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The Dilemma of Investing in more Complicated Products
There is a trend in all markets. The trend has been seen in companies moving upmarket toward more complicated products with higher prices; this is mainly due to the increasing demand to sustain the upcoming technologies that emerge due to the disruptive technologies in the market. These technologies are performance-driven improvements and also due to the competition from the existing and the new entrants.
The companies have not been successful in developing simple and cheap products due to continuous innovation in product architecture. The innovations and architectural works have also been accompanied by radical departures which are not a characteristic of cheaper and simpler products. In this case, it is quite costly and expensive for companies in terms of infrastructure and the company growth process.
These companies have been leading in the innovation of risky, competitive, and expensive technologies. Establishments were mainly characterized by successful pioneers and entrant firms; this led to less concentration in making simple and cheap products. Since there were many entrants in the markets, the established companies expected them to focus on simpler, cheaper products. But this was not the case as they also concentrated on new innovations.
Established companies have also not been able to focus on simpler and cheap products since they are characterized by, rapid, incremental, and expensive products architecture. This, as a result, made them have the fear of losing competition strategy and also these extra costs cannot be met by the low-end markets which were consisting of simple and cheap products. When faced with sustaining technology changes that were to be given to the existing customers, this led to the making of better quality products.
Hence, the technological changes that have been introduced have consisted of sustenance for the previous innovations. These circumstances led to disruptive technologies, which also led to the toppling of managers. The technologies are characterized by straight forward innovations and consisted of off the shelf components.
With this trend, simpler and cheap products have not been given much focus. This is because they did offer what was unimportant to the mainstream markets and focused mainly on the emerging markets. Investing in these low-end markets often involved great development expenses such as product sustainability. This has led them to invest in high large end markets which have sustained investments. These appear less risky than investments and the customers needs in this category exist and their needs are known.
They also believe that once they go up they cannot go down. They focus on higher markets that consistently pay a significantly higher price for incremental technologies. Also; the simple and cheap products are not predictable in terms of technologies and selling strategies, which make them risky hence they focus more on sustainable innovations that can keep them at par or in competition with other existing companies. This strategy seems less expensive in terms of covering sustainable strategies.
When companies upscale their production, i.e. they confront certain markets and technological change. They sometimes end up losing the dominance of the market. This is particularly seen regardless of the companys investment in the latest technologies. Some of these failures occur to companies that either moves fast or move slow, those that concentrate on electronic products, those building chemical and mechanical technology, those in manufacturing as well as those in the service industries.
An example of a company that upscaled itself was seared roebuck which was a retail out store, which was regarded as the most well-managed retailer in the world. Its zenith sears store accounted for 2% of all retail sales in the United States. This company was a pioneer in several technologies that have been critical in todays success and admired by other retailers countrywide. The company mainly focused on credit card sales, catalog retailers and store brands and in supply chain management. Today; no one speaks to sears the way they used to in the 1960s. What led them to be out of business was they missed out on the advantage of discount retailing and home centers
They have also been driven out of the business. It was noted that the merchandise group lost $ 1.3 billion in the year 1992 even before a $1.7 billion restructuring change. It was later seen that it was blinded by arrogance which led to the basic change in the American market place. This led to dismal performance in its stock which no longer made it competitive. It mainly failed due to ignorance of the rise of discount retailing and home centers.
In the computer industry, IBM dominated in the mainframe market, but has since missed the years on the emergence of minicomputers. These were technologically simpler than mainframes. At this time, no major manufacturers of the mainframe computers became players in the mainframe computer business. The minicomputer market was created by digital equipment corporation and was later joined by a set of companies that were managed aggressively by the owners.
These were like prime, data general, Wang Nixdorf and Hewlett Packard. All these companies later on missed out on the desk top personal computer, which was developed together by apple, Tandy commodore as IBMS stood alone. Another company that missed out was Pc division which created the personal computing market. Another factor which led them out of business was the fact that they had not practiced principles of good management. This was particularly emulated by apple and they were innovative in it. These disruptive technologies were however for favoring some customers since they are simple and cheap and frequently used.
They include the desktops and minicomputers. These companies should focus on disruptive technologies which will earn them an advantage in terms of turnover margins in the future. Though they are underperforming today, they will be in full competitive performance in the future. For example, many who need mainframe computers before now no longer need them since their requirement have surpassed the mainframe computers and are now using either mainframe or microcomputers. The needs of computer users have passed the technological requirements and the improvements by the manufacturers. The large companies always assume the change that come with time.
