market share and addressing a large customer base often miss the bus to innovate the future technologies. These firms are so reoccupied with their current business and meeting the current customer demands that they fail to make technological investments that customer of the future may demand.
There an also be a variety of other reasons prevailing in the organisation such as bureaucracy, arrogance and poor planning.
The most important reason can be attributed as; the firms are wedded to their organizations. In other words, the management is totally concentrated on current customers and markets. Although these firms also survive the technological changes in the long run, by altering their technology, because they generally use sustaining technology, which has a long life term.

How do firms figure out a disruptive technology?
The most important thing to be monitored from the organizational point of view is to figure out which technology is disruptive and which sustaining.
Most of the disruptive innovations are figured out in the disagreements in the organizations for new product development and new technology development. There might not be enough support from the mid level managers of the organization due to their financial incentives.
Also a disruptive technology cannot be found out effectively by surveying the customers, who have little idea about the disruptive innovations. In other words the thriving sustaining technology can be forecasted properly with the help of customer surveys and their needs, but a disruptive technology might not be perceived properly by customers.

How Firms incorporate and deal with disruptive technologies?

Firms should identify potential disruptive technologies and should measure their possible future implications on their sales.
Their current techniques and processes which are serving their current customers cannot be derailed, hence a completely different department or organization should be formed, from the mainstream business.
The managers should track the performance trajectories of a product or technology and should make a possible forecast if the particular domain is exposed to disruptive innovations.

Big Firms vs Small Firms – from the disruptive technology perspective

Big firms don’t find it profitable to invest in disruptive technologies, because the potential revenues from these innovations is small as compared to the huge revenues earned from their current operations, and there is a high uncertainty about the future size of this disruptive innovation. They generally have 2 approaches to deal with a threat of disruptive innovations. The firm should either go down-market indulging into this new disruptive technology which provides a low margin business as a simultaneous operation alongside its mainline business or it should go up-stream and concentrate on the sustaining technology and maintain its large customer base.
But small firms have a different outlook to such technologies; they find it as an opportunity for a new business and enact quickly.

References:

1. By: Kennedy, Shirley Dugun. Information Today, Jun2008, Vol. 25 Issue 6, p19-21, 2p

2. By: Bower, Joseph L.; Christensen, Clayton M.. Harvard Business Review, Jan/Feb95, Vol. 73 Issue 1, p43-53

3. By: Claunch, Carl. eWeek, 3/3/2008, Vol. 25 Issue 7, p26-26, 1p,

STRATEGY UNDER UNCERTAINTY

The importance of strategizing under uncertainty has been revealed in today’s volatile and competitive market, where the environment is changing rapidly. In order to survive, every organization needs to prepare for the uncertainty which lies ahead so that it can maintain its market share and also protect itself from the competitors. Apart from that, even proper strategizing can also give a view of the expected future and the company can mould itself to be the foremost player in the new domain which evolves thereafter.

"Anyone who tells you they have a 5- or 10-year plan is probably crazy."
-- Lewis E. Platt
former Hewlett-Packard chief executive officer (CEO)

The view of having a photo printer at every home, has paid off successfully with the printer segment of HP performing outstandingly and other firms such as cannon and Samsung following suite.

“Competitive strategy under uncertainty involves a trade-off between acting early and acting later after the uncertainty is resolved, and another trade-off between focusing resources on one scenario and spreading resources on several scenarios, thus maintaining flexibility. “ (Wang Qiyang, n.d. , P 22)

These situations can be broadly classified as below into the strategies which the corporate follows.

Betting Big – In some scenarios, if the organization is confident and has an optimistic look about a possible future, than the firm can bet outright on that uncertainty, which may further lead to either a huge profitable investment or a huge loss. Hence although this optimistic view can have huge gains but there is a high risk involved. Properly informed betting, with proper innovation, market research, expert opinions, foreseeable trends and outlook can combinedly make the proper ingredient of betting large.

Hedging – Some firms believing in hedging strategy, which can be viewed as a defensive strategy of venturing into various possible alternatives. This strategy acts as a mere survival strategy and can help the firm to adapt to the various possibilities, thus reducing the uncertainty. It is generally used if the future becomes very foggy and it is difficult to look for distinct outcomes of the future.
But also it has its downside of not being able to fully concentrate on a view, but to diversify resources among various outlooks.

Wait and see – Such firms are exposed to the highest uncertainty on the account of not preparing for the future. Every successful business idea has its own life cycle which can come to its mature stage where after the firm needs to shift to new business and move along the new trends. There is a very high risk of getting extinct if the organization doesn’t evolves.

The Darwin’s theory of evolution holds perfectly for the business firms as well, i.e. in order to survive a firm has to change and gel itself with the future trends.
In order to cope with turbulence environments and improve corporate efficiency, the firm needs to be innovative, top management should be willing to take a calculated risk and the firm should properly evaluate the current market orientation, proper market research about the newer customer demands, track its competitors accurately, integrating the corporate planning department with new product development activities and creating cross functional committees.
Innovation represents the most effective means to deal with turbulence in external environments.

The higher uncertainty requires more flexible strategies by the organization. The process of strategic planning and management actually is not only the process to match the company's competencies with the customers' needs profitably and over the competitors, but also the process to integrate all related methods and tactics such as marketing audit, SWOT analysis, cost leadership, diversification, focus, globalization, penetration, game and bet, entrepreneurship, etc. to adapt to and effect the changing environment.

“Corporate planning and strategizing as an organizational activity rather than an activity of a small group of corporate planners”

The responsibility of strategizing shouldn’t be an activity of just a few corporate planners but should be an activity of the whole firm and should be shared across every individual of the firm. Innovation should be encouraged in the organization at all levels of hierarchy.

Current trends reflect such initiatives. “Stop Talking, Start Doing” which has been the most recent mottos of IBM with the IBM innovation station becoming the buzzword to rethink the core processes of the organization and has been adapted as one of the objectives across the firm encouraging participation of every individual employee towards innovation, by giving valuable ideas to the top management and encouraging communication across the tiers of the organization.

An example of a possible “Strategy under uncertainty” in the current telecommunication market in INDIA

TRAI has given permission to Internet service providers to provide Internet telephony in India. It has allowed National Long Distance operator to connect it to ISPs through public Internet for unrestricted Internet telephony. Although this may come as a shock to the current telephone and mobile service providers in India, but this has been predicted by these organizations as the next level of telecommunication in India. It can be easily foreseen that in the coming few years the communication between ISP and phone across India is feasible. Hence these firms such as reliance, Airtel, Tata Indicom and BSNL has also actively tried to venture into public internet and have become major players in the segment of internet service providers (ISP) in view of the future uncertainty.

Finally to conclude, strategy under uncertainty involves a trade-off between acting early or later after the uncertainty is resolved, and between focusing and investing on one scenario or spreading resources on several scenarios, thus maintaining flexibility. The trade-offs takes into consideration the nature of uncertainty, industry economics, intensity of competition, and the position of a firm relative to its competitors.

References:
1. Courtney, H., Kirkland, J., and Viguerie, P. (1997,November) Strtegy Under Uncertainty, HBR
2. Wernerfelt, B. and Karnani, A. (1987) COMPETITIVE STRATEGY UNDER UNCERTAINTY, Strategic Management Joumal, Vol.
3. Lynn, Gary S.; Akgun, Ali E.. Engineering Management Journal, Sep98, Vol. 10 Issue 3, p11, 7p