The_Innovators_Dilemma__Clayton

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Specifically, in the desktop personal computer marketplace between 1986 and 1988, the smallness ofthe drive began to matter more than other features. The smaller 3.5-inch drive allowed computermanufacturers to reduce the size, or desktop footprint, of their machines. At IBM, for example, thelarge XT/AT box gave way to the much smaller PS1/PS2 generation machines.Figure 9.2 Substitution of 8-, 5.25-, and 3.5-Inch Drives of 30 to 100 MBSource: Data are from various issues of Disk/Trend Report.For a time, when the availability of small drives did not satisfy market demands, desktop computermakers continued to pay a hefty premium for 3.5-inch drives. In fact, using the hedonic regressionanalysis described in chapter 4, the 1986 shadow price for a one-cubic-inch reduction in the volume ofa disk drive was $4.72. But once the computer makers had configured their new generations of desktopmachines to use the smaller drive, their demand for even more smallness was satiated. As a result, the1989 shadow price, or the price premium accorded to smaller drives, diminished to $0.06 for a onecubic-inchreduction.Generally, once the performance level demanded of a particular attribute has been achieved, customersindicate their satiation by being less willing to pay a premium price for continued improvement in thatattribute. Hence, performance oversupply triggers a shift in the basis of competition, and the criteriaused by customers to choose one product over another changes to attributes for which market demandsare not yet satisfied.Figure 9.3 summarizes what seems to have happened in the desktop PC market: The attribute measuredon the vertical axis repeatedly changed. Performance oversupply in capacity triggered the firstredefinition of the vertical axis, from capacity to physical size. When performance on this new146
dimension satisfied market needs, the definition of performance on the vertical axis changed oncemore, to reflect demand for reliability. For a time, products offering competitively superior shockresistance and mean time between failure (MTBF) were accorded a significant price premium,compared to competitive offerings. But as MTBF values approached one million hours, 1 the shadowprice accorded to an increment of one hundred hours MTBF approached zero, suggesting performanceoversupply on that dimension of product performance. The subsequent and current phase is an intenseprice-based competition, with gross margins tumbling below 12 percent in some instances.WHEN DOES A PRODUCT BECOME A COMMODITY?The process of commoditization of disk drives was defined by the interplay between the trajectories ofwhat the market demanded and what the technology supplied. The 5.25-inch drive had become a pricedrivencommodity in the desktop market by about 1988, when the 3.5-inch drive was still at a premiumprice. The 5.25-inch drive, in addition, even though priced as a commodity in desktop applications, wasat the same time, relative to 8-inch drives, achieving substantial price premiums in higher-tier markets.As described in chapter 4, this explains the aggressive moves upmarket made by establishedcompanies.Figure 9.3 Changes in the Basis of Competition in the Disk Drive Industry147
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Copyright © 1997 by the President
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In GratitudeAlthough this book list
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IntroductionThis book is about the
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There are two ways to resolve this
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Most new technologies foster improv
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Chapter 6 examines the emerging per
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To maintain their share prices and
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another—changes. When the perform
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published has been the number of pe
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HOW DISK DRIVES WORKDisk drives wri
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Some have attributed the high morta
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SUSTAINING TECHNOLOGICAL CHANGESIn
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The same pattern was apparent in th
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The trajectory map in Figure 1.7 sh
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with increased capacity at a lower
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commercially mature in its new appl
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entrant firms to topple the incumbe
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technology disk drives.11. This sta
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In assessing blame for the failure
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Source: Reprinted from Research Pol
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with its own value chain, 10 is ass
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Source: Data are from company annua
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Figures 2.5 and 2.6 illustrate clea
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analysts, therefore, joined their m
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engineering workstation, and mainfr
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procure the component flash chips;
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Figure 2.8 Comparison of Disk Drive
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in commercializing such technologie
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products can be interactively devel
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Source: Osgood General photo in Her
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mechanical excavators by their reac
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Source: Brochure from Sherman Produ
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Bucyrus Erie was the only maker of
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equipment on which had longer reach
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11. Makers of early hybrid ocean tr
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Source: Data are from various issue
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Source: Data are from various issue
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Compare that conversation to the ma
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employees, there was nothing about
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more than 93,000 in 1980 to fewer t
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Another analyst made similar observ
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1970).3. The use of the term system
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Part Two of this book is built upon
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CHAPTER FIVEGive Responsibility for
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career trajectories within the comp
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its major customers and replace the
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Page 97 and 98: Figure 5.2 Gains in Discount Retail
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Page 107 and 108: was a start-up or a diversified fir
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Page 117 and 118: CHAPTER SEVENDiscovering New andEme
Page 119 and 120: new architectures for which Disk/Tr
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Page 145: drives. By 1989, the measure was 1.
Page 149 and 150: Consider, for example, the product
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Page 161 and 162: Figure 10.1 The Electric CarSource:
Page 163 and 164: nothing first-time bet, as Apple di
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Page 169 and 170: We need a strong motivation to acce
Page 171 and 172: 16. This list of smaller, simpler,
Page 173 and 174: Third, just as there is a resource
Page 175 and 176: The Innovator’s DilemmaBook Group
Page 177 and 178: lead to success with sustaining tec
Page 179: recognizing that different technolo
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The_Innovators_Dilemma__Clayton

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