They are often satisfied with their products and see no need to expand. This can be describing as blindness towards upcoming opportunities. Once these other companies have emerged the dominant companies appear dismal in the eyes of customers. However, much they try to market their organization, catching up with the entrants has always proved to be very challenging.
Disruptive Technology
Generally, disruptive innovations are technologically straight forward off the shelf components put together in product architecture. This is up to simpler prices approach. They offer less than what the customers in the established markets want. They have given the customers what they want and could have targets at large markets to generate the necessary sales and profits for maintaining growth. These disruptive technologies are usually started by frustrated engineers from established firms and they formed them to exploit the disruptive products. Disruptive technologies have been known to improve in parallel place with established businesses. What matters most is that the disruptive technology is improving.
The reason why established firms delay to introduce new technologies is due to the fear of underperformance. This may occur in sales of the existing products which are always more pronounced. As illustrated in the nature of disruptive products, they may now be rendered as not market efficient but may perform competitively in the futures markets. The only thing that may not render the new technology as underperforming is the issue of an emergence of new applications.
At times a new technology erupts a midst old established technology. In this case, the owner of the new technology waits for the new application to become established. During this time they develop novel versions of the old technology in response to an attack on their home markets. The fear of poor market performance can become a negative strategy in efficient market operation.
In such an event, it is obvious that the established companies will fail. On the other hand disruptive companies get organized and are able to satisfy the needs of the customers. I addition, they are able to design and produce current products. This process prevents the organizations from creating disruptive products. The form of existing technology for improving the current products may not be pertinent for disruptive products.
The disruptive technology were cheap and simple and included the off shelf components. These were placed together in a product form that was not as complicated as the initial innovations. These companies offered lesser than what the customers in the established markets were being provided with. Theirs was a package that was totally different from the attributes known in the emerging markets. The entrants in the markets always find new values in the market. On the other side, innovative companies are always in a position to find out more existing markets. This ensure upward rather than the downward search.
These markets have been found to be very different from the existing markets. The upward markets are better promising. This has proved in terms of investments and profit margins. The profit margins are always large. These companies ensure product improvement and hence improved profit margins. The other factor that improves the companys performance is the existing pool of customers. The customers always increase the market sales as they take supplies. It has been found that new entrants do improve faster and greater than established companies. This results in the disruption of the established companies from venturing into that particular technology or the disruptive technology.
The disrupted market products do not sell much. Firms that deal in such good tend to come up with efforts of laying their products by counteracting the existing technology. Since to lay out products is customer oriented, these firms have opted to be friendly with the customers by cutting off high prices, holding great road shows for sales and at times putting them on product lottery. This strategy is good but, without adding some gist on the product, it is as good as obsolete.
Actions of by Midlevel Employees in Disruptive Technology
Any technology that is disruptive is thought to be a technology that is capable of creating a value market and a new market. Its existence threatens the current market. The technology always ends up in disrupting the existing markets. The secret that has rendered the survival of disruptive technology is that most companies do lower their prices. This occurs after the new product has been released into the market.
The most striking feature is always the branding that attracts most buyers in the market. Therefore, disruptive products are always anything to go by. Examples of disruptive creations include, Traditional-publishing, various -sizes floppy disks drives, off-set printing hard- disks drives. The new innovated objects include for the 14 inch floppy disk drive there is an 8 inch innovated floppy disk drive, for the off-set printing we have innovated computer printers and for traditional publishing we have desktop publishing. The truth is that the innovated components are more attractive, easy to use and interesting for use. On the other hand, the disrupted markets seem old fashioned hence boring and their turn over is obviously low.
The real authority givers of decisions pertaining to the development of a company lies with the people in the organization. These people are deeply founded within the organization. They suggest decisions on particular proposals. These decisions are on which proposal are to be submitted to the senior management (Barton 115). This is very different from normal thoughts. People always believe that the senior executives are involved in critical decision making in a company though this is not the case.
The corporate factors have led middle level workers to disregard or kill disorderly technologies.Being a leader in the disruptive innovation is beneficial since being a leader in disruptive innovations has little advantage over established ventures and then leadership in disruptive innovation has great benefits economically. In this type of technology, established organizations will also be able to satisfy current customer needs and will be able to facilitate the needs and production needs of the current demands of customers since they frequently interact with the customers more than the top level leaders (Barton 111-126).
These organizations will as a result be able to stop the organizations most favorable ways of developing a disruptive product (Clark). Interpretation in the innovators dilemma seems to suggest that senior management teams do fail to invest in disruptive innovations which they consider to be irrational.
They should have made appropriate investments in them but unfortunately were unsuccessful in doing so due to being blinded by the current customers and the huge profit margins. it shows that that organizational competencies-particularly market facing or customer competence developed through experience with the existing generation of the technology-make it very difficult to evaluate the promise of disruptive technologies and thus that the senior team is always rarely equipped with the information.
They always a requirement for them to make appropriate decision (Kaplan 204).Christensen and Raynors (222) distinction strategies created for the improvement of the products may not be applicable in the development of a disruptive product as set by the senior executives (Clark). Senior executives of Companies tend to invest in technologies which fit the worth of their network value.
This value network defines the hierarchy of significant characteristics to the currents clients. These current customers reinforce the essence of value by no including the type of innovation presented or marketed. Thus, sometimes the needs of the current customers are not addressed (Christensen 236). New entrants and innovators may get different value networks in the markets for innovations. Some companies always seek additional markets upwardly rather than downwards because up-markets/high end markets are already known. These companies could also be promising by having larger margins. These Investment companies have the tendency of making products for improvement. This results into high demand and afterwards a high profit margin.
In addition, the current customers stir up the market and go with their supplies. This will always lead to creation of a vacuum between the established and the disrupting innovations. People in the deeper levels of administration such as middle level managers and other staffs a result keep away from career jeopardy of back up innovations for which low performance competitions or a down-market is identified. They hand over these opportunities to senior managers who dont even see them as an option in the process of decision making in the company.
Though a senior manager may choose to follow a potentially disruptive improvement, there will be opposition from the middle level managers. This is because they havent been taken into consideration. The decisions should be at the middle management level or layer. Avoiding career risks for which there is no identification of down market is done by the middle mangers. They have tactics on how to screen out opportunities that cannot be blamed on them by the mangers.
It is very difficult for a senior manager to pursue a potentially disruptive creation. This is because the middle level managers know how to programme their work schedule. In any case the middle level managers realize that their efforts are being pursued, they will become reluctant in resource allocation. The senior managers are not able to understand the market promises of the disruptive innovations, because their views are greatly controlled by the current experiences.
They only focus on the current customers and do not wait to see other opportunities. This is particularly true in that senior managers play a key role in the strategic decision making (Christensen 234). Another reason that leads midlevel employees to ignore or kill disruptive technologies is that the problems are politically based. Managers with the most number of resources and those who are aligned with the large and most trusted customers would always pull most political weight and will be able to divert resources to their own projects (Christensens 200).
What established companies need to do is to recognize and enter different networks so as to be able to sustain themselves in the existing market. The established companies should be able to align disruptive innovation with the right target customers by developing the creative work or project in a section of an organization. This project serves the clients for that particular innovation. It does not need to meet some target requirements in terms of certain profit margin demands which are thought to provide sustenance into the innovation. They should also be prepared to go through an extensive period process.
This process is tolerant of failure. This is due to the inability to forecast the market with creation of products that are disruptive. This kind of learning should be taken way beyond group focus to real observation of new applications and new customers. The resources should be used in big organization rather than in the business process or culture. These companies should try to push the growth of emerging markets such as for Apple Newton and shouldnt take long until the market grows so big to be interesting.
What they should do is to match the organizations size to the ever growing disruptive markets. This will help in satisfying the goals by the initially increasing market value. This will also assist its cycle to match the one for the market. The only solution could be acquisition. The company runners or managers should be conservative enough. This is by assessing the company for organization. This would help in setting up a structure that caters for the deficiencies in the emerging markets.
In another way, this depicts that, the companies that had led to the most advanced from simpler to surprisingly radical innovations were those companies that were entrants rather the incumbent leaders. This is though not depicted among the established companies. To compare the usability or goodness between mainframe computers and a note book is thought to be very ambiguous comparison. This is because, the usability of the different objects of forms of the computers are quite different.
Different companies respond to technological innovations differently. Some established firms that have been seen to be, innovative, aggressive, customer sensitive may not embrace new technology or innovations easily. In the analysis of the disk drive, the issue of comparison may be applicable. The established organizations have the following characteristics that describe them as very competitive. They are customer sensitive and very innovative.
The companies can apply these approaches to every sort. The established companies also do have some disadvantages. They do not always target on mobility and vision in the path Map. The ability to find markets and new applications for the new products seems to be wanting in the established companies. They only exhibit this ability in the initial period of the project. This occurs upon entry in the market of which they get lost in the process. A company should keep in focus its reason for existing and also to be able to survive struggles and appear in places it is required.
Findings on Reorganization of a Firm
These results suggest the organization of company structure in the near future here; it states that while the managers may think that they are in control of the flow of the resources of the firms their efforts might be surpassed by other companies. The companies should form patterns that satisfy both their customers and their investors. The highest performing companies in fact are those that are best at innovation. They are able to cope with emerging disruptive technologies.
The organization should surround themselves with different set of customers that is, those who want the product of disruptive technology and those who do not want. Managers should align themselves to disruptive technology rather than ignoring them or fighting them. Companies should adopt disruptive technology which typically enables new markets to emerge. Reorganization of a firm may be conducted by deciding on strategies that would help move the goods to the market and eventually lay them off to the customers. Lowering the price is one reason but not a good one. This is because even the innovator products have low prices too. Relocation as the firm restructure could be a good idea.
Every company wants to increase its profitability. The best way is to move into a new area or country where the product could be just gaining popularity. This would help the firm receive high turnover. These might reduce the downward mobility of the firm. The impact of technology is quite different in other places. For instance, in the comparison of a disk and a mainframe computer that was depicted in question three. The ambiguity was demonstrated to be on the usage.
Therefore, the comparison did not add value to any information researcher. The hard disk technology study revealed two technological change types. The particular technologies had different impact on the leaders of the industry. The first sort was found to have sustained the rate of innovation or improvement in the industry. This was exhibited on the product performance. The two most common features on product performance were recording density and total capacity. Their ranges also did vary. They varied in difficulty but, there were increments hence reached the radical position. It is only those industries at the top that dominated.
There was a big contrast in the second sort. This is because it redefined the trajectorys performance. This resulted in frequent failure in the industries.
There is strong evidence linking companies to this technology who have seen early significant first mover advantages over later entrants. Disruptive technologies have become competitive to establish products.This does happen due to the pace of the technological advancement in yield which frequently surpasses the rate of other companies. It is seen that these products may underperform today in relation to customer expectation in the mainstream market and become directly performance competitive tomorrow.
Customers can at time be very predictive. They at times do not make their choices on the highest performing product. This occurs when the performance for two competing products have developed and improved up above the demands of the market. Here, the basis is shifted from functionality to dependability, then to expediency and then eventually the cost.
Only companies that carefully measure trends in how their mainstream customers use the products can target the points at which the basis of the competitor will change in the market. Other managers have developed interest in finding entrepreneurial opportunities and wonder how they can identify potentially disruptive to technology around which new companies and markets can be built. Large organizations can strategize on how to redesign and structure themselves on the basis of reliability, functionality and their availability to the clients. This is how it should be structures otherwise the companies would be headed for great lose.
Recognizing that dissimilar technologies and different markets have differing requirements, they should try to have distinct management practices and organizational practices. Another way into solving the problem is to construct a simple market plan which critically analyses the performance for an existing product and then also analyze the disruptive technology.
This can be placed on the vertical and the horizontal axis respectively (Christensen 200.) Distinction between low-end disruptions and new-market disruptions is a useful building block in this argument.Low end disruptions introduce products or services that are cheaper and of lower quality than the existing products. On the other hand, new market disruptions offer better performances on dimensions the current customers do not value greatly (Christensen 224).
Works Cited
Barton, Dorothy. Core Rigidities and Core Capabilities: A paradox in Managing a Novel Product . Strategic Management Journal 13.2 (1992): 111-126.
Christensen, Clayton. Innovators Dilemma: Failure caused by New Technologies. New York: Blackwell Publishers, 1997.
Kaplan, Sarah. Framing the Future: Strategic choices, Cognitive frames and Response to Fiber Optic Revolution. Cambridge: Massachusetts Institute of Technology, 2004.
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